PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON * * * * * * * * * SUSAN RISSLER SHEELEY, * v. * Case No. JEFFERSON COUNTY PUBLIC * 04-1026-PSD-C SERVICE DISTRICT, OLD * STANDARD, LLC and THORNHILL,* * HEARING TRANSCRIPT * * * * * * * * * BEFORE: KEITH A. GEORGE, Administrative Law Judge HEARING: Tuesday, December 14, 2004 9:30 a.m. LOCATION: Charles Town-Jefferson County Courthouse County Commission Meeting Room 100 E. Washington Street Charles Town, WV WITNESSES: Susan Rissler Sheeley, Joe Hankins, Sue Lawton, Marty Kable, Herbert J. Jonkers, Vince Ammirato, Jason Allen, James Weimer Reporter: Stacey D. Melvin Any reproduction of this transcript is prohibited without authorization by the certifying agency. A P P E A R A N C E S RONALD E. ROBERTSON, JR., ESQUIRE Public Service Commission of West Virginia 201 Brooks Street P.O. Box 812 Charleston, WV 25323 Counsel for the PSC THOMAS R. MICHAEL, ESQUIRE Michael & Kupec 228 Court Street Clarksburg, WV 26301 Counsel for the Complainant JAMES V. KELSH, ESQUIRE 300 Summers Street, Suite 1230 P.O. Box 3713 Charleston, WV 25337-3713 Counsel for the Jefferson County PSD ALSO PRESENT: DAVID HAMMER, ESQUIRE, INTERVENOR SCOTT FAULKNER, INTERVENOR A P P E A R A N C E S (C O N T') E. DANDRIDGE MCDONALD, ESQUIRE Steptoe & Johnson Bank One Center, Seventh Floor P.O. Box 1588 Charleston, WV 25326-1588 Counsel for Old Standard, LLC and Thornhill, LLC INDEX TO WITNESSES DISCUSSION AMONG PARTIES 12 - 29 WITNESS: Susan Rissler Sheeley DIRECT EXAMINATION by Attorney Michael 29 - 42 CROSS EXAMINATION by Attorney Kelsh 42 - 45 CROSS EXAMINATION by Attorney McDonald 45 - 54 CROSS EXAMINATION by Attorney Robertson 54 - 60 WITNESS: Joe Hankins DIRECT EXAMINATION by Attorney Kelsh 60 - 92 CROSS EXAMINATION by Attorney Michael 92 - 110 CROSS EXAMINATION by Attorney Hammer 110 - 129 CROSS EXAMINATION by Attorney Faulkner 129 - 148 CROSS EXAMINATION by Attorney Robertson 148 - 167 REDIRECT EXAMINATION by Attorney Kelsh 167 - 171 I N D E X (CONTINUED) CROSS EXAMINATION by Attorney McDonald 171 - 172 RECROSS EXAMINATION by Attorney Michael 172 - 176 RECROSS EXAMINATION by Attorney Hammer 176 - 181 RECROSS EXAMINATION by Mr. Faulkner 181 - 183 RECROSS EXAMINATION by Attorney Robertson 183 - 184 WITNESS: Sue Lawton DIRECT EXAMINATION by Attorney Kelsh 184 - 191 CROSS EXAMINATION by Attorney Michael 191 - 194 CROSS EXAMINATION by Attorney Hammer 194 - 199 CROSS EXAMINATION by Mr. Faulkner 199 - 207 CROSS EXAMINATION by Attorney Roberson 207 - 215 I N D E X (CONTINUED) WITNESS: Marty Kable DIRECT EXAMINATION by Attorney Kelsh 215 - 222 CROSS EXAMINATION by Attorney Michael 222 - 226 CROSS EXAMINATION by Attorney Hammer 226 - 238 CROSS EXAMINATION by Mr. Faulkner 238 - 243 CROSS EXAMINATION by Attorney Robertson 243 - 252 REDIRECT EXAMINATION by Attorney Kelsh 252 - 260 RECROSS EXAMINATION by Attorney Hammer 260 - 262 REDIRECT EXAMINATION by Attorney Kelsh 262 - 263 RECROSS EXAMINATION by Attorney Robertson 263 - 266 WITNESS: Herbert J. Jonkers DIRECT EXAMINATION by Attorney McDonald 267 - 295 I N D E X (CONTINUED) CROSS EXAMINATION by Attorney Kelsh 294 - 297 CROSS EXAMINATION by Attorney Michael 297 - 309 CROSS EXAMINATION by Attorney Hammer 309 - 330 CROSS EXAMINATION by Mr. Faulkner 330 - 335 CROSS EXAMINATION by Attorney Robertson 335 - 342 REDIRECT EXAMINATION by Attorney McDonald 342 - 343 RECROSS EXAMINATION by Mr. Faulkner 343 - 346 WITNESS: Vince Ammirato DIRECT EXAMINATION by Attorney McDonald 346 - 355 CROSS EXAMINATION by Attorney Kelsh 355 - 357 CROSS EXAMINATION by Attorney Robertson 357 - 361 I N D E X (CONTINUED) WITNESS: Jason Allen DIRECT EXAMINATION by Attorney McDonald 362 - 370 CROSS EXAMINATION by Attorney Michael 371 - 372 CROSS EXAMINATION by Attorney Hammer 373 - 378 CROSS EXAMINATION by Mr. Faulkner 378 - 380 CROSS EXAMINATION by Attorney Robertson 380 - 388 WITNESS: Susan Rissler Sheeley REDIRECT EXAMINATION by Attorney Michael 388 - 392 RECROSS EXAMINATION by Attorney McDonald 393 - 394 WITNESS: James Weime DIRECT EXAMINATION by Attorney Robertson 394 - 409 CROSS EXAMINATION by Attorney Kelsh 409 - 416 CROSS EXAMINATION by Attorney Hammer 416 - 417 I N D E X (CONTINUED) CROSS EXAMINATION by Attorney Michael 417 - 419 CROSS EXAMINATION by Mr. Faulkner 419 - 421 REDIRECT EXAMINATION by Attorney Robertson 421 - 424 DISCUSSION AMONG PARTIES 424 - 426 CERTIFICATE 427 E X H I B I T S Staff's Exhibits: Page Number Description Offered One Final Joint Staff Memorandum 395 Sheeley's Exhibits: Page Number Description Offered One Copy of Formal Complaint 36 Two Letter of Intent 37 Three Operation and Maintenance Agreement 37 Four Asset Purchase Agreement 37 Five Real Estate Purchase and Sale Agreement 37 Six Ground Lease 38 Seven Real Estate Purchase and Sale Agreement 38 Eight Ground Lease 39 Nine Operation and Maintenance Agreement 39 Ten Asset Purchase Agreement 39 Old Standard's Exhibits: Page Number Description Offered One Responses to Interrogatories 269 Two Sewer Line and Wastewater Treatment Plant Project 271 Three Application for Construction 273 Four Technical Specifications 273 Five EnviroQuip 274 Jefferson County PSD's Exhibits: Page Number Description Offered One Cooperative Venture Agreement 185 Two Certification, John T. Quynn 190 Three Issued Water Permits 216 Four Utilities by County Served 219 Thornhill's Exhibits: Page Number Description Offered One Sewer Line and Wastewater Treatment Plan Project 272 Two Permit Application 274 P R O C E E D I N G S --------------------------------------------------------- JUDGE KEITH A. GEORGE: Good morning. My name is Keith A. George. I'm an Administrative Law Judge with the Public Service Commission of West Virginia. We're here for a hearing in Case Number 04-1026-PSD-C. Because of the size of the crowd, and the need for more space, we got permission to go upstairs to the Circuit Court Room. So we're going to take a break and reassemble upstairs in the Circuit Court Room. Thank you very much. SHORT BREAK TAKEN JUDGE GEORGE: Good morning, as I mentioned downstairs my name is Keith A. George. I'm an Administrative Law Judge with the Public Service Commission of West Virginia. We're here for a hearing in Case Number 04-1026-PSD-C. I appreciate your patience as we relocated. At this point, I'm going to ask the attorneys for the parties to identify themselves for the record? ATTORNEY MICHAEL: Thank you, Your Honor. My name is Thomas Michael. I represent the Complainant. That's Susan Rissler Sheeley, who is also present with me today. JUDGE GEORGE: Thank you, Mr. Michael. ATTORNEY KELSH: Your Honor, my name is James V. Kelsh, representing the Jefferson County Public Service District. JUDGE GEORGE: Thank you, Mr. Kelsh. ATTORNEY MCDONALD: I'm appearing this morning on behalf of the Developer Defendants, Old Standard, LLC and Thornhill, LLC. E. Dandridge McDonald from the firm of Steptoe & Johnson, Charleston. JUDGE GEORGE: Thank you, Mr. McDonald. ATTORNEY ROBERTSON: Good morning, Your Honor. My name is Ronald Robertson. I'm here representing the Commission's Staff in this complaint case. JUDGE GEORGE: Thank you, Mr. Robertson. ATTORNEY HAMMER: Good morning, my name is David Hammer, I'm here on the behalf of the Town of Bolivar. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: Yes, Your Honor. JUDGE GEORGE: I assume you're going to make a motion to intervene? ATTORNEY HAMMER: Yes, as of yesterday evening, I do make that petition. JUDGE GEORGE: I've not received a copy. Unfortunately sometimes it takes two or three days for things to get from the Executive Secretary's office to my office, which is crazy, but that's how it works. Do you want to orally present the motion to intervene? ATTORNEY HAMMER: Sure, very briefly. I'm new Counsel for the Town of Bolivar. Bolivar, of course, lies very near to this proposed development site. Bolivar believes that many of its municipal services will be impacted by this proposed sewer development plan. In addition, Bolivar relies upon --- for revenue from various sources, including tourism, which would also be impacted. JUDGE GEORGE: Any objection to the intervention of Bolivar? ATTORNEY MCDONALD: Can we have a moment, Your Honor? OFF RECORD DISCUSSION JUDGE GEORGE: Any objection today to the intervention of Bolivar? ATTORNEY KELSH: Yes, Your Honor. The Jefferson County Public Service District objects to the intervention of the Town of Bolivar for two reasons. Primarily, Bolivar's petition here violates the Commission's rules on intervention, which provide intervention should not broaden the scope of the proceeding. Bolivar raises some concerns that are outside of the scope of the Complainant. That the Complainant ---. JUDGE GEORGE: Can you explain to me how his concern about tax revenue, combining city services would impact on tourism is out of the scope of this proceeding, whether or not you have the duty to file for a Certificate of Convenience and Necessity? ATTORNEY KELSH: The issue that the District understands and the Complainants are taking on, whether the District has an obligation to file for an application or a Certificate of Convenience and Necessity, and whether the Districts other agreements require Commission approval. That should be the limit of this hearing. Mr. Hammer raises concerns about impact on municipal services, impacts on tourism. Fairly addressing those issues would require the calling of witnesses that you would not call to address the two primary issues of this matter. JUDGE GEORGE: Explain to me why this Commission should not consider his concerns and whether or not the statute requires you to file a Certificate of Convenience and Necessity. It seems to me, clearly, that he has a legal interest in this proceeding. Go ahead and try one more time to convince me he doesn't. ATTORNEY KELSH: Well, what I would ask the Commission to do with respect to the Town of Bolivar, and likewise with the Faulkners, is perhaps to allow them to intervene, but limit the scope of their intervention to get the issues that have been raised by the Complainant. To the extent they try to broaden them into general public policy concerns, I would ask the Administrative Law Judge to limit that testimony and limit that inquiry because it broadens the scope of this proceeding, and Mr. McDonald in his motion to vacate the prime order cites to a case in which the Commission ruled that the scope of a complaint case is going to be broadened, fair notice has to be provided to all parties in advance of hearing. That has not occurred here. JUDGE GEORGE: I think you have a very narrow view of what's going to happen today, and one that I may not share. Any other objections to the intervention of this party, the Town of Bolivar? ATTORNEY MCDONALD: Yes, Your Honor. I mean the Developer Defendants object. I believe Mr. Hammer said that he was concerned about the impact of the Sheridan project on municipal services. The Sheridan project is not going to take water from the City of Bolivar. It's not going to use Bolivar's wastewater facilities for its own. He hasn't stated what that impact would be. I submit there is no impact on Bolivar's municipal sewer system. You said something about tax revenue, I didn't hear him say that, but that's far outside the scope of the limited issues in this case, as I understand it, which are whether the Public Service District is required to obtain a Certificate of Convenience and Necessity, and whether the Developers are required to get some kind of permission approval before, for this contract. Bolivar has nothing to do with those legal issues, and his intervention would violate the rule on expanding the scope of the issues. He was to get his petition to intervene two days before today's hearing. He did not do so. JUDGE GEORGE: Mr. Robertson, do you have any response to any of this? ATTORNEY ROBERTSON: Yes, Your Honor. Looking at the complaint case, looking at whether or not the District and/or the Developers should file a certificate according to the statute and also with the District's entering into advanced, fully executed agreements, I think that the Administrative Law Judge is very familiar with the certificate process. Looking at that and yet still staying narrow. But looking at some things such as recreation and things, the Staff feels too that it's probably something that's more appropriate for possibly DEP to look at. If there is a certificate filed, there will have to also be a NPDES Permit for a new discharge point. Those particular things sort of get outside of the scope of the PSC. I think, and I know the Judge is very aware of filing a certificate and looking at that to give the proper weight that's to be given to the Town of Bolivar. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: Briefly, Your Honor. I think it's curious that we're hearing statements that the Town of Bolivar's entrance are more appropriate in a certificate case. We'll never get to present in time a certificate case if the proposal of the Jefferson County PSD and the Developers is allowed to go forward. So I think they have an interest in this case, which is about whether or not the certificate needs to be filed now, so we do not object to their intervention. JUDGE GEORGE: Mr. Robertson, I wasn't completely clear about Staff's position. I assume, you're saying you have no objection to this intervention? ATTORNEY ROBERTSON: That is correct, Your Honor. And looking at that particular thing, I noted Your Honor is already aware of somewhat looking at the scope of this complaint case ---. JUDGE GEORGE: You're saying that it should be relatively narrow? ATTORNEY ROBERTSON: Looking at the particular reasons here. Other things are going to get outside of the jurisdiction and we have no objections to the Town of Bolivar coming in as an intervenor. JUDGE GEORGE: Mr. Hammer, do you have any response? ATTORNEY HAMMER: Very briefly. I've heard conclusory statements that we have no interest whatsoever. That seems to put the cart well before the horse in this matter to the extent that we made arguments and intend to do things that Your Honor deems outside of the scope of this hearing. But otherwise we do have a legitimate stake and interest in this outcome. JUDGE GEORGE: Very well, I'll grant the Town of Bolivar's intervention request. I would ask that you move up here to the table, if the parties could make room for you. We have one more outstanding request for an intervention that I'm aware of, and that is the intervention of Scott and Vicki Faulkner. I assume they're here today, too. One of you needs to be the spokesperson. MR. FAULKNER: I will be the spokesperson, Your Honor. JUDGE GEORGE: Do you want to stand up and tell us why you should be made an intervenor in this proceeding? MR. FAULKNER: Yes, Your Honor. My wife and I have lived in the area for 18 years. Four generations of our family lived in the area who use the Shenandoah River. We are also involved with a number of projects relating to economic development of the area, which this project will impact. More specifically, I'm the president of Friends of Harper's Ferry National Reserve and Park, we are the officially designated community liaison through the national park in Harper's Ferry. We were designated that in 1988. We are involved with a number of land transactions along and adjoining the parcel in question that is being proposed for the sewer plant. We're also involved with a number of land transactions relating to boundary expansion over where pipes might run for the Sheridan or any other potential service area. If this proposal goes forward without adequate public input by the County and by the State, it will severely impact these land negotiations, and severely damage the future integrity of the park and the historic advocate of plans. Therefore we feel we have a legal interest in this matter because of our mandate from the federal government and from the local communities to be a community liaison for all matters relating to the park and relating to the communities surrounding the park. JUDGE GEORGE: Thank you, Mr. Faulkner. There are objections to your intervention status for the purpose of this hearing. ATTORNEY KELSH: Your Honor, in addition to the District's filed objections, which I stand by, I would also note that the Commission's rules provide that intervenor status should not be granted to parties that essentially have identical interests. The Town of Bolivar has been granted intervenor status, they're represented by Counsel here today. The interests that Bolivar has expressed are similar to those ---. JUDGE GEORGE: Can you read me that language in the rules? ATTORNEY KELSH: I don't have any of the rules handy, but I'm sure the Judge is familiar that the Commission does not favor granting multiple parties intervenor status when they have ---. JUDGE GEORGE: The language is permissive; is it not? Does it say that Commission ---? ATTORNEY KELSH: I believe it is permissive. JUDGE GEORGE: For the purposes of today, the Commission may or may not be forced to facilitate the proceeding of the hearing to limit the number of parties that have similar interests. Something like that? ATTORNEY KELSH: Yes, it is permissive. The underlying concern is to avoid redundant representation. We have a lot of evidence to present today. Having multiple parties that have the same interest is not going to expedite matters, and it's not going to enhance this proceeding. So in addition to the reasons stated by the District in its filed objections, the Faulkner's intervention ---. JUDGE GEORGE: Would you please state those reasons? ATTORNEY KELSH: The reasons that the District objected to the intervention by the Faulkners is that it would expand the scope of this proceeding by addressing issues that are not pertaining to the complaint. These are issues which are much better addressed by other agencies having competent primary jurisdiction over such matters, such as the DEP and the County Planning Authority. JUDGE GEORGE: Very well. Mr. McDonald, you have an objection as well? Do you have an objection as well? ATTORNEY MCDONALD: Your Honor, we do have an objection. In fact, we have filed objections on December 3. JUDGE GEORGE: Would you mind restating your grounds? ATTORNEY MCDONALD: Rule 12.6 requires an intervenor to have a legal interest in the subject matter of any hearing. The subject matter of this hearing, is when a prior PSC approval is required under 24-2-11 or 24-2-12 before the Developers and the Jefferson County Public Service District enter into certain contracts. And whether the Developers need a certificate to build a wastewater treatment plant. The Faulkners have not addressed this issue at all. Rule 12.6 requires an intervenor to state his or her position or interest. The petition must be denied where its allegations are not pertinent to the issues already presented, or where its allegations unduly broaden the issues already presented. The interest of the Faulkners is the recreation, water quality, tourism, historic preservation, the Jefferson County comprehensive plan, and the Harper's Ferry National Park. These interests are not pertinent to the interests already presented, and those interests unduly broaden the issues already presented. Now, the Commission's rules for an intervenor can make to broaden the issues, but only under certain circumstances. Rule 12.6(c), they have to file a separate verified complaint. The Faulkners did not file a separate complaint, and the petition to intervene, itself, is not verified. The petition must be denied. JUDGE GEORGE: Mr. Robertson, do you have any objection to the intervention of the Faulkners? ATTORNEY ROBERTSON: No, Your Honor, Staff does not. Still looking at the limited purposes of this particular hearing about the certificate, whether or not the District needs to enter into prior PSC approval before executing any type of contract. There's several contracts listed in Staff's memorandum. Also, the issue gets into whether or not the Developer and/or the District should file a certificate. One of the things that is in the checklist of the Commission's rules of practice and procedure gets into the State's historical preservation, and to get a certificate in, there will be reviews from the division of cultural center, or through that particular agency to look at particular significant issues. Without a certificate, nobody knows if there is any significant issues in that manner. That's one of the reasons Staff is still adamant about either the Developers and/or the District filing a certificate in this case. But we have no objections to the granting of the intervention of the Faulkners. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: No objection, Your Honor. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: I'll address only the very narrow point that there is concurrence of representation. I'm here only on behalf of the Town of Bolivar. I do not purport to represent the Faulkners, indeed, the Faulkners are not residents of the Town of Bolivar, and to the extent that they have other interests, even if their interests overlap, I do not represent them, so I have no objection. JUDGE GEORGE: Your response, Mr. Faulkner, to what you heard? MR. FAULKNER: Yes, Your Honor. As we've already stated, and as PSC Staff has also stated, historic review of this entire project will be required if the PSC requires a certificate of need. The fact that this case today is about a series of events that were to avoid these particular, important, legally mandated oversight issues is exactly what the issue is and what we're prepared to speak on. We've also intervened in other PSC matters. We listen closely and we do not overlap our questions. We do understand the need for an expeditious procedure, and we will do everything to stay within the limits of today's scope and to expedite accordingly. JUDGE GEORGE: Very well. I'll grant the motion to intervene to the Faulkners. I don't usually take public comments in complaint cases, although there are various parties that might be more than willing to make you as a witness to hear your public comments. Just talk to one of the parties during one of the breaks, maybe you've already done that. At this point, we'll start with the proceeding. We'll call any evidence. Okay. We need a five minute break. SHORT BREAK TAKEN JUDGE GEORGE: The Court Reporter is having trouble with her equipment. I understand that we're relying only on her backup system at this point, and everyone needs to speak loudly, clearly, distinctly, or we may have to do all this again. Yes, Mr. McDonald? ATTORNEY MCDONALD: Your Honor, there is another preliminary matter. December 7th, I filed a motion of the Developers to limit the evidence and argument to the issue raised in the complaint. I don't believe you've ruled on that motion. JUDGE GEORGE: I'm going to rule on that point by point. If you hear something that you think is outside of the scope of this complaint, you object, and I'll rule on it. ATTORNEY MCDONALD: You said earlier, Your Honor, that you thought that certain folks' view of today's hearing was quite different than yours. For the hearing, I think we're entitled to know yours. JUDGE GEORGE: You'll know by the time we rule on objections. Mr. Michael, you may call your first witness. I'm going to put witnesses right over here. ATTORNEY MICHAEL: Thank you, Your Honor. I'm going to call the Complainant as a witness, Susan Rissler Sheeley. JUDGE GEORGE: The Court Reporter will place you under oath. --------------------------------------------------------- SUSAN RISSLER SHEELEY, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY MICHAEL: Q. State your name, please. A. Susan Rissler Sheeley. Q. Your address? A. 142 Long Marsh Lane, Charles Town, West Virginia. Q. Where is that physically located? A. It's located off Kabletown Road, which is County Route 25, in the vicinity of Thornhill. A little distance past the Thornhill development, but it all is in with the Kabletown Village. It's off of Kabletown Road. Q. That's in Jefferson County? A. In Jefferson County, yes. Q. How did you first become aware of the agreements or the proposed agreements between Jefferson County Public Service District and the two developers? A. I had been attending Public Service District meetings, Board of Zoning Appeal meetings, other meetings within Jefferson County. I recently retired from the Federal Government, in the Virginia area. I moved back here. I was born and raised in Jefferson County. When I retired, I decided I wanted to get involved with Jefferson County community-type activities. I started attending some of the meetings. I became aware at one of the meetings after discussion in the meeting between the Board and the people attending that it appeared to me that proper procedure was not being followed. That the Certificate of Convenience and Necessity was not being applied for at the proper time. That four different memorandum of understanding, memorandum of agreements were being proposed from the developers, and issued, approved and signed by the Public Service District. The intent then was to --- after the sewer process had taken place, construction and everything, then apply for a Certificate of Convenience and Necessity, which was my understanding to be backwards. Q. Were you present at meetings of the Jefferson County Public Service District where this was discussed? A. Yes, I was. Q. Was the question raised at those meetings about whether the certificate should be applied for before the agreements? A. There were discussions about that, yes. There were different individuals who made comments about the amount of time involved in applying for and getting a certificate. It was too time consuming. That they wanted to go on and proceed with the sewer process. Q. You made a statement that it was too time consuming to --- who made the statement that it would be too time consuming to apply for a certificate? ATTORNEY KELSH: Your Honor, I'm going to object to questions that calls for hearsay, we've heard some hearsay evidence already. JUDGE GEORGE: We've had admission by the party. Let's hear what she is going to say, then you can object again. ATTORNEY MICHAEL: It's admission by the party, Your Honor. I believe that when we hear her answer that it will be let in characterized as such. It certainly doesn't go to the truth of the matter, but somebody's opinion. It's not a statement of fact, and it goes to ---. JUDGE GEORGE: Go ahead and listen to what she's going to say, what the objections are going to be, and you can respond to the objections. BY ATTORNEY MICHAEL: Q. Do you remember the question? A. Yes, I do. The statement was made by the Developer. I happen to have it in the notes that I took. And it's not spelled out in the minutes of the meeting. However, there are complete audio tapes of the meeting, and many of the meetings were also video and audio taped. JUDGE GEORGE: What was the name of the person that made the statement? A. Herb Yonkers. JUDGE GEORGE: And Mr. Yonkers said that it was too time consuming to get a Certificate of Necessity. Very well. Do you still want to object, Mr. Kelsh? ATTORNEY KELSH: Yes, I object to it being hearsay evidence. JUDGE GEORGE: Clearly it's an admission of the party under the hearsay rule. ATTORNEY KELSH: We have that party available today to discuss that. JUDGE GEORGE: Well, if he wants to say that he didn't say it, he's more than welcome to, but I think it is clear. Go ahead, Mr. Michael. ATTORNEY MICHAEL: Thank you. Your Honor. BY ATTORNEY MICHAEL: Q. You went to the meetings, you found out about this proposal, and you realized that they were not going to apply for a certificate. Why did you care? What did it matter to you? A. I care because the regulations, and please excuse me if I'm referring --- I really don't know if they're really ordinances or regulations, but the proper procedures were not being followed. Part of my government career was in an area of strictly enforcing federal travel regulations for all travelers within our bureau. I guess, it's very important to me that regulations be followed. There wouldn't be these regulations if there was not a purpose for them. When the regulations were not being followed, it appeared to me that people were trying to circumvent what was established as the proper procedure for building development, constructing sewers and so forth. I just felt that that needed to be brought to the attention of the Public Service Commission. Q. Did you obtain copies of the agreements? A. Yes, I did. Q. Where did you get those? A. I went to the Public Service District office in Ranson and obtained them. Q. Were those the same copies that we attached to our complaint? A. Yes, sir. Q. We had four agreements between the District and Old Standard, an operations maintenance agreement, an asset purchase agreement, a real estate purchase agreement, and a ground lease. Are those the documents that you obtained? A. Yes, sir. JUDGE GEORGE: Mr. Michael, if you want them to be evidence, you need to have them marked and introduced. Just attaching them to your complaint doesn't do it. ATTORNEY MICHAEL: I'm moving in that direction, Your Honor. JUDGE GEORGE: Okay. I just wanted to make sure you know that. ATTORNEY MICHAEL: I appreciate that. BY ATTORNEY MICHAEL: Q. In the sense, these are the same four agreements you obtained between the District and Thornhill; is that right? A. Yes, sir. Q. Attached to our complaint, you also had a letter from Old Standard to the Public Service District, dated March 1, 2004. Where did you get that? A. Public Service District. Q. So all of these documents were documents in their files? A. Yes. ATTORNEY MICHAEL: Your Honor, we've marked as Complainant's Exhibit One a copy of the complaint along with all the documents that were attached to the complaint. That's what I just went over with the witness. JUDGE GEORGE: We will mark that as Sheeley Exhibit One. ATTORNEY MICHAEL: Thank you, Your Honor. JUDGE GEORGE: I think it would be helpful to me if we broke that exhibit up, Mr. Michael, if you have no problem with that? ATTORNEY MICHAEL: Yes. Well, there would be ---. JUDGE GEORGE: I would make the complaint Sheeley Exhibit One. (Sheeley Exhibit Number One marked for identification.) ATTORNEY MICHAEL: The complaint would be Exhibit One, the letter of March 1, 2004 would be Exhibit Two. Then we have eight agreements after that. JUDGE GEORGE: Eight agreements? ATTORNEY MICHAEL: Yes, four for each developer. JUDGE GEORGE: I'm marking the letter as Sheeley Exhibit Two. Mr. Michael, an operation maintenance agreement and an asset purchase agreement for each of the projects for each developer; is that not right? (Sheeley Exhibit Number Two marked for identification.) ATTORNEY MICHAEL: That's correct, Your Honor. There's an operation maintenance agreement for each developer, an asset purchase agreement, a real estate purchase agreement, and a ground lease, four separate documents for each developer making a total of eight. JUDGE GEORGE: I'm marking an operation and maintenance agreement for Old Standard, dated May 3, 2004, Sheeley Exhibit Three. I'm marking an asset purchase agreement dated May 3, 2004 for Old Standard as Sheeley Exhibit Four. I'm marking a real estate purchase agreement dated May 3, for Old Standard, Sheeley Exhibit Five. (Sheeley Exhibit Number Three through Five marked for identification.) JUDGE GEORGE: These documents are all just loose papers. I'm trying to figure out where one starts and the other ones stop. I'm marking a ground lease between Jefferson Public Service District and Old Standard as Sheeley Exhibit Six. (Sheeley Exhibit Number Six marked for identification.) ATTORNEY MCDONALD: Six is the Old Standard ground lease? JUDGE GEORGE: I believe so, sir. I'm marking a real estate purchase and sale agreement dated June --- I'm thinking the 7th. June the 7th, Thornhill as Sheeley Exhibit Seven. (Sheeley Exhibit Number Seven marked for identification.) ATTORNEY MCDONALD: Could you repeat that, Your Honor? JUDGE GEORGE: Certainly. A real estate purchase agreement dated, I believe --- the date is hard to read, but I believe it's June 7th with Thornhill as Sheeley Exhibit Seven. I'm marking a ground lease for Thornhill dated June 7th as Sheeley Exhibit Eight. I'm marking an operation and maintenance agreement dated June 7th with Thornhill as Sheeley Exhibit Nine. I'm marking an asset purchase agreement dated June 7th, between the District and Thornhill as Sheeley Exhibit 10. That seems to be all the ones I have. Is that it, Mr. Michaels? (Sheeley Exhibit Number Eight through Ten marked for identification.) ATTORNEY MICHAEL: Yes, Your Honor, that is it. JUDGE GEORGE: Did I hear you move these exhibits into evidence? ATTORNEY MICHAEL: Yes, Your Honor. We move Sheeley's Exhibits One through Ten into evidence at this time. They're all exhibits consistent with the complaint and all the documents that were attached to the complaint. JUDGE GEORGE: Objections to the admission into evidence of Sheeley Exhibits One through Ten? ATTORNEY MCDONALD: No objections, simply relevance, Your Honor. I've got several more pages in my package, though, that's been marked. It appears that pages 9 through 14 of the FAX sent on June 29, '04. I wonder if Counsel can testify what that means? ATTORNEY MICHAEL: Yes. I believe this is an attachment to one of the agreements, Your Honor, and it should be --- I believe that that's an attachment. Those documents were attached to --- as we got them, the ground lease with Old Standard, which is Exhibit Six. JUDGE GEORGE: Ground lease? Which ground lease is it, Exhibit Six? ATTORNEY KELSH: Exhibit Six. JUDGE GEORGE: Mr. McDonald, you're more than welcome to look at my Exhibit Six and see if I have those pages in there. ATTORNEY MCDONALD: Well, I just note that these documents refer to Thornhill and not Old Standard. JUDGE GEORGE: I've got documents on the back of Exhibit Six that refer to Thornhill. Hearing no objection to the admission into evidence of Sheeley's Exhibits One through Ten, they're admitted into evidence. You may proceed. ATTORNEY MICHAEL: Thank you, Your Honor. BY ATTORNEY MICHAEL: Q. Ms. Sheeley, did you, after we filed the complaint, receive copies of the Public Service Commission's Staff Memorandums in this matter? The Memorandums for the Public Service Commission Staff commenting on our complaint, did you receive those? A. Yes. Q. Did you have a chance to review those? A. Yes, I did. Q. What was your response to those? A. If I remember correctly, their response was basically that they ---. Q. No, what was your response? A. What was my response? Q. Yes. Did you agree with those? ATTORNEY MCDONALD: Objection. There's been several Staff memos in this case, Your Honor. I don't believe Counsel identified which one he was asking about? ATTORNEY MICHAEL: I was asking about all of them. I'm just trying to establish a very simple point. Do you agree with Staff's position in this matter, Your Honor? JUDGE GEORGE: Well, just ask her if she agrees with Staff. BY ATTORNEY MICHAEL: Q. Do you agree with the Staff's position in this case, Ms. Sheeley? A. Yes, I do. ATTORNEY MICHAEL: Thank you. I have no further questions for this witness, Your Honor. JUDGE GEORGE: Mr. Kelsh, Cross Examination? ATTORNEY KELSH: Yes, Your Honor. CROSS EXAMINATION ATTORNEY KELSH: Q. Ms. Sheeley, you indicated in your Direct testimony that you've been involved in Board of Zoning Appeals efforts in Jefferson County; is that correct? A. I've been attending meetings, yes. Q. Did you attend meetings concerning Sheridan development? A. There were discussions in meetings that I attended that had to do with Sheridan development. Q. Do you oppose the Sheridan development? A. I don't have an opposition to development. My concern is solely for the purpose of following the procedures as established for a private sewer and issuance of --- applying for and issuance of the Certificate of Convenience and Necessity. Q. Ma'am, that wasn't my question. My question was, at the Board of Zoning Appeal meetings that you attended where the matter of Sheridan was raised, did you speak in opposition to the Sheridan development? ATTORNEY MICHAEL: Objection, Your Honor. I thought we weren't going to get into all of these issues about growth in the County. Believe me, if you get into the growth we made in Jefferson County, we'll be here for a week. JUDGE GEORGE: I think it's fair Cross Examination. I think he's looking at the Claimant and questioning --- ATTORNEY MICHAEL: Your Honor, it opens the door. If she says she opposed it, I'm going to ask her why. JUDGE GEORGE: That opens the door, I agree. But I think it's a fair Cross Examination question. BY ATTORNEY KELSH: Q. I trying to determine whether the Claimant's objection is for both of those or more particularly ---. If you would respond to the question, please? A. Would you repeat it? Q. At the Jefferson County Board of Zoning Appeals meetings you attended for the matter of the Sheridan development, did you speak in opposition to the Sheridan development? A. No, I did not. Q. Did you attend one of the Zoning Appeals meetings which concerned the Thornhill development? A. Yes, I did. Q. At those meetings did you speak in opposition to the Thornhill development? A. To the best of my knowledge, no. I spoke at a PSD meeting. Q. Have you ever submitted any claims to the Board of Zoning Appeals in writing that opposes either the Sheridan or the Thornhill developments? A. Yes, I have. Q. Did that concern the Sheridan development? A. Thornhill. Q. Just Thornhill. Are you a customer of the Jefferson County Public Service District? A. No, I am not. Q. How is your wastewater treated? A. I have a private septic and a well. ATTORNEY KELSH: Thank you. That's all the questions I have. JUDGE GEORGE: Mr. McDonald? ATTORNEY MCDONALD: Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY MCDONALD: Q. Good morning, Ms. Sheeley. A. Good morning. Q. My name is Dan McDonald, I represent Old Standard, LLC and Thornhill, LLC in this matter. I understand you live about five or six miles from the proposed Thornhill development. Is that true? A. That is true. Q. And you grew up here, and then went away and then came back? A. I went away during the period of time of 38 years of my career, yes. Q. I understand your interest in the Sheridan and Thornhill developments is that the developers follow the rules. A. Basically, yes. Q. Is it true that you objected to defeat the approval of the Thornhill project before the Board of Zoning Appeal? A. Not to defeat the project. Q. Is that a yes, or no? JUDGE GEORGE: She's answering, I believe. A. Yes, I am. It was not a defeat of the project ---. BY ATTORNEY MCDONALD: Q. Is that one of the answers, the defeat ---? A. My concern was the density of the development for the amount of acreage that was there, and the proposed number of houses to be located on that amount of acreage along with four historical sites and recreational fields. It was just far too dense. Q. You proposed 24 reasons to the Board of Zoning Appeals why the Thornhill development should be turned down; didn't you? A. As it was proposed, yes. Q. And you were overruled on all 24? A. Yes. Q. Now, you've accused the Jefferson County Public Service District of violating the law in this case; haven't you? A. Yes, sir. Q. By entering into agreements with developers to operate and ultimately acquire a wastewater treatment plant without first obtaining a Certificate of Convenience and Necessity, or otherwise getting PSC approval? A. Correct. Q. Now, did you independently determine that JCPSD violated the law, or were you so advised by Counsel or both? A. It was both. I became concerned after discussions that I was hearing in the meetings about not applying for a certificate until after the fact. Conversations like that can raise your curiosity. It raised mine enough to check into and verify what is the right procedure here. Is it to get a Certificate of Convenience and Necessity, or do you have the option of having these four memorandums signed between developer and PSD and go work on your sewer, then file. So I was curious enough to want to know which was the right procedure. Q. But you made the determination, didn't you, that JCPSD violated the law? You accused them of that in your complaint, which you ---. A. Yes. After seeking advice, researching, and also seeking advice. Q. Ms. Sheeley, which portion of West Virginia Code Section 24-2-11, in your view, did JCPSD violate? A. I'm sorry. I cannot quote the sections. Q. Which portion of West Virginia Code Section 24-2-12 did Jefferson County Public Service District violate? A. If I had my notes from my complaint, I could tell you, but ---. Q. I'll be glad to let you get them. A. I don't have them. Q. You don't have any? A. No, I do not. Q. You also stated in your complaint, did you not, that the wastewater treatment plants proposed in the agreements, which you read, are the same wastewater treatment plants as those contemplated in certain cases which have been filed before the Public Service Commission; right? ATTORNEY MICHAEL: Your Honor, may I ask that the witness be allowed to look at a copy of the complaint that she's being questioned about it? ATTORNEY MCDONALD: I have no objection. JUDGE GEORGE: Mr. Michael, you can provide her a copy. ATTORNEY MICHAEL: If I may approach, I'll give her my copy. BY ATTORNEY MCDONALD: Q. Do you need for me to repeat the question, Ms. Sheeley? A. I think I remember it. They were in violation of West Virginia Code Section 24-2-11, by not first applying for the Certificate of Convenience and Necessity. Q. Yes, I understand that's your allegation. My earlier question was, what part of 24-2-11 did they violate? ATTORNEY MICHAEL: Your Honor, I'm not sure I can answer that question and I'm looking at it, it's a pretty long expansion. ATTORNEY MCDONALD: Yeah, I think that's the problem with the whole case here; isn't it? ATTORNEY MICHAEL: No. The point is --- that's part of it. It's got two paragraphs, second paragraph has two subsections, and it looks like it's 30 or 40 lines of text. If you want to show it to her, I'm sure she'd probably find the part. ATTORNEY MCDONALD: Well, she's accused the JCPSD of violating that statute, I would think she would know what part of it she's accusing them of violating. ATTORNEY MICHAEL: I simply ask if he insists on that question, Your Honor, that she be allowed to look at the statute. JUDGE GEORGE: You can provide her with a copy of the code. I'm not sure we're making much ground anyway. I mean, we're going to have a briefing and all the lawyers are going to be able to point out exactly what rules were violated or not violated. I'm not sure what we're going to have her cover. But if you want her to answer that question, he can give her a copy of the code and we can let her look at it. A. I was advised by Counsel. I made my proposal that something did not seem kosher, something seemed to be going out of order of --- and that was a dead giveaway in the discussions at the PSD meeting. It's what really turned me on to it. I'm not a lawyer. I'm not a legal person, so I sought legal advice. BY ATTORNEY MCDONALD: Q. I understand. If you don't know the answer to the question, that's fine. We will indeed brief the issue after the evidence. The question we paused on was whether or not you stated in your complaint that the proposed wastewater treatment plants are the same wastewater treatment plants as those contemplated in certain cases which had been filed before the Public Service Commission. You alleged that; did you not? Q. Yes. Who told you that they were the same wastewater treatment facilities? A. I don't recall. I'm sorry. Q. Have you had conversations with the Public Service Commission Staff about your complaint in this case? A. No, I have not. Q. There's nobody from the Staff that told you that these were the same wastewater treatment plants that were the subject of some other cases? A. No, sir. Q. You also stated that after the Public Service Commission Staff stated that a Certificate of Convenience and Necessity should be required for these projects, that is to say the earlier wastewater treatment plants, the PSD withdrew its petitions. You said that, didn't you? A. Through the ---. Q. You said that in your complaint. Quote, after the PSC Staff stated that a Certificate of Convenience and Necessity should be required for these projects, the PSD withdrew the petitions, end of quote. You said that, didn't you? A. That's correct. Q. Who told you that? A. To my recollection it was legal counsel. Q. Your legal counsel? A. Yes. Q. So nobody at the PSC Staff said you should file this complaint? A. No, sir. Q. This complaint was filed after you lost your case on Thornhill before the Board of Zoning Appeals; isn't that true to say? ATTORNEY ROBERTSON: Your Honor, I object to that question. Mr. McDonald was talking about earlier limiting this to the certificate issue. If you want to get into the Zoning, you'll knock the doors down. JUDGE GEORGE: I think the door has already been opened. I thought he already asked and this was already answered. ATTORNEY MCDONALD: This is a sequence question, Your Honor. I don't think she has answered it. JUDGE GEORGE: Very well. He wants to know if you filed your complaint after you lost your arguments at the Zoning Board? A. It was after the loss, but we still had our appeal pending. The appeal had not gone all the way through, so the issue with the Zoning Board was not a totally resolved issue at the time I filed this complaint. BY ATTORNEY MCDONALD: Q. It was still going on. You were still fighting in the Board of Zoning Appeals? A. We still had issues with it, yes. ATTORNEY MCDONALD: Thank you. No further questions. JUDGE GEORGE: Mr. Faulkner, Cross Examination of this witness? MR. FAULKNER: I have no questions, Your Honor. JUDGE GEORGE: Mr. Hammer, Cross Examination of this witness? ATTORNEY HAMMER: No questions, Your Honor. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: Yes, Your Honor. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Ms. Sheeley, I want to be specific, after the Final Joint Staff Memorandum was filed, actually, December 9, 2004, last week, did you have an opportunity to read through the Staff Memorandum? A. I did very briefly yesterday evening. I did not have an extended time to look at it. Q. Looking at what you're trying to obtain in the form of relief in filing your complaint case, can you tell me what you're looking for? What type of relief are you looking at in filing this complaint of yours? A. What I'm looking for in filing this complaint is to have the proper rules and procedures followed and shortcuts not be taken in that --- what do I want to say --- processes throughout the development process be done in accordance with the procedures as they are established, and not circumventing them to expedite a certain part of developing or getting around a time period that might be involved by following procedures as they are established. Q. Right. I know you've talked about rules and regulations and following the rules, but then if there is also an appropriate West Virginia state law or appropriate several state laws, and you would also want those to be followed? A. Yes. Absolutely. Q. So looking at the Staff's recommendation of the developers and/or the District filing a Certificate of Convenience and Necessity according to West Virginia State Code Section 24-2-11, that's the jurisdiction that the Commission of PSC has. Did you agree with that recommendation? A. That they should follow those procedures? Q. Yes. A. Yes, I did. Q. You wrote that the Developers or/and --- depending on how it would be filed, that either the Developers and/or the District should, must file a certificate. Do you agree with the Commission? A. Yes. Q. Then looking at the particular agreements that you have obtained, entered in by the District and both the Thornhill, LLC and also Old Standard, LLC. You were looking at that too, if the District has violated some other state law that they should follow that particular code section? A. Yes, sir. Q. You can correct me if I'm wrong. So looking at your complaint, and then looking over the Staff's recommendation, from your viewpoint as a Complainant, they're pretty much one and the same as to the result from the Staff recommendation and what you wanted in this complaint case? A. Yes, sir, that's correct. Q. Is it safe to say that you really want all of the statute and rules and regulations to go through, and have all the things, everything, I'll say ducks in a row, have all the ducks in a row, all the permits and everything that's required by the Commission? A. Correct. Q. Then let me ask you this, if the Judge says that the Developers and/or the District has to file a certificate to proceed and get approval of the different agreements that the District and the Developers entered into, if that is the case, and they are required to file a certificate and everything if filed according to the Commission's certificate checklist, going through all the information that the Developers or the District has to file, then you've achieved what you wanted to in your complaint? A. That's correct. Yes, sir. Q. Then let me ask you another hypothetical, speculative question. If all of the ducks are in a row, filed by the Developers or the District, everything is true to the T, then you're really --- you're looking at have that done, so you wouldn't have a problem with it, at least from the Commission level, or actually --- I'm just looking at the PSC's --- the narrow viewpoint the PSC has with water ---? JUDGE GEORGE: Are you asking her if they file a certificate, she'll protest it? ATTORNEY ROBERTSON: No. JUDGE GEORGE: That's what I thought you were asking. ATTORNEY ROBERTSON: Because there may be some other issue as to whether or not the certificate is filed. JUDGE GEORGE: So you're not asking her if she would oppose it, if it was filed as a certificate application, you're asking her if she believes that the issue she raises in this proceeding would be resolved if the proper certificate was filed? ATTORNEY ROBERTSON: Right. That's one of the beliefs that I believe that she is wanting, and that is what the Staff is recommending. With the notice of filing, if that is the case, you can still protest, but I was just looking from a narrow viewpoint of that is what she is wanting to obtain as relief in this complaint. To have those --- pretty much going through the ---. A. That's correct. BY ATTORNEY ROBERTSON: Q. So then basically the cause of your concerns of attending the District's Board Meetings --- let me ask you this. Are you a regular person appearing at the Board meetings fairly regularly? A. Fairly regularly, yes. When I moved back to the County, I retired and moved back to the County. I wanted to become active in County activities and learn more about how the different boards, commissions and everything --- how the County operated. In order to do this, I chose to start attending different meetings just to get an idea of the process, who looks out for the County and how are things approved within the County. So PSD is one of the ones I started attending. The sewers are a big issue in this County right now, big, big issue. I, honestly, am just curious about what's going to happen in the County with the sewer situation the way it is. The main sewer plant is just about maxed. Even though there is a process coming forward to enlarge it, still it's a concern. ATTORNEY ROBERTSON: Thank you, Ms. Sheeley. I have no further questions of this witness at this time, Your Honor. JUDGE GEORGE: Any Recross? ATTORNEY KELSH: No, Your Honor. JUDGE GEORGE: You may step aside. Thank you very much. You may call your next witness. ATTORNEY MICHAEL: We don't have any other witnesses. I understand that the Staff Memorandums are part of the record of the case. JUDGE GEORGE: I hope Mr. Robertson will move it into evidence. It does need to be moved into evidence. But he still --- we'll get to his case. ATTORNEY MICHAEL: That's it then, Your Honor. Thank you. JUDGE GEORGE: Thank you, Mr. Michael. Mr. Kelsh, do you have witnesses? ATTORNEY KELSH: Yes. I would like to call Joe Hankins as the District's first witness. JUDGE GEORGE: Could you spell that name, Mr. Kelsh? ATTORNEY KELSH: Yes, it's H-A-N-K-I-N-S. JUDGE GEORGE: Thank you. The Court Reporter will place you under oath. --------------------------------------------------------- JOE HANKINS, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY KELSH: Q. Mr. Hankins, are you a Board member on the Jefferson County Public Service District? A. Yes, I am. Q. How long have you been a Board member? A. I was elected in March of this year, my first Board meeting was in April. Q. Where are you employed outside of the District's Board? A. I work for the Conservation Fund, the National Land and Water, non-profit, based in Arlington, Virginia. I have an office here in Jefferson County where I'm the Director of the Fresh Water Institute, a program of the fund. Q. What does the Fresh Water Institute do? A. We have a series of programs focused on, obviously, fresh water. We have an academic research function. We have a demonstration function, an education function, and also a technical outreach function all focused on water issues. Q. You have extensive background in aquatic matters? A. Yes, I do. Both my undergraduate and graduate degrees are related to environmental science. The focus of almost all of my professional work has been aquatic issues. Q. With the Fresh Water Institute are you not involved in the Water Advising Council that's looking into the Chesapeake Bay standards? A. Yes. It's actually a two part issue here. I volunteer my time with the Water Advisory Committee that's a construct of Jefferson County Commission, which brings together technical resources in the County to address water-related issues. I'm also involved on a professional basis through work with the Chesapeake Bay strategy process. We have a small contract with West Virginia DEP to assist with that effort. I'm also a participant on the State's Nutrient Criteria Development Committee, a subgroup of the Environmental Quality Group. Q. So you're actively working to examine what the Chesapeake Bay's criteria will be for West Virginia for meeting the Chesapeake Bay standards? A. Yes, we are. Q. You're obviously familiar about the technical standards in that area? A. Yes, I am. Q. From your work experience, you've become familiar with both conventional and alternative wastewater treatment methods, have you not? A. Yes. We have some of the earliest on-site alternative systems at our facility that the Fresh Water Institute installed for the County. I am familiar with a broader range of technology as it can be applied. Q. The complaint which Ms. Sheeley filed alleges that the District failed to obtain a Certificate of Convenience and Necessity when it was required to do so. Section 24-2-11 has certain specific requirements and I'd like to ask you about that. Has the District begun any construction of any plant, equipment, property, or facility for furnishing public sewer service to the Sheridan, Old Standard, or Thornhill developments? A. No, it has not. Q. Has the District applied for or obtained any franchise, license or permit from any municipality or other governmental agency for furnishing sewer service in the Sheridan, Old Standard, or Thornhill developments? A. No. Q. The Complainant also alleges that the District has violated West Virginia Code Section 24-2-12, which requires certain agreements to obtain the consent and approval of the Public Service Commission. I'd like to go through these one by one. There are a number of subsections in that statute. I'd like to read them with you one by one and get your indication as to whether the District has violated any of those specific subsections. Has the District entered into any contract with any other utility to operate any line or plant of any other utility, referring to the sewer service to the Sheridan, Old Standard, or Thornhill developments? A. No. Q. Has the District purchased, leased, or in any other manner acquired control, direct or indirect, over the franchises, licenses, permits, plants, equipment, business or other property of any other utility that is furnishing sewer service to the Sheridan, Old Standard, or Thornhill developments? A. No, we're not. Q. Has the District assigned, transferred, leased, sold or otherwise disposed of its franchises, licenses, permits, plants, equipment, business or other property or any part thereof for furnishing sewer service to the Sheridan, Old Standard or Thornhill developments? A. No, we've not. Q. Has the District, by any means, direct or indirect, merged or consolidated its franchises, licenses, permits, plants, equipment, business or other property with that of any other public utility furnishing sewer service to the Sheridan, Old Standard or Thornhill developments? A. No. Q. Has the District purchased, acquired, taken or received any stock, stock certificates, bonds, notes or other evidence of indebtedness of any other public utility for furnishing sewer service in the Sheridan, Old Standard, or Thornhill developments? A. No. Q. Has the District, by any means, direct or indirect, ventured into any contract or arrangement for management, construction, engineering, supply or financial services or for the furnishing of any other service, property or thing with any affiliated corporation, person or entity for furnishing sewer service in the Sheridan, Old Standard, or Thornhill developments? ATTORNEY MICHAEL: I'm going to object to leading on that, and ask that he break out those elements specifically. ATTORNEY KELSH: Your Honor, if he answers the question in its entirety, or to question in its entirety, we're going to be here a long time today. I don't see any benefit of breaking that out. JUDGE GEORGE: Any response to that? ATTORNEY MICHAEL: Yes. That section that he's reading contains a number of different elements, a number of which seem to be addressed by these exhibits that have been admitted into evidence. I'd like to hear this witness' non-repeating answer to the questions regarding those issues. ATTORNEY KELSH: Your Honor, I'm reading to the witness from the statute that is at issue. It's not a leading question. The witness has the ability to answer that in the affirmative or the negative. JUDGE GEORGE: I tend to agree. It's probably not leading. I do think the answer, if you kind of group them together, if he says no to all of those, then you can cross him on any particular form. Go ahead. ATTORNEY KELSH: Thank you. BY ATTORNEY KELSH: Q. Mr. Hankins, your response to that last question was, no? A. Yes, my response was no. Q. Finally, has the District required, either directly or indirectly, the majority of the common stock of any public utility organized or doing business in this State for furnishing sewer service to the Sheridan, Old Standard or Thornhill developments? A. No. Q. District acknowledges that it entered into two series of four agreements with Old Standard and Thornhill; correct? A. Yes. Q. That first agreement with Old Standard and Thornhill require the District to obtain a Certificate of Convenience and Necessity from Commission prior to closing; correct? A. Yes. Q. In order to file a Certificate of Convenience and Necessity, PSC requires an extensive information to be filed to accompany that application; does it not? A. That's my understanding. Q. Is the District in a position to file the Certificate of Convenience and Necessity for those two developments at this point? A. No, we are not. JUDGE GEORGE: Can you tell me why? A. There's an extensive amount of engineering and operation and maintenance cost data, final engineering plans, other permits and requirements, which we do not have with the information available to allow us to go through the checklist to finalize that. BY ATTORNEY KELSH: Q. Are you aware that the certificate application is subject to a 270 day statutory deadline? A. Yes. Q. Would it be counterproductive for the District to file an incomplete application then have to re-file it later? A. Clearly. Yes. Q. The Complainant has marked and moved into evidence the two series of four agreements with both Sheridan and Thornhill developments. Has the District entered into similar agreements with other developers? A. One example would be Deerfield Village, it's generally similar. Q. Is the District in the position now or shortly to make a certificate application in that case? A. My understanding is we have rethought on that. JUDGE GEORGE: I want to know more about this Deerfield Village. A. Deerfield Village. JUDGE GEORGE: Yes, one word. It's already been constructed, Mr. Hankins? A. It is under construction now. JUDGE GEORGE: What type of treatment plant is under construction? A. It is an Ashville RS-2 re-circulating sand filter design for a cluster development. The wastewater will be treated on-site and disposed of through ground allocation. JUDGE GEORGE: This is a package plant? A. We wouldn't term it a package plant. It's advanced on-site treatment for a cluster development of, I believe, 48 homes. JUDGE GEORGE: It's not what you would call a package plant? A. I think package plant has a little bit of a negative connotation from some of the old days. This plant is capable of advanced wastewater treatment and providing very high quality effluent. JUDGE GEORGE: What's the developer involved with Deerfield? A. Eric Lewis. JUDGE GEORGE: I was thinking, there's been no filings to the PSC at all regarding Deerfield? A. We have pre-filed for our certificate. JUDGE GEORGE: You pre-filed for your certificate? A. We fully intend to get that application. JUDGE GEORGE: So you guys arranged a certain agreement with a developer in this case to build this plant? A. The agreements that we entered into are generally similar to the agreements that are at issue in this case. JUDGE GEORGE: None of those agreements were submitted to the Public Service Commission for approval? A. No. JUDGE GEORGE: And the developer has not filed for a Certificate of Convenience and Necessity with the Commission? A. Not to my knowledge. JUDGE GEORGE: As far as you know, that transaction was crafted similarly to the one that's before the Commission today? A. Yes, sir. JUDGE GEORGE: That was crafted that way at the advice of your Counsel? A. Yes, certainly. JUDGE GEORGE: Go ahead. A. I guess if I could completely understand the ordinance. JUDGE GEORGE: It was Mr. Lewis' idea, the Board's idea, or Mr. Kelsh's idea? A. I think it was a follow along on the Sheridan and Thornhill agreements, yes. JUDGE GEORGE: It was a follow along with the Sheridan, Thornhill Agreements. The Sheridan, Thornhill Agreements occurred first? A. They were proposed first, yes. JUDGE GEORGE: They were proposed first. After you found this way of doing business, you did it again with Deerfield? A. We've had a longer relationship with Deerfield. Deerfield approached us about providing wastewater service, I believe like in the middle of 2003. JUDGE GEORGE: Why didn't you consider the Deerfield agreement to be an alternate administration agreement? A. I can't answer that. There's no public sewer service available locally to the Deerfield plant, or the Deerfield subdivision. JUDGE GEORGE: And all they're building in Deerfield is the treatment plant. They're not building anything else? A. Only what is on-site and necessary for collection. JUDGE GEORGE: So it goes to 48 houses? A. And it's specifically sized for that, Your Honor. JUDGE GEORGE: And you don't believe that is an extension of your facilities? A. It certainly is an extension. Perhaps in our capital assets, we take over of those assets at the point they're accepted within the hearing standpoint. JUDGE GEORGE: Do you know what an open mainline extension agreement is? A. Yes, I do. JUDGE GEORGE: What is an open mainline extension agreement is? A. It is an alternate financial arrangement when the District cannot --- if the project proposed does not meet the standard for payback relationship, we need to seek alternate ways to finance the proposed projects. JUDGE GEORGE: Did Deerfield approach you requesting you to provide public utility service or not? A. Yes, sir. JUDGE GEORGE: Why didn't you just do it? Why didn't you just provide the sewer service? A. We don't have any conventional central system available to that location that made financial and technical sense. JUDGE GEORGE: So why didn't you build this cluster treatment plant and build the lines? A. The developer approached us about providing the facilities to us, so the investments by the Public Service District and the general financial position of the Public Service District's customers was enhanced by the developer's offer of capital assets in the construction. JUDGE GEORGE: Essentially, the Deerfield development is going to be similar to the one at issue here today, and that is they're going to give you this facility? A. Fundamentally, yes. JUDGE GEORGE: Let's change the scenario just slightly. If the 48 homes had existing sewer pipes and then requested service, what would you have done? A. We would have looked at an alternate arrangement to extend our facilities, as a utility is required to do. JUDGE GEORGE: You would have filed that agreement with the Commission? A. I presume so, hypothetically. JUDGE GEORGE: Not as a result of any Commission review of your arrangement? A. I presume so, hypothetically. JUDGE GEORGE: So because it not only involves collection pipes, but also involves a treatment plant, that's somehow different in your mind; is that right? A. I think we were looking at the ability and the outcome to provide wastewater service for this development. JUDGE GEORGE: But because it involves water treatment --- would you agree with me that if it was at the edge of your pipes and the developer came and said they want service to these 48 homes, we're going to put the pipes in and turn them over to you, you would have to come before this Commission with an alternate mainline extension agreement? A. I believe so. JUDGE GEORGE: So because it involves even more than that, you suddenly no longer have to come before this Commission with an agreement? A. I don't know what the scale of the project is. JUDGE GEORGE: Well, it involves treatment? A. It does involve treatment. JUDGE GEORGE: And treatment is a lot more sophisticated than a collection pipe; would you agree with me? A. Yes, I would. JUDGE GEORGE: Would you agree that the Commission is in a much different, I'm not sure what --- would you agree with me that part of what the Commission does is typically process and act as Zoning Board in some sense in the proper location for a treatment facility? ATTORNEY MCDONALD: Your Honor, I am not sure this witness knows how the Commission does its certificate cases. JUDGE GEORGE: That's why I kind of wondered, because the witness has been put on and well qualified by Mr. Kelsh as an expert in this, that and the other. And he was giving his opinion about whether it is proper to have the agreement submitted to the Commission. I'm not sure how far afield I went. Do you want to continue? ATTORNEY MCDONALD: Well, I think he's qualified on water management and wastewater, but I don't think the PSD has had a certificate case since he's been on the Board. So he may not be up to snuff as you are with the ins and outs of a certificate case. JUDGE GEORGE: Okay. I thank you for that info. What else do you understand about certificate cases? A. As clearly referenced by Mr. McDonald, my time on the Board has been brief. I have been through PSC training, but I'm not versed in certificate law. JUDGE GEORGE: Assume for me that --- part of our certificate process is it gives the Commission many responsibilities to look at public interest in a sewer facility. Assume with me for a moment that one of the things it does is permits the Commission to consider whether the plant is properly sited. Whether it might be better to have the plant here, or four blocks over, or what have you. Part of what we do is sort of a zoning operation. Would you agree with me that the Commission is in a much different posture when the plant is already built there and you're saying, we want that plant that's already built? ATTORNEY MCDONALD: I guess that's a multiple part question. Zoning is a difficult word. Certainly I would submit that the Commission clearly has a substantial interest and expertise in the appropriateness of the physical facilities. JUDGE GEORGE: Well, the location of the physical facilities, the Commission can say, it shouldn't be there, it should be five blocks over, but if it's already there, what can the Commission do? ATTORNEY MCDONALD: I think in the Deerfield case, the developer is constructing the facilities. We are not. JUDGE GEORGE: And as you just brought up, the Commission also has expertise, and sometimes the Commission might say, we think this filter should be enlarged, or the pipe should be enlarged, or this is a problem, or that's a problem. Once the pipe is already in the ground, what's the Commission going to do. A. In this particular case, my understanding is that the West Virginia Bureau of Public Health and West Virginia DEP Office of Groundwater has completely reviewed the Deerfield project and all of its permits are in place. JUDGE GEORGE: Well, again, what the Commission decides is whether the proper regulation of the utility that you need a larger pipe or bigger filter, what's the Commission going to do? It's in an entirely different situation when the plant is already in the ground. A. At the point when we apply for a certificate as we fully intend, and have signaled our intent, then clearly the Commission would weigh in on that issue. JUDGE GEORGE: Why aren't these developers utilities when they build the plant? ATTORNEY KELSH: Your Honor, I'm going to object to that question. It calls for a legal conclusion. I don't think this witness is qualified to answer that given the technical and statutory definitions the Commission has developed, the statute and its precedents. JUDGE GEORGE: Very well. What's your understanding of why the developers are not utilities? It's a convoluted scheme to try to carefully comply with the law and not circumvent the law. Now, surely you're aware that this might be a delicate issue, when you decided to proceed with Deerfield and with the two projects that are subject to this hearing. You're not aware of this delicate issue? A. Yes, absolutely. I was aware that it was a delicate issue. JUDGE GEORGE: So what's your understanding of why the developers aren't going to be considered utilities? A. My understanding is a non-legal opinion, which has to do with the number of customers that the ---. JUDGE GEORGE: Forty-eight (48) in Deerfield it's going to be 800 in ---. A. Deerfield 48 homes, I believe, if they all filled out. JUDGE GEORGE: And the Thornhill project, it's going to be how many customers? A. I believe 500 and some customers at that one. JUDGE GEORGE: And the Sheridan development? A. Somewhere under 200 homes. JUDGE GEORGE: So what did somebody tell you was the magic number, that does not make these folks utilities? A. I understood 25 customers. JUDGE GEORGE: But all of these projects we talked about are way over 25. I'm trying to understand your answer. A. My understanding is that the definition of a customer is somewhat at issue and that there are multiple ways to interpret customers, and that the agreements were structured in such a way to clearly keep the number of customers below 25. JUDGE GEORGE: So Deerfield is actually under construction as we speak? A. Yes, it is. ATTORNEY KELSH: Could you repeat that question, Your Honor? JUDGE GEORGE: Deerfield is under construction as we speak. He said yes. ATTORNEY KELSH: Thank you, Your Honor. JUDGE GEORGE: Are either of the projects, the treatment plants, or the pipes under construction for either of these systems as we speak? A. I don't believe so. JUDGE GEORGE: Go ahead, Mr. Kelsh. BY ATTORNEY KELSH: Q. Mr. Hankins, the Administrative Law Judge asked you about your understanding of what makes a utility. You indicated the number of customers. Do you know how many customers Deerfield has today? A. Zero. Q. How many customers do Old Standard, Sheridan and Thornhill have today? A. Zero. Q. With respect to these four, a series of four agreements the District has entered into for the Sheridan and Thornhill developments, have other developers approached the District about making similar arrangements? A. Yes, there have been a number. There's a substantial interest in such arrangements, yes. JUDGE GEORGE: It's much easier this way; isn't it? A. I would not characterize that as easier, no. JUDGE GEORGE: You don't have to apply for a certificate before the project at all; do you? A. As framed in this situation, we would anticipate applying for a certificate. JUDGE GEORGE: Well, you don't have to get the certificate before you build the thing. ATTORNEY KELSH: Your Honor, I object to the form of the question. It implies the District is building the project. The District is not building them. JUDGE GEORGE: No. If I inferred that, I certainly didn't mean to infer it. Somebody's building it. It's not just appearing out of the blue; right? A. That's correct. JUDGE GEORGE: You've made contacts with the people who are building these things. A. Entered into understandings of outcomes, yes. JUDGE GEORGE: You know that they're building these things to turn them over to you? A. That is our understanding. JUDGE GEORGE: It's much easier for the developers if they don't have to get a certificate before they actually build the plants, and that's why you have so much interest in this whole scheme; isn't it? A. I can't speak to the ease or difficulty. I think one of the critical issues in this environment, which I'm sure Your Honor is aware of, is essentially crisis in wastewater treatment services and the needs to find alternate solutions. If I look at what is happening nationally, we're seeing reductions in SRF funding, the EPA had dramatic cuts this year. EPA at the federal level has signaled a substantial interest in decentralized approaches and reduction in collection systems and associated costs. We're also in a perfect storm environment of the Chesapeake Bay and it has dramatically enhanced and improved requirements for water quality. The Public Service District has been criticized in the past for the rates and costs involved in the provision of wastewater treatment service across the county. When we had an opportunity to have substantial capital assets at a very low cost to the District to help us meet our mission of providing wastewater services for customers in the county, that's certainly appealing. JUDGE GEORGE: It's easier in part because you don't have to provide public notice before the plant is built; is that correct, at least through the Commission? A. We are not building the plant. JUDGE GEORGE: Well, I'm not saying you're building the plant. But someone is building the plant, and you know who that someone is, and you got contacts with that someone. My question isn't whether you're building the plant. My question is, is part of the reason it's easier is because you don't have to provide public notice before the plant is built? A. The public notice process is clear. Whether it's easy or not, I don't know, but we have no objection to providing public notice. JUDGE GEORGE: You don't have to have public hearings before this Commission before the plant is built. A. I would submit, yes, that's true. JUDGE GEORGE: You don't have to have to undergo the delay that may be involved in the project, because there's some processing done at the Commission? Somewhat less than 270 days, and maybe the full 270 day delay of the Commission to process the plans, so it's easier. A. There is a process with multiple agencies that has to be gone through. To the extent that the Commission's process is longer, yes. JUDGE GEORGE: You've been trying to get rid of the agencies before the plant is built with this scheme, so it's easier for the developer. A. I don't know that we've gotten rid of the PSC, because we would have to apply for a certificate, we fully intend to. JUDGE GEORGE: After the plant is built? A. At the point when the asset ---. JUDGE GEORGE: I mean, the Commission couldn't say, it's not in the public interest and you can't use it to service customers. But that's a much tougher position to take than to make it larger, make it smaller, move it over three blocks or whatever. It's a much tougher position to take to say, okay, he's got $6,000,000 in this facility and you can't use it, because it's not in the public interest to use. Once it's in the ground, ---that's a fair piece down the road; isn't it? A. I'm not in a position to speculate what the Commission's thoughts on that would be. JUDGE GEORGE: So you're on the Board, and you're going to proceed --- I assume you voted to proceed with this Deerfield project? A. I did. JUDGE GEORGE: You voted to proceed with the two projects that are at issue now? A. Yes. JUDGE GEORGE: So what's the big advantage to the utility of doing this way, as opposed to having public notice and some Public Service Commission involvement and proceedings before the facilities are built? A. I think the largest advantage to the District, in the interest of providing high-quality enhanced wastewater service, is the ability, the implication, and the understanding that the District will acquire new customers at a very low cost in terms of the capital investment required. So that is the advantage. JUDGE GEORGE: You could have the same process with some kind of Commission involvement; couldn't you? A. Possibly. It's unclear. JUDGE GEORGE: Go ahead, Mr. Kelsh. BY ATTORNEY KELSH: Q. Mr. Hankins, do you know what the District charges approximately for a residential customer using the net allowance of 4,500 gallons per month? A. I think our unmetered bill is $48 and 50-some odd cents. Q. And your unmetered bill is based on a 4,500 gallons per ---. A. It's $10.79 per 1,000 gallons. JUDGE GEORGE: You said there was some potential interest in this, how many other developers are interested in hopping on board and building plants without Commission review? A. Again, that's a two part question. We have been approached by several developments or developers in the last months about finding alternate ways to provide wastewater services, given the capacity and constraints of the Charles Town plant. Whether there are other developers out there or not, I don't know. A half dozen of them approached us. JUDGE GEORGE: At least six more? A. I think so. JUDGE GEORGE: So if this door is opened, the Commission is not likely to consider a certificate filing from the District after the plants are built? A. If the process is anticipated, we would apply for certificates before the assets were ours, yes. JUDGE GEORGE: Go ahead. BY ATTORNEY KELSH: Q. Mr. Hankins, you indicated that in your response to the Judge's question that six other developments --- as many as six may have approached the District. I'm familiar that Bel Air, Logan's Hill (phonetic) Faraway Farms have approached the District about similar arrangements. Are you aware of any others? A. I know we've had some conversations --- my understanding was, Faraway Farms inquired about such arrangements. And just casual conversations mean many things, but certainly there is interest in decentralized plants and similar arrangements, yes. Q. With the exception of Sheridan, Thornhill, and Deerfield Villages, has the District entered into any formal agreements with any other developers? A. No, we've not. Q. Back to the District rates. Are District rates relatively high, as far as you know? A. It's my understanding, yes, they are high. Q. Do high rates pose a challenge to the District in fulfilling its mission? A. Certainly. We're in the customer service business, and our ability to provide services and expand our capital assets without rate increases is a challenge, yes, sir. Q. Eventually have to venture out and borrow money, particularly not to force a rate increase yourselves? A. On a case by case basis, that's a possibility, yes, sir. Q. What challenge does the District currently face in terms of meeting its duty to extend service? A. Just in terms of capital assets, we do not have --- we depend heavily on the City of Charles Town for wastewater treatment. As I'm sure everyone here is aware, the capacity of that plant is and will be an issue for a period of time. There is a dramatic demand for wastewater services in the county. The Public Service District is not the gatekeeper of those services. We're in the business of providing the service as best we can. So the growth and the costs that I was referring to earlier with regard to water quality, has created some substantial financial planning challenges. Q. Do you believe with the acquisitions of the Thornhill and Old Standard systems, the District will be able to ultimately provide service to those systems at a lower average cost than it currently costs to service other customers? A. Quite likely, yes. Q. In your experience at the Fresh Water Institute, and being on the Board and seeing what's been proposed at Sheridan and Thornhill, do you believe that the plants which the District will acquire ultimately from Old Standard and Thornhill will be capable of producing high quality effluent in compliance with the currently expected regulatory standards in the foreseeable future? A. Yes, absolutely. We're taking a very high technology approach to the problem. Q. You would expect that will meet Chesapeake Bay standards? A. Yes, sir. Q. Will it produce a higher quality effluent than the City of Charles Town is currently producing? A. It certainly should. It's designed to a different standard and a different performance capability. Q. If the Charles Town plant is required to come into compliance with the Chesapeake Bay standards, is that going to cost some money? A. Absolutely. Q. Will having other low-cost assets help the District to keep rates stable? A. Yes. I think it's prudent for us to invest in the technology that will meet future requirements up front. In this case, that technology and those assets are being provided to us at no or low cost. ATTORNEY KELSH: That's all the questions that have at this time. JUDGE GEORGE: Mr. McDonald? ATTORNEY MCDONALD: No Cross. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. So Mr. Hankins, let's see if we can understand what we're talking about here. In its very simplest terms, the agreement is that the developer is going construct a sewage treatment plant, collection system, and convey it to the District; is that correct? A. That's correct. JUDGE GEORGE: Can you break down the steps for me? It's a complicated dance. You lease back equipment, you serve people, you have agreements, and all of this stuff. Can you go through the dance real carefully with us so I can see who's got the customer and what rate he is, where the customer is and all the different things exactly? ATTORNEY KELSH: Your Honor, if I may. I can explain how the agreements work. ATTORNEY MICHAEL: No. I'd rather hear the witness explain. I was going to ask those same questions. JUDGE GEORGE: Let's see if he can do it. Could you go through the process? A. The property is now the District's, but has been conveyed to the District. JUDGE GEORGE: Just the real estate underneath the treatment plants? A. Real estate, the ground. We lease back that property. JUDGE GEORGE: That's the first step, the transfer of the property? A. Yes, sir. JUDGE GEORGE: Has that been done yet? A. My understanding is that with the Sheridan project, yes. JUDGE GEORGE: It's not been done for the Thornhill project? A. I don't believe so. JUDGE GEORGE: So the first step is the real property that's going to be underneath the treatment plant? A. Yes. JUDGE GEORGE: What's step number two? A. Then that property is leased to Old Standard. JUDGE GEORGE: So you lease it back? A. Yes. BY ATTORNEY MICHAEL: Q. That's the step I wanted to ask about. Why? Because if the whole purpose is to have them build the system and give it to the District, why would you want the step where you're leasing the property back to them? A. We're leasing it for the purpose of the developer to construct a project, capital assets. There's an understanding by the utility that they would build the capital assets. They would want the property leased to them so that they controlled use of the property at that time for that purpose. JUDGE GEORGE: So why transfer the property to the utility to begin with? Why not just leave it all in their hands? A. I can't answer that. BY ATTORNEY MICHAEL: Q. Well, isn't the reason so that the developer will not be considered a utility if they don't own the property? A. I can't answer that question. Q. Nobody ever discussed that with you? A. No. Q. You didn't raise the question at a Board meeting? A. No. Q. Weren't you curious about why this was such a complicated scheme? A. My understanding was, we were looking for a mechanism to capture these assets. Understand, this gets into subsequent steps. If the District is unsuccessful in making a case that this is a good deal and following along a certificate application, the assets then return to the developer at his risk and cost. Q. All right. So ---. JUDGE GEORGE: Before we go on, I want to go through the rest of the dance. So they give you this real estate, and you lease it back to them. What's next? A. They would design and construct facilities in use of the property. JUDGE GEORGE: But the design and construct of the actual treatment plant facility, the membranes, the pipes, the electric wiring, all of that. What input does the District have in that process? A. The District reserved the right to provide some engineering review on that design in anticipation of some future ownership responsibilities. JUDGE GEORGE: So your engineers looked at the designs? A. Both groups are anticipating that the facility at some point in the future may become an asset of the District, so it was in both of our interests to make sure that we were on the same page in terms of an asset that would meet our needs and our requirements. JUDGE GEORGE: So before they're actually constructed, your engineer looked at the design? A. Yes, sir. JUDGE GEORGE: You might say, changed it, or made something different, or made something better, or spend more money on it? A. I think at minimum, we were making sure that the plant met our requirements, as we would with any other construction. JUDGE GEORGE: So then the plant is constructed? Is that the next step of the dance? A. Yes, sir. JUDGE GEORGE: After they've complied with whatever engineering review you have? A. And other forms of review requirements that it's their obligation to obtain. JUDGE GEORGE: But nothing with the Commission, with other agencies? You need to respond verbally. A. Yes. JUDGE GEORGE: So then what's the next step? When is the first customer hooked into this system? A. That would depend on the build out plans of the developer. JUDGE GEORGE: So after the plant is built, what's the next step in your mind? A. At some point, presumably homes will be built, wastewater would flow to the plant. JUDGE GEORGE: Once the first home is built, is that the next step, the first home being built? A. Well, after the plant is constructed. JUDGE GEORGE: Okay. The plant is constructed, without Commission input at all. The raw sewage starts flowing after the first home is built; right? A. Yes. JUDGE GEORGE: At that point, when does the O&M agreement kick in? A. The District anticipated that we would be approached for an operational agreement, not an ownership agreement. But we may have a contract to operate the plant. It would still be the asset of the developer, but we'd just operate the plant so that the plant had licensed operators available. JUDGE GEORGE: So the developer is never going to have their own employees operating the plant? A. Not as we anticipate, it's conceivable if we didn't operate the plant. JUDGE GEORGE: As soon as the raw sewage starts going in, it's going to be your employees that are there operating the plant? A. That's what we would anticipate. JUDGE GEORGE: Then after a month of this raw sewage going into the plant, and it's time for the first bill to the homeowner that purchased this home, who sends the bill? A. That would be the Developer's responsibility. JUDGE GEORGE: So the Developer sends the bill? A. We would only have an operational contract. JUDGE GEORGE: So this first structure is being utility serviced by the Developer? A. Wastewater services are provided by the Developer. We have an operational contract to maintain the sewer. JUDGE GEORGE: After structure 25 is built and there are 25 homes that are sending raw sewage to the plant, who sends the bill to the customer? A. My understanding is the Developer continues to. JUDGE GEORGE: What about after customer 27? A. It would still be the Developer. JUDGE GEORGE: What about customer 800? A. At some point, when the financial situation and it became clear the development was a growing concern, houses were being sold and there are adequate customers for the District to be able to anticipate that our operational costs --- we don't have a capital cost, but our operational costs would be recovered by the number of customers that are present. That would be part of the certificate application process. Then we would take over the plant, so where that break is ---. JUDGE GEORGE: Would you agree with me that it's unlikely that if you only have 27 customers and you have a plant that's capable of treating sewage for 800 customers, it's not too likely that you're going to cover your operating expense with 27 customers? A. It's hard to tell at this point. We haven't done that economic analysis. JUDGE GEORGE: At some point, the plan is, after you get a certain number of customers, not necessarily the statutory number which constitutes providing sewer service, but some number that makes it economically viable for you to cover your O&M expenses, then you're going to start billing the customers? A. At that point, and this goes into your sequential question earlier, the asset, we would apply for a certificate and move toward acquiring, taking over the asset. JUDGE GEORGE: So after that 230th customer or whatever makes economically viable for you to have it, then you apply to the Commission and you have the 270 day wait, then the Commission will give its blessing or not give its blessing. ATTORNEY MCDONALD: Your Honor, forgive me again for speaking, but if you read the contract you'll find that ---. ATTORNEY MICHAEL: Objection, Your Honor. I don't want you suggesting an answer ---. ATTORNEY MCDONALD: Let me finish. ATTORNEY MICHAEL: No. I don't want him to suggest an answer to the witness, Your Honor, and that's what he's about to do. ATTORNEY MCDONALD: Your Honor, if you will read the documents, you will see that --- ATTORNEY MICHAEL: Object. ATTORNEY MCDONALD: --- the wastewater treatment plant will be transferred to the Public Service District upon completion of construction as soon as all the regulatory approvals have been gotten by the PSD, so we're not talking about 237 houses. JUDGE GEORGE: So your understanding of the arrangement is different from the witness'. I think Mr. Michael is right. I think you're attempting to help the witness out. ATTORNEY MCDONALD: Your Honor, you're asking him questions about documents that speak for themselves. Let the documents speak for themselves. JUDGE GEORGE: I'm asking him questions about what he understands about this complicated arrangement that he voted for, and his utility entered into with the Developer. I think they're fair questions. ATTORNEY MCDONALD: I'm saying, your questions assume things that are not true. If you'll read the document, you'll understand the structure. JUDGE GEORGE: You can correct it with other witnesses or when you cross examine this witness, or recross. The plan is, as far as you understand, that you're going to eventually, not right off the bat, but eventually you're going to be the utility provider to the customers connected to this plant? A. I think that's anticipated, yes, sir. JUDGE GEORGE: Very well. Mr. Michael, you may continue. BY ATTORNEY MICHAEL: Q. Do you know if the collection systems remain under the ownership of the Developer in the same sequence as the treatment plant itself? A. All of the assets, similar to other developers, would become assets of the District. Q. When the plant becomes operational, and the District is operating under the O&M agreement, that's when money starts changing hands between the Developer and the District; is that correct? A. At the point we have applied for permits and requirements, yes, there would be a transition period. At some point, the plant would become our asset. Q. No, I'm not talking about that. I'm talking about prior to the asset transfer, there's an O&M or operations and maintenance agreement. My question is, and I think you said this, the District will begin operating the plant for the Developer; is that correct? A. Under an operating contract, yes. Q. Does money change hands at that time under the operating agreement? A. Yes. We would be paid to operate the plant. Q. What's the basis of your payment and how is it calculated? A. My understanding is, it would be based on estimate of what the plant may cost the District to operate it. It is not in our interest to operate the plant in any loss. It's not related to the number of customers. Q. And you send that bill directly to them? A. To the legal team. Q. Then under your agreements, you're going to file --- let me back up a second. At some point, as you've told the Judge, after you've been operating it for a while, the plant, you'll apply for a certificate and ask for permission to have the plant and collection system transferred to the District; is that correct? A. That's correct. Q. Why at the particular point, the point that you believe, that the District believes a certificate is now necessary? A. I think we would apply for a certificate when we have all the information available to us to make that application, so this point, I can't really anticipate when in the process we would apply. Q. As far as requesting information, what information are you referring to? A. In terms of the operating costs of the plant, we need to understand all of that, the engineering design, the entire list of requirements in the checklist for ---. Q. All of that could be understood before the plant is constructed; correct? A. Yes, it could. Q. So let me ask you again. Why did you pick a point in time after the plant is constructed to apply for a certificate? A. We're not controlling the timing of when the plant is constructed. The planning process, the design for the development, that is underway. My understanding is that when we have enough information to allow us to reasonably go forward with a complete certificate application, we will do so. Q. I don't understand, I don't think. Is it your position that you won't get that information until after the plant is constructed and operating? A. My position is we don't have the information now. At the point when we have that information, we will ---. Q. Isn't that point before the plant is constructed? A. We're not constructing the plant, so we don't know whether those two ---. Q. As a matter of fact, the agreement says that the certificate will be applied for after the plant is constructed, after you begin operating it, and prior to the transfer of the plant to District; correct? A. Yes, I agree. Q. Now, you told the Judge you didn't think any of the manual construction had started on these projects. I'm going to read to you from the responsible standard from Commission Staff's Interrogatories, number 18, at Sheridan, the collection lines are 50 percent installed and the wastewater treatment plant is on order with the manufacturer. Are you aware of that? A. Yes. I think the specific question was whether the plant construction had started. I don't believe it has. Q. But the collection lines are 50 percent complete? A. I can't verify that. Q. Has the District inspected those lines before they were buried? A. No, we did not. Not to my knowledge. Q. Why not? Aren't you going to acquire them pretty soon? A. Yes, we will. Q. Why didn't you inspect them? A. I don't know. To my knowledge, I don't know if we have or have not inspected them. Q. Now, as far as the Deerfield ---. ATTORNEY MICHAEL: If I could approach the witness, Your Honor? I think I have a copy of the October 4, 2004 minutes from your Board of Directors meeting. BY ATTORNEY MICHAEL: Q. Isn't it a fact that at that meeting, I think you made a motion, that Deerfield be instructed to file a certificate? A. I think I made a motion for our legal counsel to complete the documents to pre-file on that. Yes, sir. Q. In fact, who did the filing, Deerfield or the District? A. I believe Deerfield Village made the application. Q. To the Public Service Commission? A. Yes, I believe so. Q. In fact, there's a pending case now. There's a notice of intent to file a brief filing. It's already been for the Deerfield project? A. Ye. Q. And you think it was done by the Developer? A. It was filed by Jim Kelsh, our attorney. Q. For? A. For us. Q. For the District? A. Yes. Q. Sir, are you treating the Deerfield situation somehow differently from Old Standard and Thornhill in terms of the requirements in a certificate case the institute initiated? JUDGE GEORGE: Deerfield is already constructed; is it not? A. No, it's not. JUDGE GEORGE: Well, already under construction? A. Portions of that development are under construction, and the plant is under construction. BY ATTORNEY MICHAEL: Q. Well, why did you make this motion? Let me just ask you that. Why did you feel that it was necessary that they get the certificate process started in Deerfield? A. I think we were anticipating the Deerfield to moving rapidly. It's a much smaller project with a smaller plant, so it just seemed appropriate to move forward quickly. We already have all the engineering plans and everything is approved. We have more information in hand to allow us to make that application. Q. And Deerfield treatment plant is under construction? A. I believe so, yes. Q. Does it concern you at all that the construction started before the certificate was even pre-filed? A. It's a concern, but we don't have capital at risk in that project. Q. That's what you made your comment on, is that if you had capital risk, you would have to have Commission's blessing or certificate is filed, and ---. A. That wouldn't be the sole concern, but it's certainly a significant concern. ATTORNEY MICHAEL: That's all I have. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Hankins, do you have available to you at your seat Exhibits Three and Nine that have been admitted into evidence? A. No, I do not. Q. You have the operation and maintenance agreements? A. I don't have those. JUDGE GEORGE: I can provide them. Just give me a second. BY ATTORNEY HAMMER: Q. Mr. Hankins, you've been handed Exhibit Three and Exhibit Nine, which are both titled operation and maintenance agreements; do you have those before you? A. Yes, I do. Q. Are you familiar with those documents? A. In general. If you have a specific question, I'd like the opportunity to review the question. Q. Okay. I want to start with some general questions about these documents. With the exception of the handwritten annotations on the two exhibits and the insertion of the Developer's names, would you agree with me that the documents are identical? A. I believe that was the intent. Q. So these are form documents? JUDGE GEORGE: The Deerfield expansion, you had them sign a similar O&M agreement? A. Okay. I'm responding to two questions here. JUDGE GEORGE: Respond to mine. His wasn't that good anyway. When Deerfield came, did they sign the same document with different notations? A. I believe it is generally the same. I can't speak for those exactly, but I believe they're the same. JUDGE GEORGE: If the next six developers come, assuming you're not ordered to cease and desist this practice, they'll sign similar O&M agreements? A. Excuse me. JUDGE GEORGE: Go ahead, I'm sorry. BY ATTORNEY HAMMER: Q. These form documents are what the District intends to use currently, has used in the past, and intends to use in the future; correct? A. We've used them in the past for this specific case. Any future use would be specifically reviewed. Q. Now, you testified under Direct Examination, that in addition to your duties as Director of the Fresh Water Institute, you're also a volunteer for the County's Water Advisory Committee? A. That's correct. Q. Your substantial concern is actively seeking to meet Chesapeake Bay standards? A. My personal interest, or the Water Advisory Committee's interest? Q. Your personal interest, both in your duties as Director of Fresh Water Institute, and your duties on the Public Service District, both of them. A. Yes. I think that's a significant issue facing the County, as a private citizen and as a professional, yes, it is. Q. In order to ensure water quality effluent standards, it's critical, wouldn't you agree, that the plant be designed and function properly? A. Yes. Q. In determining who designs these plants, I know from both Exhibit Three and Exhibit Nine that Thornhill on Exhibit Nine and Old Standard on Exhibit Three, it states on the form of the contract that they are primarily in the business of land acquisition. Do you see that? A. Could you point that out to me? Q. Sure. Page one of Exhibit Three, page one of Exhibit Nine. A. And your reference is to the District or the Old Standard? Q. No. It's Old Standard on Exhibit Three and Thornhill on Exhibit Nine, both exhibits state, whereas, insert developer, is primarily in the business of land acquisition; do you see that, sir? A. Yes, I do. Q. Is that a true statement? A. I can't answer that. Q. Did the District do any investigation into either of these developers prior to signing these operation and maintenance agreements? A. In terms of due diligence for these agreements? Q. No, sir. Did you investigate the background of, for instance, Thornhill, prior to signing this operations and maintenance agreement? A. Not in a formal way, no. Q. So your district made no formal investigation into whether Thornhill --- what the activities of Thornhill are; is that correct? A. Yes, I mean other than our familiarity with the parties involved. Q. Would the same be true of Exhibit Three, that the District made no investigation into whether Old Standard --- into what Old Standard's business was? A. Yes, I will submit that's true. Q. Now, I want to ask you about your duty on the District to ensure that wastewater standards are met, effluent standards. Looking at the operation and maintenance agreements, Exhibit Three and Exhibit Nine in front of you, if you turn to page two of either of the O&M agreements. Do you have that page two before you? A. Yes, for Exhibit Three. Q. Yes, that works. Do you know whether Old Standard or Thornhill has any experience whatsoever in the design of wastewater treatment facilities? A. I don't know, but I know that they have engaged ---. Q. At the time the District entered into this agreement, did the District know whether Old Standard or Thornhill had any experience whatsoever in the design of wastewater systems? A. I think it was anticipated by the District that they would engage engineering firms qualified to design them. Q. It was hoped for, is what you're saying? A. You're asking for my understanding, and that's my understanding. Q. But at the time the District entered into this agreement, the District had no idea whether Thornhill or Old Standard had any experience whatsoever in constructing or designing a wastewater treatment facility; isn't that true? A. I would agree. Q. Is there any other agreements that details the District engineer's obligations and duties for overseeing the design and construction of these wastewater facility treatment centers, other than these two documents? A. Could you repeat that please? Q. Sure. Is there any other contract that we don't have before us, but you're aware of, that governs the District engineer's responsibilities with regard to overseeing the design and construction of these two wastewater facility centers? A. I can't point to the exact language, but my understanding is that in these agreements ---. Q. I will come to that, sir. My question is, is there any other documents, other than these two documents? ATTORNEY KELSH: Your Honor, I think he was attempting to answer the question to the best of his ability and Counselor interrupted him. ATTORNEY HAMMER: Well, I'm going to come to these documents in a moment, but I'm asking about other documents. JUDGE GEORGE: Are there other documents, sir? A. Not that I'm aware of. BY ATTORNEY HAMMER: Q. So these two documents are the only documents that you're aware of that govern the District engineer's duties and responsibilities in overseeing design and construction of these wastewater treatment facilities? A. We have a relationship with the District engineer and his obligations to us. There's a relationship on all projects. We have other agreements that specify our requirements for physical facilities that become property of the District. JUDGE GEORGE: Your normal engineer is? A. Pentree. JUDGE GEORGE: Did you tell Thornhill and whatever that other one is, Old Standard, that they needed to use Pentree? A. That they needed to use Pentree, no. JUDGE GEORGE: So in this arrangement, they were free to pick any engineer they wanted to pick? A. Yes, I believe so. JUDGE GEORGE: Even to do it without an engineer, if they could do it without an engineer? A. Well, I think at some point it would get to a point where it's clear the facilities that were being constructed, if it were not engineered, that would become patently obvious at some point. We would be at odds in terms of the outcome of the project. JUDGE GEORGE: And the way you protected yourself was you said, we're going to be able to review with any engineering problems and we're going to be able to do on-site inspections as the construction is going on, we're going to keep our nose in it; is that fair? A. Certainly, we were going to have input into the engineering design of the project, yes. BY ATTORNEY HAMMER: Q. But there is no document that governs the extent of that input, or who pays the costs, for instance, if the engineer finds something of concern to him? A. I think it was anticipated that the design would meet our requirements as a minimum. The Developer or his engineer agreed to add ---. Q. Did you provide some sort of document to the Developer that these are our engineering requirements, that it has to be at least this, or has to be at least this? A. I can't answer that specifically, but my understanding was that had been communicated. Q. That was part of what you understood to be the whole procedure, is that they had to meet your standards? A. Yes. Q. Was your understanding communicated? How was it communicated? A. That question might be best answered by our general manager. Q. So you believe that your general manager would be able to testify that there is some communication that lays out any detail of the standards for how these two contractors are to build these wastewater treatment facilities? A. I think our general manager can speak to the issue of how we enter into relationships with facilities that were constructed by others, and how our engineering and inspection procedures are applied in these cases. Q. But there's no existing agreement that governs those details at this time; is there? A. I don't believe so, but I can't answer that question. Q. Regardless of whether or not the District is ultimately satisfied with either the design or the construction of these facilities, isn't it true that pursuant to paragraph two of both of these agreements, the District is obligated to operate and maintain these facilities? It's expressed in a mandatory, they shall do this? A. I think as we look, the facilities must be able to meet regulatory requirements. Q. But isn't the District's obligation, no matter what, under these two operation and maintenance agreements to operate and maintain these sewer systems, because it states they shall do it? A. I believe that's true. Q. You stated earlier that the District's mission, and I'll quote, you tell me if I have it wrong, their mission is to provide wastewater services to customers in the County? A. Yes, that's true. Q. You testified earlier in response to one of the Judge's questions, that there are currently zero customers; correct? A. For a specific development? Q. Yes, sir. A. Zero customers at the present? Q. Yes, zero customers at the present. You're not billing anybody right now; are you? A. With the Sheridan Development? Q. For wastewater treatment services, you're not billing anyone, for Sheridan, for Thornhill, either of those? A. We have customers that we are providing wastewater services for and that we are billing. Q. In those developments? A. In these developments, no. Q. So in those developments, you have zero customers; right? A. That's right. Q. So the purpose of this facility is not to provide service for existing customers, it's to provide service for future customers; isn't that correct? A. I suspect that's true. Q. But you stated, and correct me if I'm wrong, that you believe both plants will ultimately produce high quality effluent? A. Yes. Q. You hold that belief despite not knowing anything about the background of either Old Standard or Thornhill; true? A. I hold that belief based on my understanding and some significant knowledge of membrane technology. Q. I'm asking about your knowledge about these two proposed contractors. You've already testified you had no knowledge about their backgrounds. A. Could you restate the question, please? Q. Sure. You testified that you believed that the plants will ultimately produce high quality effluent, and you hold that belief, notwithstanding the fact that you know nothing about the background of either of these two developers. A. My belief in the ability of the plants to produce high quality effluent is predicated on the technology that's been proposed, and obviously the construction and operation of those plants to meet all regulatory requirements. The effluent is based on the technology and the operation of the plant. JUDGE GEORGE: When did you first become aware of the exact nature of the technology that the developers would use to treat the sewage? A. In our research work, as part of my professional day-to-day work, we had been looking at membrane technology from several vendors, probably 24 months ago. JUDGE GEORGE: That wasn't my question. My question was, when did you first become aware that Old Standard or Thornhill was going to use that particular type of technology in these developments? A. I think it was expressed in Public District meetings that the technology was proposed. JUDGE GEORGE: Did the District approach these developers and say, you have this complicated scheme, or did the developers approach the District and say, we this type of case? A. I think the initial contact was made before my time on the Board, so ---. JUDGE GEORGE: So you don't know. I'm just wondering when in the process you found out what type of treatment technology that you had. Was it very early in the process? A. It was very early in the process, yes. JUDGE GEORGE: They said, if we do this, we're going to need this type of technology? A. I think that the expression of concern was that the developers were interested in putting in the very best technology that they were able to support, and membrane technology is one of several out there that they chose. JUDGE GEORGE: That's the one they mentioned? A. Yes. BY ATTORNEY HAMMER: Q. They mentioned that technology, but nowhere in this contract are they contractually obligated to use that technology; are they? In fact, their only obligation is in paragraph one, that at a minimum they meet or exceed all criteria required by the West Virginia Division of Environmental Protection. In fact, you don't know --- they're not contractually obligated to use any particular technology whatsoever. A. I don't believe that in these agreements the technology is specified. Q. Wouldn't the PSC have unique knowledge and expertise in reviewing the particular type of technology to be used in constructing these facilities? A. I can't speak for the PSC's knowledge of this technology. I would hope that they would have the ability, yes. Q. Wouldn't it make sense then to give the PSC the upfront opportunity before construction to review the design of these proposed facilities? A. They're one agency of several that have expertise in reviewing wastewater applications. Q. In fact, aren't these contracts simply a subterfuge to avoid requiring PSC approval through obtaining a Certificate of Need prior to building these facilities? A. I would not characterize it as a subterfuge, no. Q. Now, the Fresh Water Institute that you're a director of, that Institute is in business providing alternate solutions; aren't they? A. We are in the research and demonstration, we're not for profit. We're not in the business of providing wastewater solutions, no. Q. And in the course of that research, you study the use of membrane technologies; correct? A. Yes, we do. Q. The very technologies that you're hopeful will be used by the developers in these projects? A. Yes, that's true. Q. Potentially, the Fresh Water Institute stands to benefit by the implementation of a membrane technology that it has been recommending for years; true? A. No. I see no relationship. We have an academic research institution. We're looking at a range of treatment technologies. Membrane technology happens to be a cutting edge technology that we have examined in our research. Any investment we have there from a research standpoint has been fully paid for by us. There's been no contribution --- if that's where you're going with this question, there's been no contribution or benefit that has accrued to the Fresh Water Institute because of the developer's choice to the technology. Q. No benefit whatsoever? A. None. Q. Even though the Fresh Water Institute receives funding to study this particular type of technology? A. We receive funding to look at different technologies. Q. Including this technology? A. Including this technology. That particular grant relationship to look at membrane technology was approved two years ago, well prior to my position on the Board and well prior to any of these agreements. Q. In your efforts to actively meet Chesapeake Bay standards, have you also sought to meet, to actively protect local water standards? A. Could you clarify where you're going here? Q. Sure. The Town of Bolivar, of course, has a concern about its water supply. A. Yes. Q. What have you studied with regard to these applications to ensure that the Town of Bolivar's water supply is not negatively affected by either of these plants? A. Are you referring to my professional involvement, or PSD's? Q. On the PSD. A. I don't know if we had looked at that issue directly. Q. Have you done any study whatsoever of the type of geology in the area where these plants are proposed? A. No, the PSD has not. Q. Are you aware professionally that the type of geology is called or characterized as a karst geology? A. Yes, I am. Q. Can you explain for the record what karst geology is? A. Karst terrain generally makes reference to limestone derived bedrock and the associated landscape that's associated with this area. Karst generally is understood as, in this area, the Great Shenandoah Valley, which extends to multiple counties south in Virginia and up into Pennsylvania. We all share much of the same bed rock, and geology, and hydrology. JUDGE GEORGE: Does Bolivar get its water from the river or from wells? A. I can't answer your question. BY ATTORNEY HAMMER: Q. Now, you mentioned that karst is characterized by a certain hydrology. Would you agree that that hydrology involves rapid movements of water from one location to another across the County? A. I'm not a hydrologist. But my understanding is that can occur in karst, yes. Q. And that karst geology is subject to various fault systems caused primarily by erosion. A. Faults and solution channels, yes. Q. That should one of those faults or solution channels open up beneath one of these pipes that's been installed without your inspection, there is a potential that that pipe could discharge into the water supply? A. That's two parts. As I indicated in my earlier testimony, I don't have direct knowledge of whether we had inspected the pipes or not, but I would submit a failure with wastewater collection system can cause both infiltration and exfiltration and potentially damage groundwater, yes. Q. And if groundwater is damaged, there's a potential to endanger public health; do you agree with me? A. Certainly, potentially, yes. Q. That makes it all the more important that the PSC has approved a process be gone through prior to the construction of one of these projects; doesn't? A. Along with a host of other agencies and inspections. ATTORNEY HAMMER: No further questions. Thank you. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: Thank you, Your Honor. CROSS EXAMINATION BY MR. FAULKNER: Q. Good afternoon, Mr. Hankins. Mr. Hankins, the April meeting in 2004, where these four agreements were basically voted on by the PSD, was that your first meeting at the PSD? A. Yes, it was. Q. And you were appointed by the County Commission when? A. In March. I don't know the exact date. Q. So at whatever County Commission meeting in March, then approximately what time in April was the PSD meeting that was ---? A. I can't speak for the exact, but we generally meet early in the month on Monday. Q. Early in the month. So between your appointment and that first meeting, did you receive briefing from anybody from the PSD, either your other two commissioners, or from staff, or from counsel regarding your duties or any agenda items that might be coming up at that first meeting? A. I did have several conversations with Sue Lawton, as a general manager, and just casual conversations with the other Board members to try to see what the issues were. Q. And in those discussions, did they ever talk about the role of the PSC at the state level vis-à-vis what the PSD does locally? A. I was generally aware. At that point, I had not gone to a PSD board member training, but I was generally aware of the relationship. Certainly my education as Board member had a steep learning curve, as you can surely appreciate. Q. What is your understanding of the role of the PSC to the PSD? A. A public service district is a utility, and our actions, or actions and existence are heavily controlled and regulated by the State Public Service Commission. Q. In the documents that have been discussed so far, especially the Exhibits Two, Three, Four and Five, which make up the Sheridan package, when did you first see those documents? A. They arrived in my packet of materials that were provided to Board members prior to me. Q. And was there any discussion with either Counsel or with Susan Lawton about these items prior to the Board meeting? A. I had asked Sue Lawton for some background information. There was no discussion before the Board meeting. Q. And what did Ms. Lawton --- what were some of the questions you had and what information did she impart to you? A. Obviously, this has been a while, but my concerns were probably characterized by trying to get up to speed on what this was about. Also, I was concerned about whether the development, particularly with this case, where it was in the county planning process, and whether this was enabling or not to that process. Q. At any point in these discussions, were you informed about either the March 1st PSC Final Joint Staff Memorandum requiring that these developments and the PSD file a joint application for a Certificate of Convenience or the March 24th recommended decision on this matter by the PSC? ATTORNEY MCDONALD: Would you repeat that question, please? JUDGE GEORGE: He doesn't have a copy of the decision, sir. MR. FAULKNER: Oh, I see. Sure, I thought that --- I only have one copy of it, but I thought that there was a recommended decision underlying, with the signature of Miles Cary. JUDGE GEORGE: That's not --- there's a misunderstanding somewhere. MR. FAULKNER: Okay. JUDGE GEORGE: Go ahead. MR. FAULKNER: All right. ATTORNEY MCDONALD: Your Honor, I asked that the question be repeated. MR. FAULKNER: Okay. I'll restate it. BY MR. FAULKNER: Q. At any point prior to the April meeting where these four documents were put forward, were you informed that this matter had already come before the PSC and that a Joint Staff Memorandum had been written on these developments and on the sewer plants proposed for those developments? A. I don't remember specifically when I became aware. I believe you're referring to the cooperative venture? Q. Yes, cooperative venture. A. I don't remember specifically when I became aware or if I became aware prior to the meeting. Typically, during our PSC meetings, we meet with Counsel, he provides us an update on current litigation and other issues. And if I wasn't aware prior, it would have been discussed in our meeting. JUDGE GEORGE: So at least, does the PSC make some sort of general filing of standard or policy of developments prior to this case? A. There was a cooperative venture agreement, I understand. And this is history, prior to my presence on the Board. There was a co-op venture related to these developments submitted, to my understanding it wasn't acted upon. That's about the extent of my knowledge. JUDGE GEORGE: So your understanding of what the utility was trying to do here was to do what, try to get the Commission to a hearing with these two developers? A. Generally, yes. JUDGE GEORGE: For these same projects? A. Whether they're the same or not, I can't answer. JUDGE GEORGE: And there was a contrary Staff recommendation where the utility approved? ATTORNEY KELSH: Could you repeat that question, please, Your Honor? JUDGE GEORGE: I asked him if there was a contrary Staff recommendation that the utility approved. A. I can't answer ---. ATTORNEY KELSH: Contrary recommendation approving that the cases be dismissed? JUDGE GEORGE: No. Contrary to the suggestion that the Commission approved some type of cooperative ventures. ATTORNEY KELSH: Oh, yes. A. I can't answer to the sequence of events. JUDGE GEORGE: Very well. Mr. Faulkner, would you read that Case Number --- MR. FAULKNER: Yes, the Case Number is ---. JUDGE GEORGE: --- that they made the Decision in? MR. FAULKNER: Yes. This is Case Number 03-1543-PSD-PC. This was filed on September 19th, 2003. And there was a March 1st, 2004, Final Joint Staff Memorandum which recommended that this application relating to a cooperative venture agreement between Jefferson County Public Service District and Thornhill be --- and then also between the Jefferson Public Service District and Sheridan be dismissed and that ---. JUDGE GEORGE: I don't think we need to go into much greater detail about it, but I do want to put all of the parties on notice that I'm going to review that case file. I'm putting you on notice that I'm going to look at that case. MR. FAULKNER: Thank you, Your Honor. ATTORNEY ROBERTSON: Robertson, Your Honor. At this particular --- let me --- it may clarify everything. First of all, in the Staff's final recommendation in this particular Complaint case, I did go ahead and attach both of the cases that were filed as 03-1543 and 1544 as it links to the Staff recommendation and the Staff recommendation in this Complaint case. JUDGE GEORGE: Thank you. BY MR. FAULKNER: Q. Mr. Hankins, you mentioned in your earlier testimony that you saw this as a delicate issue. What led you to that conclusion? A. I think it's been indicated by other witnesses, wastewater treatment and the issue of planning and growth are sensitive issues to the County. Accordingly, there's a lot of interest in these cases. As a citizen, I'm aware it's just a general atmosphere and environment regarding planning in the County, so I think it's fair to say it's delicate. Q. Given that the PSC's role is to help determine the appropriate location of facilities, did you feel in the case that these four documents that came before the PSD in April, that the PSD was in a better position to deal with this arrangement locally as represented in these four documents, than to go to the PSC? UNIDENTIFIED SPEAKER: I'm going to object to the question. I think it's stating a false premise that --- and apparently the Judge agrees with this --- the PSC --- this is a Board of Zoning review for plant sizing. The PSC files the certificate applications, but that's primarily to deal whether the investment is prudent or not, and ---. JUDGE GEORGE: I do disagree. There have been cases where the whole finding of the hearing is whether or not the plant is properly sited here or it's a public nuisance on the side of the road and that ultimately the Commission does have siting authority for sewer plants and some other utility facilities as well. So I would overrule the objection. You may proceed. BY MR. FAULKNER: Q. Will you please answer the question? A. Could you repeat the question, please? Q. The question is that at the April 2004 meeting where these four documents came forward for your review and approval, did you feel, personally, since you voted for these four documents and the arrangements that they represent, that the PSD was in a better position to determine the appropriate location of this plant than the PSC would? A. My vote was not based upon that assumption. My vote, at the time, was based on my understanding that the development had a bigger share in this case and received County Planning approval and the District had already entered into a mainline extension agreement to provide wastewater services to the development. Subsequently, it became impossible for that anticipated wastewater treatment service to come to fruition. And my understanding at the time, and remains, that we were provided an opportunity to fulfill our commitment and obligation to provide wastewater services in a manner that was favorable both to the District and, apparently, also to the development. Q. Provide wastewater services to whom, since there were no houses at that time nor are there in Sheridan at this time? A. Well, typically in any new development, there are no houses when these agreements are entered into, so ---. Q. Then what is the duty of service? A. It's anticipated. It's ultimately a business venture that, I think, the District frequently enters into relationships, anticipates relationships based on future economic development. Q. The capacity of this plant is how large? A. The initial plant design, my understanding is it's 50,000 gallons per day. And my understanding is that the building down at the Sheridan Old Standard plant would be 125,000 gallons. JUDGE GEORGE: Sir, is it just one treatment plant for both or two treatment plants? A. No, they're separate. JUDGE GEORGE: Two separate facilities and they're both going to do 50,000 gallons per day? A. I believe the Thornhill plant is 100,000. JUDGE GEORGE: 100,000 gallons per day for Thornhill and 50,000 for Sheridan? A. Yes, sir. JUDGE GEORGE: And they're both expandable to increase their capacity? A. Yes. Typically, it's good practice to build facilities that have some readily expandable capacity. BY MR. FAULKNER: Q. And how many houses with an average use does 50,000 gallons a day take care of? A. Depending on whose numbers you use, we typically figure roughly 180 gallons per day, plus an infiltration allowance per house. So it would be anticipated that the 50,000 gallons per day would approximately handle the Sheridan development. Q. I asked the question for 50,000 gallons a day, how many houses would that handle given those numbers you just mentioned? A. I can't do the math in my head but it could be divided out. Q. Because I think it's larger than 178 homes. A. Again, my recollection was the development was somewhat under 200. That may have been inaccurate. Q. But the issue is, did the PSD or did you personally consider that this plant was being built for more than just Sheridan? A. I think typically when you design facilities, they're not necessarily designed for the full build out of development from day zero and there are many cases where developments take several years to reach their flat design capacity. And in this case, the wastewater facility would be able to be quickly upgraded through the addition of memory cassettes so the burden to upsize the treatment capacity of the plant is minimal. Q. The question I'm trying to get to is the plant, especially with its capacity going up to 125,000 gallons a day, is designed to serve more than just the Sheridan subdivision or could be designed to serve more than just the Sheridan subdivision? A. I believe we had also anticipated that the Shipley School and the Cliffside Quality Inn would also be handled by the plant. Q. Do you know that the Cliffside Quality Inn has been a customer of the Harpers Ferry-Bolivar PSD for well over 40 years and is therefore on that system and is --- do you know that? A. Yes. Q. Did anyone from the PSD talk to Cliffside or the Bolivar-Harpers Ferry PSD about removing a customer from them? A. My understanding was the Cliffside plant has it's own wastewater treatment facility? Q. That is not true. MS. FAULKNER: No. JUDGE GEORGE: Well, you're asking him questions. He's not the witness. MR. FAULKNER: Okay. You're right. Okay. Sorry. BY MR. FAULKNER: Q. Anyway, did you, at any point, interact with Harpers Ferry-Bolivar PSD about taking customers away from them? A. No. Q. Did you know if anybody talked to the principal of Shipley's School or to the Jefferson Board of Education? A. No. Q. So how do you know that these were plans? I mean, who represented to you that any discussions or any commitments had been made? A. No one represented those discussions to me, although I have been aware through other activities that have been discussed here that wastewater treatment in that area is an issue. The Health Department has pointed out concerns in that area and that there have been some performance problems for those facilities, so in the interest as a utility, it's actually public health. And it's not unusual that we would look around for improvements to be made. Q. Are you familiar with what they call the LISA (phonetic) system of zoning that we use in Jefferson County? A. As any citizen is familiar, yes. Q. And could you describe for the record your understanding of what LISA --- what zoning under LISA means? UNIDENTIFIED SPEAKER: Objection. Far beyond the scope of this --- MR. FAULKNER: I disagree. UNIDENTIFIED SPEAKER: --- the issues in this case. MR. FAULKNER: I disagree, Your Honor. This is the heart of why this plant is being built where it is and why they're going about this process to end run the PSC regulations. UNIDENTIFIED SPEAKER: Your Honor, that's an issue for the local LISA regulatory body. JUDGE GEORGE: I tend to agree but what worries me though, since both you and Mr. Kelsh on Cross Examination asked a witness if they opposed particular developments in the Board of Zoning. UNIDENTIFIED SPEAKER: Okay. JUDGE GEORGE: So you opened the door to questions related to zoning. MR. FAULKNER: Those are questions regarding zoning procedure and complaints, participation was in those procedures but did not get to the substance of those zoning stances. JUDGE GEORGE: His question was, are you aware of what the procedures are. His question of this witness was related directly to procedure. ATTORNEY KELSH: Your Honor, I asked a witness about her involvement before to impeach her testimony and she was just interested that people follow the rules. That was obviously not the case. JUDGE GEORGE: I understood the purpose of your question, but I think by delving into that area, you opened the door for other parties to talk, at least in a limited nature, about the Board of Zoning. I won't let him go very far, but I think you opened the door. You both did. You may proceed. Don't go too far with this. BY MR. FAULKNER: Q. Will you describe for the record your understanding of what LISA means in terms of zoning, in particular to public sewer availability? A. Again, as a citizen, my understanding is that the LISA score is a component of the County Engineering and Planning Departments assessment of the suitability of a site for development. The LISA system came out of the USDA's Soils Analysis primarily and incorporates a number of metrics that are then assembled into a score. And that score could be used --- or has been used locally to determine the suitability of the public's interest in developing a property. MR. FAULKNER: What I'd like to do is to submit for the record a part of Article VI, Development and Review System, which explains LISA. JUDGE GEORGE: You can attempt to do that through your own witness. MR. FAULKNER: Okay for this. Okay. What I want to do is to just ---. BY MR. FAULKNER: Q. Do you know that the Driggs (phonetic) property, which the Old Standard Quarry proposed sewer plant is going to be located on is zoned rural at the moment? A. That is my understanding. I don't know that specifically, but that's my understanding, yes, sir. Q. And currently, if no sewer plant existed on that site, the developer of --- if any development ever was proposed for the Driggs property, the Old Standard Quarry site, would fall under rural development rules. Do you understand that to be the case. A. You're going to have to repeat that. Q. In other words, if no sewer plant was built, if this plant was not built, the Old Standard Quarry/Driggs property would remain a rural zoned parcel? A. I can't answer that question. ATTORNEY MCDONALD: Objection. That's totally within the purview of the local planning zoning board. MR. FAULKNER: All right. I'll rephrase my question. BY MR. FAULKNER: Q. Do you realize or did it ever occur to you that by building the sewer plant on a rural zoned area is going to add LISA points to allow a rural zoned area to be developed? A. I understand that the availability of public water and sewer, public infrastructure, is a component of the assessment of the suitability of a parcel's development. I can't speculate as to the County planning and zoning process would attempt ---. JUDGE GEORGE: I think that's probably as far as you want to go. BY MR. FAULKNER: Q. Well, my follow-up would be that the PSC review of locations of sewer plants prior to their being built is a function of zoning at the state level. Do you agree? A. Of a land use zone? Q. Land use, yes. A. That's not my understanding. But again, I'm not versed in what's involved. Q. The last issue then is who is the PSD's engineer? A. Pentry. Q. Pentry. Who is the engineer who built and designed Sheridan? A. We have interacted with Potesta Engineering, which is the engineering firm. Q. And who's the designer or/and builder of the sewer plant for Sheridan? A. I believe Potesta, but again, I can't answer that question specifically. Q. Is there any relationship; do you know, between Potesta and Pentry in terms of affiliation or anything? A. I can't answer that question. Q. From your own standpoint as a member of the Board of PSD, and therefore a person who oversees operations of the PSD, what steps do you hope to see taken to make sure that this plant is built to specifications and that all proper inspections are conducted? A. We clearly have procedures and processes like I mentioned earlier in place. We will be involved in all of the design and the inspection of the on-site facilities. Does that answer your question? Q. Yes, sir. MR. FAULKNER: That's all, Your Honor. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: Yes. I have several questions of Mr. Hankins. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Hankins, I'm going to get this correction first. At Sheridan, you did not say that to your knowledge you don't know whether the District has inspected the sewer lines that are in the ground at Sheridan? A. I don't know. I can't answer that question specifically. I'm sure someone else on our staff can answer that. Q. Okay. That's as far as I was going with it. I'll see if someone else on the staff ---. So let's say that nothing is inspected before the District --- looking at the District's proposal to buy this Certificate and ---. MR. FAULKNER: You started with an initial phrase. I want to make sure I understood that phrase. JUDGE GEORGE: We're having trouble hearing. ATTORNEY ROBERTSON: Okay. Is that better? JUDGE GEORGE: That's better. ATTORNEY ROBERTSON: Better, okay. I'll just need to speak up. Sorry about that, Your Honor. BY ATTORNEY ROBERTSON: Q. Looking at when the District would inspect with Sheridan, that would be at the time you would file, the District would file the certificate? A. I don't know that those two actions are tied or they would occur together. Q. But if the District is going to take over a system in a plant that has already been built by the developer, at least the way you understand this process, then the District, before it would file the Certificate, they're going to inspect both the lines and also the treatment plant that's already been built? A. Yeah. I think our inspection process would occur both during construction, as well as --- or in other words, as-builds construction to make sure the facility met the design intent and is performing properly. JUDGE GEORGE: You're going to be looking at these sites before they go into construction, you're going to have inspectors out there on an ongoing construction and after it's all over, you're going to walk through it and eventually look it all over; is that fair to say? A. I think so. Yes, sir. JUDGE GEORGE: And in that case, the plan all along is for this to be your equipment, eventually? A. It's anticipated that it could be, yes. BY ATTORNEY ROBERTSON: Q. Looking at whenever the District would file the Certificate and you're looking at that eventually becoming District property, District's customers. If the Commission would rule --- in your scenario, rule that the District should not be taking over a plant that collects onto any customers that are in Sheridan, I mean, then what would the District do? A. I presume we could conceivably continue to operate the plant under an operating arrangement, a contract. We may walk away. The developer would choose another path. JUDGE GEORGE: Would you agree with me that --- and I know you may not know, but would you agree with me that if that happened, either you continue to operate or maintain it or whether you walk away, either way, the developer --- public utilities. Would you agree with that? A. I couldn't speculate on that. BY ATTORNEY ROBERTSON: Q. You had talked about looking at the Operation and Maintenance Agreement. Was that in your opinion as a Board member the District entering into the O&M Agreement with Sheridan and then the other agreement with Thornhill --- is it your opinion on the Board that that agreement should be approved by the Public Service Commission? A. I'm not sure that I understand your question. ATTORNEY MCDONALD: Could you repeat that question, Mr. Robertson? ATTORNEY ROBERTSON: Yes. BY ATTORNEY ROBERTSON: Q. I'm saying the O&M Agreement that's been entered into by the District with Sheridan and/or Thornhill, is it your opinion as a Board member of the District, does that agreement need PSC approval? ATTORNEY MCDONALD: Objection. Calls for a legal conclusion. This witness is not qualified to answer that. MR. FAULKNER: You know, I was going to object on the basis of asked and answered. In the beginning of Mr. Hankins' examination, I went through the agreements that required approval under 24-2-12. His answer to all those questions was no. JUDGE GEORGE: I think it's a fair question. He voted to proceed with this. I think it's a fair question of whether he has his own opinion. I know he's not a lawyer. I'm not going to cite this part of the transcript as proof that this is or is not a situation that requires Commission approval. But we're entitled to see what he thinks. MR. FAULKNER: So after all that, could we restate the question, please? BY ATTORNEY ROBERTSON: Q. With the O&M Agreement entered into the District with Sheridan and also the similar agreement with the District and Thornhill, is it your --- you're sitting on the Board as a Board member. Is it your opinion that those two agreements should come to the PSC for Public Service Commission approval? ATTORNEY MCDONALD: Renew the objection. JUDGE GEORGE: You can answer. I've already ruled on his objection. I'm not sure why he's objecting again, but you can state your opinion on whether or not you think those zoning agreements should've been, or had prior approval. A. I don't know. I know that we have some level of ability to enter into contracts at some level. But whether these agreements would or would not need PSC approval, I don't know. I would count on our Counsel to guide us through. JUDGE GEORGE: And that's what you get in this case. Your Counsel said that this is something you can do, so they go out and do it? A. Yes, sir. BY ATTORNEY ROBERTSON: Q. Since you just recently were appointed back in April or at least you were first named back in April 2004, at this particular time, have you had an opportunity to attend one of the PSC's Board Member seminars? A. Yes. Q. Do you know approximately what date that was or the month? A. I believe it was in October. Q. Just ---. A. Most recent ---. Q. I want to turn your attention back to the Deerfield development. Subject to check, if I told you that the District filed a Notice of Intent with the Public Service Commission on or about September 9th, 2004, did you see a filing of a Notice of Intent with the Commission? A. I understood that a Notice of Intent was filed, yes, sir. The date, I can't remember. Q. But you admit that the District has filed for the Deerfield Village and that is an intent with the Commission? A. For certificate, yes, sir. Q. And my understanding of earlier testimony was there were similar agreements, such as the O&M Agreement that was entered into with Sheridan. Was there a similar agreement, like an O&M Agreement, in Deerfield Village? A. I believe so. Without the agreement back in front of me, I can't be sure, but my understanding is --- my recollection was there was substance to some of them. Q. Was then the package, looking at with the Deerfield Village agreement that was between the District and, I guess, the developer of the Deerfield Village; is that correct? A. Yes. Q. Would then the particular package of agreements, would they be possibly similar to the different packages of four agreements that we have for Thornhill and also Sheridan in this case? A. I think it's fair to say they were similar, yes, sir. Q. So would you say that the intent with looking at Deerfield Village versus Sheridan and Thornhill, the intent was the same with these agreements? A. The intent to do ---? Q. The intent with the agreements of all three of these developments, the intent or the result for the District to obtain was looking at the same result? A. The outcome anticipated was that the homeowners in the development would become customers of the District and then the capital assets would also become the District's. Q. So having knowledge of the District filing the Notice of Intent to file a Certificate for Deerfield Village, did a question pop into your mind, why not file a Notice of Intent for Thornhill? A. It wasn't that it popped into my mind, it was an issue of discussion. And in fact, we fully intend to file for a certificate at the appropriate time. I mean, it was never that we weren't going to file it, just a matter of when. JUDGE GEORGE: Did you have a Board meeting and did they in the Board meeting go over some of the issues related to certificate cases? A. In a very rapid, certainly not exhaustive, treatment, yes, sir. JUDGE GEORGE: Did they explain to you that if you're constructing utility assets and equipment facilities that are not in the normal course of business, that it's something that you don't normally do every day, then you have to have a certificate? A. Yes, that's my understanding. JUDGE GEORGE: And then did you have some kind of feeling in that training whether you could construct it? Speaking for you yourself, whether you can construct it and then get a certificate? A. We certainly would not construct facilities --- the District would not construct those facilities without a certificate. JUDGE GEORGE: You understood through that training or through directions from Mr. Kelsh or some other that if the utility itself is going to construct the asset that they had to get a certificate, before beginning construction? A. Right. JUDGE GEORGE: Why? The reason that we've got back to this case is because it's not you, it's someone else constructing the facility. A. There's a distinction there, I only guess. Although facilities can be constructed through a mainline extension agreement. We may not be the constructing entity. JUDGE GEORGE: In those instances of a mainline extension agreement, you still get Commission approval of that plan? A. A scale of the project is required, yes, sir. JUDGE GEORGE: So your understanding of mainline extension agreements is that if it's a big extension, you need to submit an agreement for extension but if it's a big developer that's doing a couple houses and a couple hundred feet of pipe, then you're not following 5.5, but you're doing something that don't need to submit that? A. I would depend on our Counsel to make that distinction. JUDGE GEORGE: The reason you believe the utility filed for pre-filing in Deerfield is you believe Deerfield is far enough along and a small enough project that you think ---. A. Yes. JUDGE GEORGE: And you have not done the same thing with these two projects because they are bigger and it's going to take longer and they're not in the same bunch. A. I don't believe all of the information is at hand with both Sheridan and Old Standard. With Deerfield, it's a smaller project where we've got much more wrap on the case and we anticipate that the project will be completed, built, potentially when these issues are resolved in this case. JUDGE GEORGE: Go ahead, Mr. Robertson. I'm sorry. ATTORNEY ROBERTSON: Thank you, Your Honor. BY ATTORNEY ROBERTSON: Q. So getting back to Deerfield Village, it's my understanding that there is both a --- I'll say a treatment plant and collection base? A. Yes. It's a different approach to waste treatment than has been proposed to the Sheridan and Thornhill. Q. But there's still going to be another somewhat structure or something of that type to treat the sewage in the Deerfield Village subdivision? A. Yes. It'll be a re-circulating sand filter system with on-site disposal leach field. There'll be no service discharge. Q. And with that, it's my understanding that you testified that that is already currently under construction by the developer? A. Yes, I believe so. Q. Do you happen to know, in working with the developer, if, I guess, the developer did not file a previous certificate for Deerfield Village --- do you know? A. To my knowledge, I can't answer that question. Q. Then in the Sheridan development, it is going to be the developer that's also building the treatment plant and the collection lines in Sheridan development? A. Yes. Q. And then also in Thornhill, it is the developer that's building the treatment plant and the associated collection lines in that particular development? A. Yes. Q. Now, it appears to me that these are all like Deerfield Village, where the developer's building everything, and so with Sheridan and Thornhill, those developers are building everything. So what is the difference in your mind of when to file a certificate? A. I think as we stated earlier, on a case-by-case basis, the process with Deerfield was moved more quickly. It's a simpler, smaller project. We fully intend to file a certificate in all three cases. The Deerfield project was simply ripening faster. Q. And under the Deerfield Village and the PSD, the Notice of Intent, in your capacity as a Board member, when do you think the PSC is going to review the whole project? A. I can't anticipate. I would assume, certainly, in the coming year. But again, with the litigation and delays, I can't anticipate that for you. Q. Would it be safe to say, since this is --- Deerfield Village is under construction, that possibly the PSC review is going to be prior to completion of the construction? A. For Deerfield, yes. We file a Notice of Intent before we intend to file a certificate. Q. And in your capacity as a Board member, do you feel that the PSC should look at plans and specs of treatment plants before --- in a certificate proceeding --- before the plant's actually built or the collection lines are built in a formal certificate? ATTORNEY MCDONALD: Did you say PSC or PSD? ATTORNEY ROBERTSON: Yes. I said the PSC. ATTORNEY MCDONALD: Calls for legal conclusion, Your Honor. Object to the question. JUDGE GEORGE: You can tell us what your view is on that as a Board member of the regulating utility. A I believe there are a range of situations where facilities can be constructed by partners. Be constructed independently by private investment. Certainly the PSC, when we file a certificate, will be reviewing those plans or potentially filing for a completed asset in the case where we take over the original facilities. I think that's sort of an open-ended question. JUDGE GEORGE: Thanks. BY ATTORNEY ROBERTSON: Q. So if the PSD does not file a certificate in all three of these developments, then who do you think the appropriate party is to file a certificate? A. I can't answer that. I cannot provide a legal opinion, but I would anticipate that the developer would file something. Q. In both of the Sheridan and the Thornhill developments, to what knowledge that you may have, do you know if the District's engineer has also been talking, conversing with the engineers of the developers? A. I think on the Sheridan plant, there has been some communication. I don't have specific knowledge. I haven't seen the communication. Q. So the District's engineer has had input, or as an advisor to the developer's engineer, looking at what the District requires in order to accept the plant and the collection lines. A. As I indicated earlier, I think, in anticipation of the possible outcome that we would take over the asset, it's in the interest of both parties to make sure that the asset meets our requirements up front and through the process. That would seem to be a better approach. Q. Do you know if the PSD's engineer has had any proposals for a membrane plant within the rest of the District service territory? A. We are currently developing a facility plan amendment for the --- Corridor. And at the most recent District meeting, and several beforehand, we had discussed the technology. And the membrane plan has always been on the short list. So, yes. Q. When you say that's being on the short list, is that one of the considerations that the District is considering, to put in a plan of a membrane out of technology somewhere? A. Yes, it is one of the technologies that we're considering. Q. Do you happen to know as a Board member how much involvement that the District's engineer had with the developer's engineer as to the design, the plans, the specs of the systems to be built? A. No. ATTORNEY ROBERTSON: Could I have just a second, Your Honor? COUNSEL REVIEWS NOTES BY ATTORNEY ROBERTSON: Q. Mr. Hankins, you said earlier in your testimony that you thought that, I believe, with both Sheridan and Thornhill, that they were originally designed for a 50,000 gallon per day plant? A. Sheridan. The initial capacity of the Sheridan plant, I believe, was 50,000 gallons and expandable to 125,000. However, I can't answer specifically on the Thornhill. JUDGE GEORGE: You said earlier there's 100? A. I believe it was 100 as the initial capacity. JUDGE GEORGE: Right. BY ATTORNEY ROBERTSON: Q. So looking at that and you're familiar with the part of the statute, this state law, that talks about the 25, serving consumer customers, less than 25 customers and then over 25 customers, of looking at the PSC's jurisdiction. Are you aware of that, about the 25? A. I'm aware of the language, generally, yes. JUDGE GEORGE: Do you agree, 100,000 gallons per day is a little big for 25 customers or less? A. I guess it would depend on the nature of the customer. BY ATTORNEY ROBERTSON: Q. But if I told you that this year, that the digs were single-family units or single houses, 50,000 gallons a day for just 25 customers would be really excessive; would it not? A. I think if we're talking about customers as a building entity versus EDUs. There's a distinction. It could be an industrial customer. JUDGE GEORGE: Well, you've had practice on industrial parks; right? A. Yes. JUDGE GEORGE: Okay. Let's take it out of hypotheticals and put it in facts. You said yourself at that board meeting that you knew that these were regular residential customers. A. Yes. JUDGE GEORGE: You knew that they were making way more than 25 in each subdivision? A. I'm not privy to how the building is going to be done. JUDGE GEORGE: Your understanding was that there was going to be more than 25 houses? A. Yes. ATTORNEY ROBERTSON: Thank you, Mr. Hankins. I have no further questions, Your Honor. JUDGE GEORGE: We're going to take a lunch break. By my watch, it's eight after 1:00. When my watch says it's eight after 2:00, we're going to start the hearing at that time, so everybody should be here. LUNCH BREAK TAKEN REDIRECT EXAMINATION BY ATTORNEY KELSH: Q. Mr. Hankins, I recall questions from Mr. Hammer regarding the Operations and Maintenance Agreements, which the District has entered into for the Sheridan and Thornhill plants? A. Yes, sir. Q. Is it the District's intention and understanding that they will operate on the terms of those agreements for a long period of time? A. To my understanding, it was always more of a contingency and that they're relatively short-lived agreements mostly. ATTORNEY KELSH: Your Honor, if I may approach the witness? JUDGE GEORGE: Certainly. BY ATTORNEY KELSH: Q. I'd like to hand you a copy of Sheeley Exhibit Number Three. This is the O&M Agreement for the Old Standard building. BY ATTORNEY KELSH: Q. I'd like to refer you to the back page of that, or the second-to-last page of that, paragraph 12. What is the initial term of the agreement? A. The agreement is effective upon substantial completion of construction of the system and shall continue in effect for a period of one year thereafter. Q. Does paragraph 12 contain terms regarding the possible renewals of that O&M Agreement? A. Yes, it does. Q. Is it year-to-year? A. Yes. Q. The District's free to back out of this after a year upon furnishing proper notice to Old Standard; correct? A. Yes. Q. And same terms apply to the Thornhill O&M Agreement? A. Yes. Q. Mr. Hammer also had some questions for you regarding the District's knowledge of the type of facility which Old Standard would construct. I'd like to hand you a copy of Sheeley Exhibit Number Two, which is the Letter of Intent. BY ATTORNEY KELSH: Q. I'd like to refer you to paragraph three of that letter. A. Numbered paragraph? Q. Numbered paragraph three on page two. A. Yes, sir. Q. How is the facility to be constructed by Old Standard described in that paragraph? A. It's a long paragraph, but the wastewater plant shall be packaged, wastewater treatment plant membrane bioreactor, 50,000 gallon per day base system, designed for expansion to 120,000 gallons per day. Q. Does this paragraph indicate who the manufacturer of this plant will be? A. Yes. It indicates EnviroCorp. Q. And the size of the plant? A. Yes, 50,000 with a peak to 100 and 125 expansion. Q. All right. Now, earlier in your testimony, there was some discussion about package plants. Package plants have a bad reputation. If the developer, Old Standard constructs a standard package plant, one of those bad ones we were talking about, instead of the one described here, what would the District do in that circumstance? A. It would not be accepted. Q. And ---? A. And we would turn down the plant. Q. The District would not close on that application? A. No. Q. The initial size of this facility is 50,000 gallons per day; correct? A. Yes. Q. And in your testimony, you stated that's the size needed to fully serve the Sheridan development, full buildup; correct? A. Yes. Q. And the District attempts to file a Certificate Application to acquire that plant; is that your testimony? A. Yes. Q. Mr. Faulkner was concerned about the possibility of that facility serving other developments in Jefferson County or in that vicinity. If the District were to expand this plant to a stage one with 50,000 gallon size to a 125,000 gallon size, would it file a Certificate Application of Commission in order to do so? A. Yes, it would. Q. Mr. Hammer asked you some questions about karst geology. Is it fair to say that karst geology is the main type of geology present throughout Jefferson County? A. Yes. Well over 80 percent of the surface area of Jefferson County is karst. Q. So the concerns he expressed about possible leak of the sewer line going into the karst geology, that's a risk throughout Jefferson County; is it not? A. Yes, it is. Q. And do you believe it's practical not to construct sewer transmission lines throughout the county because of karst geology? A. Clearly, it's not impractical. It's being done all over the country. ATTORNEY KELSH: That's all the questions I have. JUDGE GEORGE: Mr. McDonald? ATTORNEY MCDONALD: Yes, I do have questions for you. Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY MCDONALD: Q. Good afternoon, Mr. Hankins. Do you know if the Public Service District retains an engineering firm to perform inspections of developer-installed pipelines? A. Yes, we do. Q. Mr. Hankins, do you and the other Board members make every effort to comply will all applicable laws and regulations? A. Absolutely. Q. Would you deliberately or intentionally violate the law in any way? A. Not in my duties as a District Board member or personally, no. ATTORNEY MCDONALD: Thank you, sir. No further questions. JUDGE GEORGE: Attorney Michael, go ahead? ATTORNEY MICHAEL: Thank you, Your Honor. RECROSS EXAMINATION BY ATTORNEY MICHAEL: Q. I want to ask you a little bit about this previous case that's been referenced. Actually, this consolidated case is 03-1543 and 03-1544. And assuming that we show everyone in this proceeding that this case involved the same development proposals. I want to ask you about it in terms of what happened in that case. Finding Fact Number Three states, I'll paraphrase it, the Staff Filed Memorandum recommending that the District and the developers, which were Thornhill and Sheridan, filed a Joint Application for a Certificate ---. A. I'm not familiar with what case ---. Q. I know. I'm just telling you what I --- I'm leading up to the question. In that case, which was filed by the Jefferson County Public Service District, requesting approval of Cooperative Venture Agreement between the District and Thornhill and between the District and Sheridan, the Staff took the position that the District and the developer should file a certificate application. That's Finding of Fact Three. Finding of Fact Four, the District, after consulting with the developers of these projects, filed a letter with the Commission stating that it's elected to withdraw the petition in these cases. And had the Commission allowed that to happen, the case was dismissed. The final Order was entered by the Commission March 24, 2004. Now, here's my question. I think you voted in April or May to approve these agreements which we're here today for, about Thornhill, we've got --- UNIDENTIFIED SPEAKER: Sheridan and Old Standard. BY ATTORNEY MICHAEL: Q. --- Sheridan and Old Standard; correct? A. Yes. Q. And you stated in your testimony earlier that you did so on advice of Counsel? A. Yes. Q. Did Counsel tell you that a month prior to that the Public Service Commission Staff had recommended that a certificate be filed for these projects and ---. ATTORNEY MCDONALD: Objection. Objection to any question between him and his Counsel. ATTORNEY MICHAEL: I'm following up on ---. This is Recross and I'm following up on --- a thing. I don't want to know what it is. ATTORNEY MCDONALD: You're talking about a particular conversation with his Counsel. JUDGE GEORGE: Well, --- ATTORNEY KELSH: Well, I concur on that. JUDGE GEORGE: What's that? ATTORNEY KELSH: I concur on that objection. JUDGE GEORGE: Okay. That puts it in a whole different light. The question was, did his Counsel advise him on what appears to be Commission Order or Staff conclusion that there should be a certificate filed. And the basis for the objection is that it is attorney/client privilege. ATTORNEY MICHAEL: Let me add one --- let me withdraw that question and see if I can get at it another way. JUDGE GEORGE: Okay. BY ATTORNEY MICHAEL: Q. You testified earlier that you relied on the advice of Counsel when you voted to approve these agreements? A. In part. Q. Okay. Was the advice of Counsel given to you in a public meeting? A. I don't specifically recall advice from Counsel on this issue at the moment. Q. Why did you say you relied on advice of Counsel earlier in your testimony? A. As a Board member, we frequently rely on the advice of Counsel. Q. But you don't remember the advice in this specific case? A. Not specific to this issue. Q. Okay. Were you aware from any source prior to your vote to approve these agreements that there had been a prior case that the PSC just --- which had been almost a month or two prior to that? A. I became aware of that Cooperative Venture Application. I don't recall specifically when in the deliberation process it came in. JUDGE GEORGE: You think it was before you closed it up? A. I could not tell you. BY ATTORNEY MICHAEL: Q. Let me ask you this, as a Board member who hires attorneys, don't you think a competent attorney would tell you if there's already been a PSC Staff position on this, what that position was before you had to vote on it? A. I would hope that we would be fully informed. ATTORNEY MICHAEL: Thank you. That's all I have. JUDGE GEORGE: Mr. Hammer? RECROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Hankins, referring to Exhibit Two, the letter dated March 1st, 2004 --- do you have that before you? A. Yes, I still do. Q. Now, that letter was signed and sent two months before Exhibit Three, the May 3rd, 2004 contract for the Operation and Maintenance Agreement; correct? A. I have it signed by Marty Kable as chairman, 3/1/04. Q. 3/1/04 on the letter and May 3, 2004 on the Exhibit Three? I can show you it. It's right there. A. I have March 1st on both the letterhead and signature page. Q. According to Exhibits Two and Three, Exhibit Two is a letter dated March 1st, 2004, Exhibit Three is the Operation and Maintenance Agreement dated May 3rd, 2004? A. Yes. Q. So this contract, the O&M agreement was entered into about two months after the March 1st letter; right? A. Yes. Q. And the O&M Agreement makes no mention whatsoever of the contents of the March 1st, 2004 letter; does it? A. With regard to plant specifications, no. Q. That's right. None of the terms that are in the March 1st, 2004 letter are contained in the contract, the actual contract; are they? A. I can't speak to the entire scope of the letter, but specifically to your earlier question about the nature of the plan, yes, I can see that it's not specified in the agreement. Q. But assets to be constructed and acquired in paragraph three of Exhibit Two are nowhere to be found in Exhibit Three, the contract; are they? A. Yes. Q. In fact, it's a fair inference; isn't it, that these specific terms were abandoned for the contract, which just simply says Thornhill shall design and cause to be constructed --- I'm sorry. It should say Old Standard. Old Standard shall design and cause to be constructed at its sole cost --- . A. In my opinion, it wouldn't be a fair inference. In fact, I would take the opposite conclusion that this is a letter of intent that clearly anticipates the agreements. Q. You would take the conclusion that this letter of intent is a binding contract on the facility building? A. No. It's not a binding contract. Q. In fact, it expressly says there's not a contract. A. Yes. Q. If you turn to the last page of Exhibit Two, can you read that last sentence into the record, please? I'll show you where I'm looking. A. I'm sorry? At the end of page five? Q. At the last page. A. It is understood that this letter sets forth an agreement in principle only and is not binding to the parties herein. Q. So nothing in this letter is binding on Old Standard; isn't that true? A. That's correct. It's a letter of intent. Q. Yes. In fact, even on the first page, it makes clear that this Letter of Intent is not a legally binding memorandum of agreement or an offer to enter into an agreement and does not create rights or duties in either party. A. Yes, it does state that. Q. No rights, no duties arise out of this Letter of Intent; isn't that correct? A. That's correct. Q. I was a little surprised earlier to hear the testimony that the Cliffside Inn may be solicited as a customer for this new sewer facility. Assuming it's true that the Cliffside Inn is currently served by the Harpers Ferry-Bolivar Public Service District, is it the intent of the parties here, of your PSD, to poach this customer from Harpers Ferry-Bolivar? A. Absolutely not. Q. You would agree with me, wouldn't you, that if you were to take a customer from Harpers Ferry-Bolivar's PSD, the affect on ratepayers in that PSD would be negative, in other words, their costs would increase, thanks to the loss of a large commercial customer; wouldn't you? A. I can't speculate on their financial position. Q. Well, doesn't it make sense, sir, that if you take a large commercial customer away from a PSD, that that has a negative impact upon the finances of that facility? A. I can only speculate. It depends on the nature of the customer and the wastewater. Q. But you know the nature of this customer; right? A. I have no specific knowledge. I know, obviously, Cliffside is a hotel and conference center, but I don't have any specific knowledge of their waste characteristics. Q. Well, isn't the general proposition true that if you take customers away from a PSD, that negatively affects the rate structure for the existing PSD? A. Possibly. It may or it may not. ATTORNEY HAMMER: That's all. JUDGE GEORGE: Thank you. Mr. Faulkner? MR. FAULKNER: Yes, Your Honor. RECROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Hankins, you're a policy official with the PSD by being one of the three Commissioners on the PSD; is that correct? By voting and being serving on the PSD, you are a policy person? A. It's through our duties as Board members. Q. When you voted on these four documents, did you feel you were establishing a precedent? A. At the time of the vote, it wasn't clear to me whether this was a precedent or not. Q. Given that there are now six --- by your own testimony, at least six other developers looking at doing similar arrangements. Do you feel that you have established a precedent with that first vote in April? A. A precedent in the minds of ---? Q. Yourself. I mean, you're a policy official and you made a vote. The vote has had an impact. Is that a precedent? A. Conceivably. It's clearly a way of doing business that we are considering and undertaking, yes. Q. And what do you think that way of doing business is versus what might've been before April of 2004? A. I can't speculate on business beforehand. Q. You're a member of the Board. A. I am, but I've focused on my membership, the activities as of March 1st of '04. In my view as a Board member, I've been focused on outcomes. And the outcomes are to put cost-effective high-quality wastewater treatment technology in place for the benefit of the community as well as the ratepayers of the District. Q. As you testified earlier, you're concerned about making sure that every project adheres to all regulations. If this sewer plant had been built as a public utility, or by the PSD, would it have been subject to certain wage-an-hour provisions of a public project, what some people might call a State Davis-Bacon Law. A. I'm sure that we complied with whatever the requirements were for using public funds. Q. Then by having this plant built by someone, by a private concern, you're basically avoiding state workers' wage-an-hour and other what we would call State Davis-Bacon Laws. A. I can't agree that that was our intent to avoid. It's clear that the asset cost to the District is different, but that's ---. Q. But the effect of the decision was to avoid, even if the intent was not there? A. I can't speculate on labor rules. MR. FAULKNER: Okay. That's all, Your Honor. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: Actually, I have just one Recross for Mr. Hankins. RECROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Hankins, regarding in relationship to the O&M Agreement, also the line inspection of the District in looking to say more particularly more of the line inspections of the District when they're conveyed by the developer. Mr. McDonald asked you, does the District inspect the lines before taking them over, I can't remember his statement or question to you. Do you remember? A. Yes, sir. Q. Okay. Well, then, can you tell me, does the District have a specific firm that does the line inspection or do you have numerous firms looking at line inspections before the District takes over? A. I believe we often use Thrasher Engineering as our outsource inspector. Q. Do you know if Thrasher is the only firm that does that currently for the District? A. I can't answer that. ATTORNEY ROBERTSON: All right. Thank you. JUDGE GEORGE: You may step aside. Thank you very much. You may call your next witness, Mr. Kelsh. ATTORNEY KELSH: Yes. The District next would like to call Sue Lawton. JUDGE GEORGE: The Court Reporter will swear you in. --------------------------------------------------------- SUE LAWTON, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY KELSH: Q. Good afternoon, Ms. Lawton. A. Hi. Q. Where are you employed? A. Jefferson County Public Service District. Q. And how long have you been so employed? A. Two and a half years. Q. And what's your position with the District? A. General manager. Q. Okay. There's been some discussion about the previous Cooperative Venture Agreements which the District submitted to the Public Service Commission. Are you familiar with those agreements? A. I remember them vaguely. ATTORNEY KELSH: Okay. I'd like to have it marked as Utility Exhibit Number One. (Utility's Exhibit One marked for identification.) JUDGE GEORGE: I'm marking it as Utility's Exhibit Number One. And just for the purposes of the record, some of these exhibits are going to be marked just with my handwriting and some of them have yellow stickers because we've apparently run out of yellow stickers. So this is Utility Exhibit One. BY ATTORNEY KELSH: Q. Ms. Lawton, there's been some reference to the Cooperative Venture Agreement as being identical to the arrangement which the District has entered into with Sheridan and Thornhill as subject to the four agreements, the two sets of four agreements which were attached to the Complaint. Are there significant ---? MR. FAULKNER: Objection, Your Honor. That's a misstatement. I didn't say they were identical. I don't think anybody else --- I know I didn't say they were identical agreements. I said they related to the same development. ATTORNEY KELSH: I'll restate the question. BY ATTORNEY KELSH: Q. Ms. Lawton, are the terms of the Cooperative Venture Agreement substantially different from the terms of the two series of four agreements which the District has entered into with Sheridan and Thornhill? A. There are differences. Q. Is the --- if I could refer you to the top of page two. Who would design and construct the treatment plant under the Cooperative Venture Agreement? A. The Utility's engineers. Q. The Utility's engineer would design it? A. Yes. Q. And the Utility would raise to the construction? A. Yes. Q. Whereas under the four agreements, which are attached to the Complaint --- or the two sets of four agreements attached to the Complaint, the developer designs and constructs those plants; correct? A. Correct. JUDGE GEORGE: Do you know why the Utility submitted this Cooperative Venture Agreement to the Commission for it to review in this? A. Well, when we originally did it, we were thinking I'm sure that this was the right way for us to go through the agreement. And then after looking at some proposals from the engineer, we decided that this was the best way. JUDGE GEORGE: So when you submitted this Cooperative Venture Agreement to the Commission, it was your understanding that that was a necessity, subject to the regulation of the Commission? A. Yes. JUDGE GEORGE: And this Cooperative Venture Agreement submission to the Commission referred to the Commission's rules; is that correct? A. I don't remember that specifically, but ---. JUDGE GEORGE: The cover says you may incorporate Rules 5.2 and 5.5. Do you know what statements those are? A. Well, the one is on a regular extension agreement that the Utility was reimbursed three and a half times --- customers attached to that line. And the alternate main line extension agreement is any variation of the ---. JUDGE GEORGE: Okay. Which requires approval? A. I think the alternate is main line extension. JUDGE GEORGE: And why do the people think this Cooperative Venture document required approval under those rules? A. On the advice of Counsel. JUDGE GEORGE: And the reason it concluded that the four contracts that were later developed into four documents submitted to essentially replace this, did not rely upon advice of counsel, as well? A. Well, we were going to apply for a certificate when Counsel told us it was appropriate to do so. ATTORNEY MCDONALD: Your Honor, I don't have any objection to the witness stating they had conferences with Counsel. Anytime we get into the substance of that Counsel, I'm going to object on the attorney/client privilege. JUDGE GEORGE: Well, that's fine. You can do so. I'm going to overrule the objection at this time. What is your understanding of why you had to get Commission review and approval of a Cooperative Venture Agreement and why the other arrangement does not require Commission agreement. A. I think of the four contracts, the one that required Commission approval is when we acquired the asset of the treatment plant. I don't think it was necessary for us to get Commission approval for the other three contracts. JUDGE GEORGE: Go ahead, Mr. Kelsh. BY ATTORNEY KELSH: Q. Ms. Lawton, with respect to the construction of the plants to be built by Old Standard and Thornhill, will the District have its inspector present to inspect the lines and the plant itself while it's being constructed? A. Yes. Q. And I believe there's been some statement of Counsel that the lines within the Sheridan development have already been partially constructed. Has the District had its inspectors present while that's been occurring? A. Correct, yes. Q. The District entered into an O&M Agreement with the developers of Sheridan and Thornhill. Does the District have inspectors who can operate these facilities? I'm sorry. Does it have operators who can operate these facilities? A. Yes. ATTORNEY KELSH: I'd like to have this marked as Utility Exhibit Number Two. (Utility's Exhibit Two marked for identification.) BY ATTORNEY KELSH: Q. And Ms. Lawton, can you identify this document? A. This is our operations manager John Tyler Quynn and his wastewater operator. MR. FAULKNER: I'd like to object, Your Honor. This is the second time that Counsel has provided documents to everyone but me and my wife and we are Intervenors of record going back several weeks. ATTORNEY KELSH: That's all of the questions I have of this witness. JUDGE GEORGE: Mr. McDonald? ATTORNEY MCDONALD: No questions. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: Just briefly. CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. It's true, isn't it, that the Cooperative Venture Agreements and the four agreements for each development that we have today, both of those relate to the same developments, the Sheridan development and the Thornhill development; correct? A. I'm not sure if the Cooperative Agreement was entered for each development, but I know we did do that for Sheridan. And I know that we have separate agreements for Sheridan and Thornhill. Q. And they were part of the same --- well, Sheridan was in the --- we're talking about the same development, just different agreements? A. Yeah. ATTORNEY MICHAEL: That's all I have. JUDGE GEORGE: You spoke of differences between Utility Exhibit One and the four documents. One of those differences that you mentioned was the fact that under the Cooperative Venture Agreement, the actual construction of the utility was through the PSC, and under the Court documents, the developers are doing the actual construction. What are some other differences? A. I don't remember a lot of the differences except I think all four functions were put into the Co-op Agreement. JUDGE GEORGE: So that's the main difference, is which entity is actually doing the construction of the treatment plant? A. And the fact that all four functions of those agreements are in this one agreement. JUDGE GEORGE: In one document, as opposed to four different documents? A. Yes. JUDGE GEORGE: But this Cooperative Venture Agreement covers issues related to operating and maintaining a facility? A. I'm fairly sure. I haven't looked at it in a long time. MR. FAULKNER: Your Honor, these documents will speak for itself, I think. JUDGE GEORGE: And another part of this document is --- and it also deals with customers? A. I don't know. I have never ---. JUDGE GEORGE: It's really something you simply don't remember? A. No, sir. I don't remember. JUDGE GEORGE: What part did you have in the draft of this Cooperative Venture Agreement? A. I would read drafts from the --- from our lawyer. I didn't really concentrate on it anymore. JUDGE GEORGE: And what role did you have in this withdrawal? Did you suggest to somebody that agreement was withdrawn? How did you --- what part did you play in that? A. I probably ---. I don't remember exactly, but what normally happens is when things are suggested to me, I pass the suggestion on to --- . I'm just an enemy. JUDGE GEORGE: And she took some kind of vote to withdraw? A. Probably. I don't remember. JUDGE GEORGE: You just don't remember? A. No. JUDGE GEORGE: Very well. I can't remember where we were. ATTORNEY MICHAEL: I just finished, Your Honor. JUDGE GEORGE: You just finished. Okay. Mr. Hammer? CROSS EXAMINATION BY ATTORNEY HAMMER: Q. Am I correct that with regard to Utility Exhibit Two, no signed, executed contract exists between the parties? This exhibit is simply a draft? A. The Agreement? Q. Yes. Utility Exhibit One. The copy I have, there's no signatures on it. A. The Co-op Venture Agreement? There's no number on this exhibit, so I don't which one ---. JUDGE GEORGE: Yes. It's part of the Cooperative Venture Agreement. A. Okay. No, I don't think anybody ever signed this agreement. BY ATTORNEY HAMMER: Q. I'm sorry. I couldn't hear. A. I don't think anyone ever signed this agreement. Q. Okay. No one's ever signed this agreement. And it appears to me that beginning in Article II and continuing to Article IV, this agreement, unlike the other agreements they have in this case, provides detailed descriptions of who does what, how and how it's expected. A. This is closely related to our standard alternate main line extension, which does have those. Q. And no such agreement exists with regard to Old Standard; does it? A. No. ATTORNEY HAMMER: No further questions. JUDGE GEORGE: And is this closely related to your standard main line extension because the utility developers saying we're going to construct these facilities are similar to what you always do. A. No, I don't think that's why. It's because we had a hard time communicating exactly what kind of agreement we were after here. And I think that the main agreement that our Counsel was familiar with, pulling together for us, was our alternate main line extension agreement. JUDGE GEORGE: But the only difference between this project and your standard alternate main line extension projects is it's more. A. It's what? JUDGE GEORGE: It's just more. Instead of just a collection system, we also have a treatment plant. A. No. That's inaccurate. JUDGE GEORGE: Well, tell me ---. A. This one has a lot more details that make it a positive acquisition for the District. The fact that it's being donated to us for a dollar is a very positive --- it will have a very positive effect on our ratepayers. Developers don't have to come to the PSD to build a treatment plant. They have developers all over this town that can build a treatment plant if they wished it. They don't have to come to us as a responsible entity to do anything with that plant. They can apply to the regulatory agency and get an OTDES permit and build it and go to whomever they wish to run it. I'm sure that happens many times. We thought it would be beneficial to accept these plants when people came to us and asked us if we wanted to. Number one, if they were going to contribute the plant at a very low cost, which would have a positive effect on our ratepayers in the long run. And number two, if they were high-quality plants, then we protect the environment. JUDGE GEORGE: So when a developer comes to you with pipes and says, I want to give to you these pipes, you would buy them off of him for extension lines? A. That hasn't happened to us yet. It's always been a payback situation. We're trying to get that changed now. JUDGE GEORGE: So this is a sweeter deal because it all of a sudden falls to you and there's more than just pipes. A. Yes, but that's not the main thing that we're doing. We were asked by developers to provide a service. That is our function, to provide service. If we had had to pay for this plant or if we had had to tie them into another system, it would not have been possible. The system that he was originally intended be tied into was decommissioned. JUDGE GEORGE: And what system was that? A. Sanitary Associates treatment plant. JUDGE GEORGE: So the developer wants to develop property and he wants utility service? A. Correct. JUDGE GEORGE: And the only way he'll be able to keep that utility service is if he makes large contributions of utility property for those facilities to ---? A. We didn't --- we offered to do that. JUDGE GEORGE: But that's the only way it's going to happen; is that right? You said yourself, if you can. A. We didn't have a treatment facility for him to go to otherwise. JUDGE GEORGE: And that's why he was willing to do it? A. Yes. That's why all of the developers that were mentioned earlier are willing to do this, are willing to pay for plants right now, because there's not sufficient facilities in this County right now. JUDGE GEORGE: Okay. Mr. Faulkner, do you have Cross Examination further on that? CROSS EXAMINATION BY MR. FAULKNER: Q. Ms. Lawton, to follow up on that line of questions, do you recall a memo that Paul Rocco, who is the Jefferson County Director of Planning, wrote to you around that time saying that publicly-owned facilities do not fall under zoning regulations in Jefferson County? ATTORNEY MCDONALD: Your Honor, I'm going to object to the question. We're getting into the zoning issues here. This is the substance of the zoning. I think it's inappropriate for this Intervenor to expand the scope of this proceeding as such. JUDGE GEORGE: Do you have a response, Mr. Faulkner? MR. FAULKNER: I'd just like to say that she, the witness had just stated that, hey, that developers are coming to PSD giving these plants out of the goodness of their own heart, basically, and that they could build a plant anywhere in this County. And that is not the case. They fall under --- any building in this County falls --- that is done by title --- entity --- falls under zoning, unless it's a public entity. JUDGE GEORGE: I think it's a fair question. Go ahead, answer the question. BY MR. FAULKNER: Q. Do you recall a memo from Paul Rocco stating that a publicly-owned facility or utility does not fall under zoning in this County? A. Yes. Q. And do you recall whether the sequence of events that led to that letter, did you ask him for that letter or did he --- what was --- who asked who for a letter like that? A. We did ask him the question. Q. And why was --- who asked the question? Was it the PSD Commissioners or did you come up with the question? A. I don't remember. Q. You don't remember who posed the question? A. No. Q. Do you remember my characterization of the letter? Was that an accurate characterization, that if a utility being proposed to be built is publicly owned, it does not fall under zoning? A. Yes. Q. Moving into another area, the recommended decision, or the Final Joint Staff Memo that came out in March of this year turning down the cooperative arrangement, how many weeks transpired between that and the vote on these five --- these four documents by the PSD in April. A. I don't know. Q. You don't know. Do you recall your own reaction when you heard of the Staff memo? What was your reaction? A. I wasn't surprised. Q. Why weren't you surprised? A. Because I don't expect the PSC to automatically approve what is asked of them. I expect there to be some resistance. Q. And what was the sequence of events from receiving this PSC document in your office to the vote? I mean, who --- we have these four documents that obviously were written and filed or created and timed to go into the reading packet for the PSD meeting in April for their vote. Q. Can you walk us through the sequence of events that went from this memo relating to the PSC's decision to these four documents being for the PSD for a vote in April? Because that's at least two or three weeks of activity that had to occur. And you being the executive director, the PSD would have had to have known something about what was occurring to get this on the agenda. So what --- can you walk us through the sequence of events? ATTORNEY KELSH: Your Honor, I'm going to object as to relevance. The PSD entered into these agreements, the Board approved these agreements. I don't see how the steps that went through evaluating these agreements is relevant to the ultimate belief that's being questioned. JUDGE GEORGE: I think it goes to intent, --- the PSD when the PSD sits down and says we're going to --- I figure he's going to have that question later, but I believe they haven't attempted to --- because the purpose of it is to simply obey Commission regulation. I doubt that she's going to admit that but we'll see where it goes. A. Our lawyers worked out some agreements. And I probably e-mailed them to our Board members or printed them out and somehow got them to you. BY MR. FAULKNER: Q. So these four documents --- who generated these documents? Were they generated by PSC or by the Developer? A. They were developed by the two lawyers working together if I remember correctly. Q. And this was done at their initiation or the PSD, yourself, or any member of the PSD requesting that this be done? A. I think that we probably requested our lawyer to work with the Developer's lawyer to come up with a mutually agreeable document. Q. But why? A. So that we could move forward with this proposal that we thought was going to be beneficial to the community. Q. And how do you define the community? A. Jefferson County. Q. And how does this proposal benefit Jefferson County? A. It allows economic development and it allowed the PSD to help environmentally. JUDGE GEORGE: And you could accomplish the same goals and you've insisted that the Developer --- you still end up with the same plant, the same treatment facility with the same economic development, assuming you proved your case. Isn't it true that the purpose of the agreement is to not have to go through that process before the treatment plant was built? A. I don't think that's so. I think it was probably so that the Developer could afford to build this plant and turn it over to us. I think that the agreements were made the way they were so that this plant could be built in the most economic function --- in the most economic way to provide the end result. JUDGE GEORGE: The only real difference between this and the cooperative venture as I understand your testimony to be is when the Commission reviews occur. Does it occur as is traditionally the case before construction of the utility or does it occur after the fact, after it's all over? And it seems like that is the only real difference between what you were trying to do before when Staff said no and what you're trying to do now. I mean, it ---. ATTORNEY MCDONALD: Your Honor, I can assure you that there are major differences between the co-op and this agreement including who designs and constructs the wastewater treatment plant, how this is decided and who decides. JUDGE GEORGE: I wasn't really asking you. I was asking her. I ---. ATTORNEY MCDONALD: Your question assumes if the District's ---. JUDGE GEORGE: I'm trying to find out a certain thing. I'm trying to find out what the motive was. Again, I'm asking her. I'm not asking you. I'm not attempting to engage in a conversation with you. I'm attempting to engage in a conversation with the witness who is being deposed. My question again is, what's the --- why go through all these machinations of who's got the customer and when they got the customer and who's got the property and transferring property and all of this. What is the goal of all that except to avoid Commission review of this project before it's constructed? And if you could tell me the answer, I'd love to hear it. I'm not asking Mr. McDonald or anyone else in the room. I'm asking you. Can you tell me a reason why there is this complicated dance other than trying to cut this Commission out of reviewing this project before it's built? A. Without looking at the differences and sitting down and going through this agreement again and finding out the detailed differences, no, I cannot answer you. JUDGE GEORGE: Go ahead. BY MR. FAULKNER: Q. Who was the Developer's attorney who worked with the PSD on this matter? A. Mr. McDonald. Q. And even though you've only been there two and a half years, the short period of time that this was developed prior to the April PSD meeting, have you seen other proposals move this rapidly from initiation to a PSD vote in literally less than a few weeks? A. Deerfield. Q. And other than Deerfield and these two proposals? JUDGE GEORGE: Deerfield is a carbon copy of this. A. Deerfield already had been through their permitting process. They already had their plans ordered. They came to us afterwards to see if we would run their plant. And we thought it was appropriate that we take over that plant. MR. FAULKNER: No further questions, Your Honor. Thank you. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: Yes, Your Honor. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Ms. Lawton, talking, let's say, on Deerfield right now, looking at Deerfield you said that they have permits; is that correct? A. Yes. Q. And so it was the Developer that filed for a health department permit to construct the plant? A. Yes. Q. Do you know if it's Deerfield even though the District has filed a notice of intent on September 9th of this year? Do you know that Deerfield has filed for the --- what's called the NPDES permit, the water discharge permit or is that going to be the District? A. Deerfield is a direct system and I think Deerfield needs a ground injection permit as opposed to --- I could be wrong on this, but I think they need a ground injection permit instead of an NPDES permit. Q. But still that would be filed by the Developer and that would be possibly approved by the DEP? A. He has that. Q. Okay. So then the District in that particular case has filed a notice of intent with the Commission; correct? A. Correct. Q. And that is then the intention --- is then the District would be filing, quote, unquote, the application for the Certificate of Needs and Necessity? A. Yes. Q. And we heard from Mr. Hankins that there were similar agreements filed in Deerfield and the District that now have Sheridan and the District entering into those four sets of agreements. And looking at this in your mind as a general manager of the District, did you not think that also the District should file a certificate for Sheridan? A. I knew that we would file a certificate for Sheridan. Q. But then that's after the treatment plant was built? A. Before we took possession of it, yes. Q. Okay. Before you take possession as a general manager, you're assuming --- you're looking at the Developers building the treatment plant; correct? A. Correct. Q. Then you would take it over? A. Yes. Q. And the same references also to Thornhill, you would still operate the same way that the Developers would build the plant and the collection lines and then the District would take it over and file a certificate? A. Correct. Q. The same situation. Looking at the current Sheridan development, is it a --- and I think we've heard from the answers and things. Do you know if about 50 percent of the collection lines have been installed in the Sheridan development? A. How many? Q. Fifty (50) percent. A. I don't know what percent. Q. Okay. But there have been some collection lines installed in the Sheridan development? A. Yes. Q. And I understood your testimony earlier that the District has also been out there inspecting the installation of those collection lines? A. A representative from the District. Q. And who would that be? A. An inspector from Thrasher Engineers. Q. Do you know if the representative from Thrasher is keeping like a time log, a time sheet of how long he's spending out at Sheridan? A. Yes, he has. Q. And the District has that information? A. Yes. Q. Do you know at this particular time approximately how many man hours has been incurred by the District through its inspector regarding Sheridan? A. No. I would have to go look that up. Q. Do you think you can provide the Staff a copy of that? A. Yes. ATTORNEY KELSH: Your Honor, I object to the relevance of this. I mean, I'm willing to let it go because it's --- I don't think it counts one way or the other in terms of the outcome of this case. But there's obviously no benefit to be gained by submitting the inspection reports as a post-hearing exhibit. JUDGE GEORGE: Do you have a response, Mr. Robertson? ATTORNEY ROBERTSON: Well, Your Honor, at this particular time the District has not filed a certificate for this particular development. They're already out inspecting the lines that are being installed currently. I mean, there is already construction. It's line construction, but still it's construction. And at least the Staff looks at that as looking at how much the District's time and effort and extent has gone out to looking at these lines which the District may or may not ever acquire. ATTORNEY KELSH: Your Honor, I think in order for this to be relevant, the Staff attorney needs to tie in the District is paying for this inspection out of its own pocket. He has not done so. JUDGE GEORGE: My only concern --- I think it's probably a relevant issue given this case. I think the issues in this case --- the Developer's agent and the utility and how much the District may be proceeding with this project when they shouldn't have. The thing that concerns me is what are we going to do with these post-hearing exhibits? No one is going to be able to cross examine them. I'm not sure --- you know, I'm not sure what we're going to do with them. ATTORNEY KELSH: Well, Your Honor, at least given a time frame if the District's Counsel would at least possibly stipulate that one, the District's inspectors are out there. JUDGE GEORGE: She's testified to that. They're her agents. They are employees. ATTORNEY KELSH: Let me ask just one other question. Ms. Lawton has --- the District's employing Thrasher, then is the District paying Thrasher for the inspection services? A. Yes, we are. But we're reimbursed by the Developer. ATTORNEY KELSH: And how is that being done, through another type of an agreement? A. No. I'm sure in one of our agreements that it says that the Developer will pay for inspection. ATTORNEY KELSH: It's not one of the current agreements that has been identified as a Plaintiff's exhibit? A. Yes. I'm fairly sure it's in there. We just re-bill the Developer for the amount that we would pay Thrasher. ATTORNEY KELSH: One of the things that Staff was looking at potentially reimbursing --- you know, it was looking at the current rate payers of the District. And that's the only reason I wanted to somewhat expand those questions, Your Honor. JUDGE GEORGE: So you're comfortable with it --- established enough ---? ATTORNEY KELSH: At this particular time, yes, Your Honor. JUDGE GEORGE: Okay. We won't need to --- do you have further Cross? ATTORNEY ROBERTSON: Yes, Your Honor. BY ATTORNEY ROBERTSON: Q. Ms. Lawton, with the Sheridan property --- going back to the cooperative venture agreement, if you remember, was it your understanding that it was going to be then the utility in that particular alternate mainline extension agreement that the utility was going to be designing and building the plant? A. Yes. Q. And at that particular time did you as the general manager of the District realize that possibly a certificate needed to be filed by the District? ATTORNEY MCDONALD: I think he's asked the question many times. I'm not sure. I think someone's asked it. JUDGE GEORGE: Go ahead and answer. A. Yes. As we would --- as we know we're going to be filing a certificate in this other matter also. BY ATTORNEY ROBERTSON: Q. But this particular agreement with the COBA agreement that was filed in 2003, that was filed for Commission review and approval before any plant construction; is that correct? A. Right. And the reason that --- the main reason that that one didn't go through is because the District's engineers' prices were going to be so high to build the plant that it was going to knock it right out of the ballgame. So we had to change that agreement. And that was one of the substantial changes in the agreement. Q. Thank you, Ms. Lawton. ATTORNEY ROBERTSON: I have no further questions, Your Honor. JUDGE GEORGE: Mr. Kelsh? ATTORNEY KELSH: No Redirect. JUDGE GEORGE: You may step aside. Thank you very much. You may call your next witness. ATTORNEY KELSH: The District would like to call Marty Kable. --------------------------------------------------------- MARTY KABLE, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY KELSH: Q. Mr. Kable, are you the chairman of the Jefferson County Public Service District? A. Yes. Q. And how long have you been a Board member with the District? A. I'm concluding my third year. Q. All right. And how many years have you served as chairman? A. This year. Q. You're completing your first year as chairman? A. Yes. Q. How long have you lived in Jefferson County? A. All my life. Q. What's your occupation? A. Farming, auctioneer and land development to some extent. Q. Okay. Are you familiar with the county? A. Pretty much so. Q. All right. I'm going to hand you a document I'd like to have as Utility Exhibit Number Three. (Utility Exhibit Number Three marked for identification.) BY ATTORNEY KELSH: Q. And you agree with me that this is issued water permits for Jefferson County? A. Yes, that's the heading. Q. I would like to refer you to page two of that. About two-thirds down do you see a listing for Briar Patch Homeowners Association? A. Yes. Q. Are you familiar with that? A. Yes. That's a small development just upstream --- Glenn Haven area. Q. Okay. A. On the northeast corner of the county. Q. Do you know how many homes are in that development? A. I think something like eight or ten. Q. Okay. A. That's all. Q. And that indicates they have septic systems, drain fields disposal method? A. Yes. Q. And they have an NPDES permit for that; correct? A. Yes. Q. Do you know if there are more lots to be developed in that development or not? A. I don't think so. Q. Okay. Next I would like to refer you --- let's see ---. ATTORNEY KELSH: I apologize, Your Honor. BY ATTORNEY KELSH: Q. Page 11. About 80 percent down there is a listing for Oak Hill Mobile Home Park. Do you see that? A. Yes. Q. Are you familiar with that development? A. Yes. That's over on the Blue Ridge east of the Shenandoah River. Q. And they have a sewage general permit? A. Yes. Q. Do you know how many mobile homes are in that mobile home park? A. I'm going to guess 75 or 80. Q. Okay. And are there more lots available there for development? A. It's my understanding that there are a few unfilled lots there, yes. Q. Okay. And they have received an NPDES permit; correct? A. Yes. Q. Next I would like to refer you to page 13. A. Okay. Q. About a third down do you see a listing for Russell Roper? A. Yes. Q. And that's for Cave Quarter Estates? A. Yes. Q. Are you familiar with Cave Quarter Estates? A. Yes. Q. Is that a housing development? A. Yes. That's kind of in the center of the county, a little bit southeast of Charles Town. Q. All right. And do you know how many homes are in there now? A. It's been a while since I've been through there, but I would think it's probably up to 30 or 40 homes at this point. Q. Okay. And they have a general sewage permit from the DEP? A. Yes. Q. And is there room for more homes in that development? A. I'm sure there are more lots available there. Q. Okay. As a Board member with the District are you familiar with other utilities, sewer utilities, in the county? A. Yes, pretty much so. Q. I'd like to hand you a document and have this marked as Utility Exhibit Number Four. (Utility Exhibit Number Four marked for identification.) BY ATTORNEY KELSH: Q. And would you agree with me that this is a listing from the PSC's database of PS --- the first page is publicly owned sewer districts in Jefferson County? A. Yes. Q. And Harpers Ferry-Bolivar PSD is listed as well as Jefferson County PSD? A. Correct. Q. And then the next page shows municipally operated sewer systems in the county and Charles Town, Racine and Shepherdstown are listed there; correct? A. Yes. Q. And the last page shows privately owned sewer plants. And just Willow Spring Public Service Corporation is listed there; is that correct? A. Yes. Q. So the Briar Patch development, even though they have a plant, they don't have a certificate or they're not a utility; are they? A. Correct. Q. And the same is true of the Oak Hill Mobile Home Park. They have 80 customers in a plant and they don't have a certificate and they're not a utility; are they? A. Correct. Q. And Cave Quarter Estates, they've got about 40 customers, sewer plant and they don't have a certificate and they're not a utility; are they? A. Right. JUDGE GEORGE: Maybe the questions would be better worded, they're not a utility yet. BY ATTORNEY KELSH: Q. Now, the District could have entered into agreements to acquire these systems; could it not? A. Yes. Q. It could work out a deal with Cave Quarter Estates maybe to buy that plant. If it does so, it will file a certificate to acquire; would it not? A. Yes. Q. But in that circumstance the District is just --- it might be one of these bad old package plants that Joe Hankins talked about in his testimony? A. Correct. Q. But Sheridan and Thornhill treatment plants, those aren't bad old package plants; are they? A. No. State of the art. Q. The District has seen to it that they're good plants; correct? A. Right. ATTORNEY KELSH: Thank you. That's all I have at this time. JUDGE GEORGE: Would it surprise you to realize that this Commission sees illegally operating sewage utilities all the time? A. Illegally operating? Yes, I can agree with that. It would not surprise me to answer your question. JUDGE GEORGE: Mr. McDonald, Cross Examination? ATTORNEY MCDONALD: No, thank you, Your Honor. JUDGE GEORGE: Mr. Michael? CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. Mr. Kable, as a general rule would you agree with me that if Jefferson County Public Service District proposed a project involving new wastewater treatment plants serving some 800 people, that you would have to go to the Public Service Commission first and get a certificate; correct? A. Yes, sir. We would surely initiate the project such as that. We would ---. Q. Would you also agree with me that if a project individual wanted to build a wastewater treatment plant to serve 800 customers, they would have to go to the Commission to get approval prior to construction? A. Yes. Q. Now, in this case we have the wastewater treatment plant serving 800 people that's going to be constructed before anybody goes to the Commission and seeks approval. Would you tell me why in your opinion that's correct? A. As per the documents that were prepared, it was our understanding that all of these permits and so forth would be in place before we were to take over the facility. Q. That's your complete answer as to why in this case it's legal to build a wastewater treatment plant before getting approval from the Commission? A. The documents that were presented to us, if they are valid and properly written, that's our understanding that that could be moved forth with the Developer's initiative and then we would take it over upon all of these things being in place at the end of the construction and the transfer phase. Q. Why? Why would that be possible? You've already established that you could build the line but you need prior approval. We've established that if the Developer does it alone, he needs prior approval. But somehow if you mix it up and do it together in a confusing sort of way, nobody needs approval. Why is that proper in your opinion as a Board member? A. Like I say, we understood that the documents were so worded that the Developer with his initiative would go forth with getting his allocation and all the various permitting in place first before we were a part of the ownership ---. Q. In other words, you were assured as a Board member the way these documents were constructed and the way the deal was put together, you could --- everybody could go ahead without seeking PSC approval? A. Everybody? Q. Meaning you and the Developer. You could go ahead and have the plant constructed before you sought PSC approval? A. In this situation that was our understanding, yes. Q. That's what you were told? A. Yes. Q. By your Counsel and by the Developer's Counsel; correct? A. Correct. And all the documents to the best of my knowledge were drawn up between the two counsels. Q. Thank you. ATTORNEY MICHAEL: That's all I have. JUDGE GEORGE: Would you agree that the purpose of drawing up the documents as opposed to the way it was under the cooperative venture was to enable this plant to be constructed before the Commission gets a chance to look at it? A. It was not my intention that we were sidestepping any of this process. As told to me we would get the certificate at a later date or we would apply for the certificate at a later date. Hence the process would go forth at that time. JUDGE GEORGE: What is the purpose of the transfer of real property and the O&M agreements and ---? A. Here again, this was presented to us as a Board by the two Counsels that drew up these documents. JUDGE GEORGE: But what was the purpose? I mean, we all know there's this complicated dance out there between the attorneys but what was the purpose in that --- developing all of this? A. If there was anything, it's the fact that upon the Developer's initiative, they can move forth faster with the actual construction and so forth at that time. JUDGE GEORGE: They can move faster with the construction because they don't have to come to the Commission and have the Commission look at the plans and specs and require public notice and probably have a public hearing and take evidence in all of this. And none of this has to happen before it was constructed so they can move faster. A. Well, the construction company. That's ---. JUDGE GEORGE: Gets it up and running a lot faster. A. Correct. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: Very briefly. Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Kable, you said that the two attorneys, the legal counsel for the PSD and the legal counsel for the Developers appeared before the Board and told it it was okay to go this route? A. I ---. ATTORNEY KELSH: Your Honor, I'm going to object to attorney/client privilege due to the substance of the attorney/client communication. JUDGE GEORGE: Making public statements in a public meeting --- I don't understand what client privilege you're trying to protect. ATTORNEY HAMMER: If I could clarify? ATTORNEY KELSH: If his question is limited to statements at public meetings, obviously statements made public are public. JUDGE GEORGE: That's what he asked. He said, did these lawyers appear before you at the Board meeting and tell you this. If you're trying to protect something said in private, then I'll listen to you. But if you're trying to protect something that was made in a public meeting, then obviously the privilege doesn't apply. ATTORNEY KELSH: Maybe I misunderstood his question. JUDGE GEORGE: Do you want to restate the question? ATTORNEY HAMMER: Sure. BY ATTORNEY HAMMER: Q. Mr. Kable, did the lawyer for the Developer and your lawyer for the PSD appear before you in a public meeting and tell you it's okay to go this route and not get a Certificate of Need up front? A. No. Q. Was that done in a private meeting? A. No. Q. When did the Developer's attorney appear before PSD and tell you that that was okay to do? A. He never did. Q. I thought you just testified a moment ago that the lawyer for the Developer and your lawyer did appear before you? A. I said they drafted the documents. But all that was done over the telephone, by e-mail and so forth between their two respective offices. Q. Let me go backwards. When were you told that it was okay to bypass the Certificate of Need process and get approval for these developments? A. It was sometime prior to our voting on the issue. Q. How much time? A. Probably a couple, three weeks or at least from one meeting to the next which would be a month. We meet monthly. Q. So was it done at a meeting that you were told this was okay? A. That could have been in ---. Q. Not could have. I'm asking when was it done. A. I think we had a pre-meeting session with our counsel. She brought out first and then our counsel brought forth at our monthly meeting. Q. Was the pre-meeting meeting publicly noticed? A. No. This was just where Sue Lawton and her counsel go over things prior to our meeting, comes up here and reviews these documents from the office or whatever documentation. They meet with the two of them and discuss ---. Q. I'm asking about when you were told this was okay. When were you told this was okay? A. That may have been at the ---. Q. Not may have been. I'm asking what your recollection is. When were you told of this? A. It would have been at the ensuing meeting, the next meeting after this came forth. Q. So there was a private meeting between Ms. Lawton and counsel? A. Correct. Q. And then before your next meeting, you were told this was okay? A. Before the --- yes. It would have been before the next meeting. Q. Who told you it was okay? A. I think it came out at the meeting by counsel. Q. It came out at the meeting or it came out before the meeting, at the pre-meeting meeting? A. Both and I think maybe Sue mentioned it to me possibly prior to the meeting in our discussion of the agenda. Q. Who was present at the pre-public meeting? A. It would have been Sue and her counsel. Q. And how many PSD members were present? A. I can't say that any of us were there. I was not there. Q. You weren't there? A. Yeah. Correct. Q. So when did you first learn that it was okay to bypass the Certificate of Need process? A. It would have been sometime after that. We were on the way to the meeting with Sue. As we went in the door or whatever ---. Q. I don't mean to accuse you. But I'm just trying to establish was this done at a public meeting or not? A. It was discussed later at the meeting. I can't remember exactly every phrase or every item that was gone over or that it was even mentioned that we were sidestepping the need to get a certificate. Q. But you as chairman had received word in advance of the meeting that it was okay to do it this way, the lawyers had agreed it was okay? A. Yes. Q. Did you ask your counsel to speak at a public meeting to address this decision? A. Only if it came about in that particular meeting. Q. No. Did you ask him? Did you? A. No, I did not. Q. Did any member of the PSD say, we would like to have counsel told in public that it's okay to follow this route? A. No, it was not asked of them --- or of him. Q. So am I correct that it was decided on this course of action outside of the public meeting? A. No. The public meeting --- I'm sure we discussed the issues of the agreement at the meeting. Q. At the public meeting? A. Yes. Q. And did you discuss the issue of not getting a Certificate of Need up front? A. I don't know if that issue was put forth as a direct question or a direct statement, that we were sidestepping the issue. Q. Didn't a citizen appear before the regular meeting on May the 3rd, 2004 and express concern that the actions of the Board were being done without following proper procedure? A. I think someone did come forth. Q. Do you remember who that someone was? A. I'm not sure if that was at that meeting. BRIEF INTERRUPTION BY ATTORNEY HAMMER: Q. These have highlights on them. These are not the originals. Do you see regular meeting May 3rd, 2004? A. Yes. Q. And these are the minutes of the May 3rd, 2004 meeting? A. Yes. Q. And do you see the paragraph that begins public comments? A. Yes. Q. Read that statement. A. Public comments were received from Susan Rissler Sheeley. She presented the Board with a letter expressing her concern about the Thornhill three subdivision which had nothing to do with the present action under the consideration of by the Board. Q. What was her concern? A. I know it had something to do with the procedure. But it didn't have anything to do with what was at hand apparently. Q. Something to do with procedure? A. Yes. Q. Do you remember what that something was? A. No. Q. Do you remember was it about getting a Certificate of Need up front? A. Yes. ATTORNEY MCDONALD: Your Honor, the Public Service District is not required to get a Certificate of Need or a Certificate of Public Convenience and Necessity to sign the contract. ATTORNEY HAMMER: That may or may not be correct. But my question is as to his recollection of what happened. And I'll ask him whether or not he remembers if that is the expressed concern. JUDGE GEORGE: I think it's a fair question. A. I'm not sure what it was. But we have a tape of the proceedings if you so desire to listen to that. I think the statement speaks for itself. It didn't have anything to do with what was at hand. BY ATTORNEY HAMMER: Q. And you don't --- as you sit here today, you don't remember what her concern was? A. Correct. JUDGE GEORGE: By that May meeting you had already voted to proceed with the contract ---? A. Yes. I think that was the April meeting, I believe. JUDGE GEORGE: So you voted to do that in April and she appears in May and says something is fishy and it wasn't on the agenda in May? A. Correct. I think Susan came forth under public comment. That is what we have in our minutes. BY ATTORNEY HAMMER: Q. Sir, let me see if I can just clarify the record here a little bit. These minutes I just showed you, these are the May 3rd, 2004 minutes; right? A. That --- what you handed me had that date on it. Q. And it was at that same meeting that Mr. Jonkers presented new agreements for approval for sewer facilities from Old Standard Real Estate, for O&M agreement, for asset purchase agreement and for ground lease. A. Was that for --- which one? Q. That's for Old Standard. A. For Sheridan or Thornhill? Q. That's for Sheridan, sir. A. Pardon me? Q. That's for Sheridan. A. For Sheridan? Q. Yes. A. Then what was the rest of the minutes there? What did they do? Q. I mean, that was the very day, wasn't it, that you entered into those agreements? A. I understand that our counsel had been working back and forth with them prior to that. He came forth with it before the Board. Q. Sir, do you have Exhibit Three handy? Do you have Exhibit Three in your hands? A. Yes. Q. Mr. Kable, whose signature is at the end of that O&M agreement? A. That's my signature. Q. Did you sign this agreement before this meeting or after this meeting? A. It would have been after the meeting. Q. Okay. So Susan Rissler Sheeley --- she has concerns about procedure. And yet you still went and signed this agreement without inquiring of counsel whether or not the procedure is proper. Can you explain why? A. Here again, on advice of our counsel we moved ahead with this. And no disrespect to Susan, but there are people that come up and protest many --- not many items, but they'll come up under public comments at the end of our meeting and make a statement and express their feelings on whatever issue. Q. This citizen had very specific concerns. ATTORNEY KELSH: Your Honor, I'm going to object. It doesn't show the level of detail that she raised her comment. It indicates she raised some concerns. It doesn't indicate whether she raised --- spoke for half a minute or five minutes. I don't know where this is going one way or the other. I mean, we're here to determine whether the District violated 24-2-11, 24-2-12. This is getting involved in a level of detail that's not pertinent to make a determination. ATTORNEY HAMMER: Your Honor, I can recall Ms. Sheeley and she can explain to the Board very briefly --- in fact, she can read to the Board the letter she read to the Public Service District Board at that meeting when they approved the Old Standard agreements. And then we'll know what she said. JUDGE GEORGE: How is this relevant? ATTORNEY HAMMER: It's going to be relevant on notice that they're in violation --- alleged violation of the law. JUDGE GEORGE: It sounds like you can ask the question. Go ahead. BY ATTORNEY HAMMER: Q. And, sir, just to finish this area because I've heard her testimony. The agreement for the Old Standard Exhibit Three which you have in your hand, that's the exact same agreement as for Thornhill; isn't it? A. Other than --- yes, essentially the same. Q. So to the extent that Sheeley has concerns about this type of --- this form of agreement, you're on notice of those concerns; aren't you? A. I guess I was. Q. And you didn't give an opportunity to have a public hearing or to solicit advice as to whether or not there is some problem with this procedure? A. Possibly so. ATTORNEY HAMMER: No further questions, Your Honor. JUDGE GEORGE: We need to take a ten-minute break. SHORT BREAK TAKEN JUDGE GEORGE: Whose turn was it? Mr. Hammer, are you finished? ATTORNEY HAMMER: I am, Your Honor. JUDGE GEORGE: Mr. Faulkner, do you have anything? MR. FAULKNER: Yes, Your Honor. CROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Kable? A. Yes. Q. In your testimony before the short break you said that one of the things that you do is land development to some extent? A. Yes. Q. Could you explain what that land development is? A. Yes. I'm a partner in Eastland which is a separate division just southeast of Charles Town. Q. Who are your other partners in that? A. Yes. Q. Who are your other partners in that? A. My wife and Steve Bittiger (phonetic). Q. And ---. A. Steve Marshall who is absent from the area. Silent partner, if you will. Q. In terms of Old Standard, LLC, besides Mr. Jonkers do you know who the other owners are of that operation? A. Yes. Q. Who are they? A. Gene Capriati (phonetic) and Lee Snyder. Q. And in terms of the Developers of Sheridan, who are the owners of that? A. The same three to my knowledge. Q. And you say you've lived in the county all your life. How long have you known each of those individuals? A. Twenty-five (25) years for all of them, I'd say. Maybe Gene a little longer. Q. In the course of ---? A. Depending on who they were and after they started developing and that sort of thing. Q. In the course of these 25 years, did you have any professional affiliation or was it all just social? A. We --- my family and I farmed the Huntfield property along with J.P. and Dickie Burns (phonetic). We shared that when that was just made a farm. Q. And one of the people who I said was any relation --- professional relationship with either Mr. Capriati, Mr. Jonkers, Mr. Snyder? A. That's professional if you consider farming a profession. Q. Okay. So your wife you mentioned, of course her name is Carol Kable; is that correct? A. Yes. Q. And what is her profession? A. Real estate broker. Q. And a real estate broker lists property for sale? A. Yes. Q. In the course of the last 25 years has she listed any properties in any of the developments of Mr. Capriati, Mr. Jonkers or Mr. Snyder? ATTORNEY KELSH: Your Honor, I'm going to object to this questioning as going beyond the scope of this complaint. JUDGE GEORGE: Any response, Mr. Faulkner? MR. FAULKNER: I think it gets back again to motivations. Some issues that happened out of the ordinary and the fact that there is potential for personal --- at least with his wife, personal benefit is something that should be part of the record. ATTORNEY KELSH: Your Honor, that's not going to count one way or the other in terms of whether the District violated 24-2-11, 24-2-12. And we have a lot of witnesses to present, and we need to keep the issues relevant to this proceeding. JUDGE GEORGE: I'm not sure he's so far afield from the relevant issues. It goes to intent. This does seem to be an extraordinary effort on the part of the utility. You may proceed. A. To the best of my knowledge, she never listed any properties while they were the persons selling the lots. She has listed properties in the subdivisions that --- where the home buyer --- where they're relocating for whatever reason. BY MR. FAULKNER: Q. But the subdivisions that any one of these three gentlemen that have associated with in the past properties within those subdivisions that she has been able to list the property at some point whether they owned the subdivision later or not? A. Not to my knowledge. Q. So none of those subdivisions have ever --- she's never listed a single property of any of those subdivisions? A. Not if they were ---. Q. I didn't say that. I said subdivisions, not --- as they developed the subdivisions, they may have moved on, may have been turned over to the Homeowners Association, whatever. The subdivision still exists with X number of houses in it? A. Right. Q. Did she --- has she ever listed properties within those subdivisions? ATTORNEY KELSH: Objection. This is irrelevant in this case. JUDGE GEORGE: I think you've stepped a little bit further than anything that shows intent. Let's go to the next question. MR. FAULKNER: Okay. That's all, Your Honor. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: Yes, Your Honor. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Kable, we talked about Sheeley Exhibit Number Three which is the O&M agreement entered in by the District and Old Standard on May 3rd, 2004. With the other agreements there is an asset purchase agreement, a real estate purchase and sale agreement, and also a ground lease agreement with Old Standard. And all of those are dated May 3rd, 2004. Are you aware that you did sign all those in your capacity as chairman of the Jefferson County Public Service District? A. Yes. Q. Then we get into the Complainant's or Sheeley Exhibits Seven, Eight, Nine and Ten. Those were all dated or at least in the handwriting were dated June 7th of 2004 and this is in regard to the Thornhill developments? A. Yes. Q. And are you familiar with signing those as chairman of the District? A. Yes. Q. And would you say that these agreements --- these four agreements for Sheridan and the four agreements for Thornhill, other than the change of names and the dates, are very possibly similar or the same agreements? A. Yes. Q. After the concerns of Ms. Sheeley at the May 3rd, 2004 Board meeting, when considering the June 7th, 2004 agreements with Thornhill, did you have any other thoughts or any other discussions about these particular agreements before entering into them as chairman of the District? A. We had discussions about them and the fact that they're coming forth --- taken before the Board, not relevant to Ms. Sheeley's complaint. Q. So that between the time of the --- entering into the Old Standard agreements and the District and then going to the June 7th agreements with the District and Thornhill, were there any other concerns or any issues that you in your capacity as one of the Board members, that the Board discussed and addressed that may have changed the situation on the first agreements with Sheridan and the second agreements entered into by Thornhill? A. No. Since they were almost carbon copies except for the signatures and dates, we saw no need to do that. Q. So the questions asked by Mr. Hammer that looking at on advice of counsel of the Developer and also the advice of counsel of the District, it was somewhat a similar sequence of events --- did take place with the agreements regarding Thornhill? ATTORNEY KELSH: Your Honor, I object to the question. I'm not sure what similar he's referring to. BY ATTORNEY ROBERTSON: Q. Well, basically did you go through the steps, the same process on advice of counsel that's what happened with the Sheridan agreements on advice of counsel? A. I don't know anything about the workings between the two of them. I assume that was the same working process before Jefferson County Public Service District. That's their agenda. Q. Right. So pretty much at least from your perspective of the point, it got to the Board's agenda, pretty much the same sequence of events happened to sign the Old Standard agreements between the District and Old Standard and Thornhill and the District; correct? A. Correct. Q. With the Thornhill agreements, did any other concern from Ms. Sheeley or any other person attending the Board meetings of the District --- were there any other concerns from May until June at the Board meetings? A. Concerning this activity? Q. Yes. A. Not to my recollection. Q. With the District entering into these agreements with Sheridan and Thornhill, do you know whether or not one of the members of the Developers, Lee Snyder is the same Lee Snyder that operates Jefferson Utilities, Inc. as the water --- provider of the water utility? A. He's the same person. Q. It is the same person. The other thing I want to get back to and I want to look at is, were you also in with the Deerfield development which the District has filed notice of intent, you also signed as your capacity as chairman on these similar agreements? A. Yes. Yes. Q. So there was a similar treatment for all three of these Developers? A. Correct. Q. Also as I asked Mr. Hankins, do you know to what involvement that the District's engineer had with the Developer's engineer as to Thornhill and Sheridan? A. They would see this plant down in Atlanta --- and Will Smith went down there with them to see this plant. And reviewed that with them and so forth. So I know there was a lot of comparing notes there and so forth. So he's been in the circle of the situations there. Q. And as to with the Developers, do you know as a Board member whether or not Mr. Smith had been reimbursed by these Developers as to flying down to Atlanta as part of the District's engineering? A. I'm not sure that's been done. But I'm sure we'll get the bill. Q. Do you believe as the chairman such as those particular things done by the District's engineer in review of Sheridan and Thornhill should be paid by the rate payers of the District? A. State that again. I missed the first part of that. Q. Such as Mr. Smith's flight down to Atlanta to review the plants that are going to be put into Sheridan and Thornhill, do you believe that the rate payers of the Jefferson County PSD --- A. No. Q. --- should pay for that? A. No. If we paid, then that would be part of moving forth with this whole project. Not out of current funds. Not ---. Q. Would you agree then that it should be also a cost reimbursed by the Developers? A. Yes. Possibly so. Q. And not the rate payers? A. As is the inspections. JUDGE GEORGE: Can I assume that the reason that the engineer went down and looked at this plant was because the plan is for this --- being constructed by the Developers? A. Yes. He was there on our behalf, if you will. JUDGE GEORGE: Acting on your behalf? A. Yes. Compensating what --- we can be out of the funds for this project. JUDGE GEORGE: And the reason you're having inspections of the facility is because you believe that in the relatively short term, all these plants and everything will be District property? A. Yes. JUDGE GEORGE: Does the District, as we sit here today, own the real estate that these plants are going to be sitting on? A. I think the transfer has been made of certain --- on the Sheridan site. But I don't think Thornhill has been transferred yet. JUDGE GEORGE: The idea is that shortly after you acquire title to the property, you're going to lease it back? A. Yes. JUDGE GEORGE: Would it be fair to presume from that arrangement that the reason that the utility wanted to own the land before construction was to ensure that eventually the utility got possession? A. Yes. BY ATTORNEY ROBERTSON: Q. At this particular time I didn't hear it because of the acoustics. Did you say at this particular time that the utility in the Sheridan owns at least the treatment plant property, the land, the real estate? A. Say that again. Q. In Sheridan --- A. Yes. Q. --- did you say that the District owns the property currently that the treatment plant is to be located on? A. It is my understanding that that has been transferred. Q. And ---. JUDGE GEORGE: Do you know when the other sites are going to be transferred? A. No, I don't. JUDGE GEORGE: It's in the works, though? A. Yes. I think that development is somewhat behind in the time frame of Sheridan. BY ATTORNEY ROBERTSON: Q. With this particular conveyance, if you know, were there any funds of the District required to purchase or acquire this property? A. No. Q. So as far as you knew, this has been donated to the District? A. Correct. Q. So then I asked Mr. Hankins and I'll ask you the same question. What is your understanding of the rest of how the other agreements work? A. I missed the middle part. Q. How the other agreements work --- if the District already --- for Sheridan, and we'll just stay strictly with Sheridan right now, if Sheridan had already --- the District already has the real estate for the treatment plant? A. Yes. Q. Then what is your understanding that how the rest of those agreements work ---? A. That we release that parcel back to them for their construction of the plant. Here again, meeting our interval of inspections and so forth. And then we take it over, operate it and maintain it on the onset. And then we transfer the entire plant, we transfer it back, real estate, plant and all. Q. So at least from your capacity as the District's chairman, that the District and within your capacity, believe that you would file the certificate after the fact, after the treatment plant and collection lines are built? A. Correct. Q. So with your discussions with the Developers, did the thought pop into your mind that possibly the --- the Developers would need to file the certificate? A. This is a new concept to me and I think maybe to the other Board members. I can't speak wholly for them. I'm not here to protect them. But I thought that going this way with the Developer showing the initiative of moving forth and getting all the other permits, that this was the proper way of doing this. And like I say, we also had advice from our counsel. Q. Thank you, Mr. Kable. JUDGE GEORGE: Any Redirect? ATTORNEY KELSH: Yes, Your Honor. REDIRECT EXAMINATION BY ATTORNEY KELSH: Q. Are you aware, Mr. Kable, that the District had filed this cooperative venture agreement with the Commission for its review? A. Yes. JUDGE GEORGE: And why would the utility file that document? A. At that point that is the direction that the Developer and the Public Service District wanted to go. But then they changed their mind. I think by everyone especially the Developer to go this route instead. BY ATTORNEY KELSH: Q. When you say that's the direction that everybody wanted to go, would you agree with me that that direction was treating this as an alternate main extension agreement? A. Yes. Q. And all the parties at some point thought that that was the proper course of action to follow? A. Yes. Q. And when did you decide that wasn't the proper course of action? A. Probably a couple of months before signing these documents because I can remember it took a couple of months to come up with the documents that you referred to here today. Q. Did the issuance of the Staff or the Commission make any recommendation that the petition be denied and that you have to file for a certificate of convenience and necessity in this project have anything to do with your decision that that wasn't the direction you wanted to go in? A. Since that was not a ruling of the PSC, we took that under advisement, but I don't think that had a bearing on the change of direction. Q. Why did you withdraw the petition? A. This alternative means moving forth with the Developer having a site that would lend itself with a gravity system to a location for the plant to be built. Q. So when you filed this cooperative venture agreement with the Commission, they didn't have a site for the plant? A. I can't say that they did then. Nor did we have capacity to serve them either. Q. You're telling me that the reason that you withdrew this petition for the Commission's consideration is because there wasn't a site for the plant? A. I think that was developed then but I can't recall the order of events of when they purchased the location. Q. Can you help me understand why that's relevant to whether or not you proceed with the petition that was filed that you withdrew? I'm having trouble understanding the relevancy of it. How's that relevant? Can you help me understand that? A. It was their property and they came forth with this sequence of events that has been spelled out here today where the --- go through the process of the purchase, the lease back, they built the plant, and then deed it over to us at a nominal figure. Q. So was it finding a physical two or three acres to put the plant on that was the reason you withdrew your petition or was it the development of all the --- transferred real estate, lease, back operation and maintenance agreements and eventual purchase of the plant? All this complicated dance. Was it as a --- the result of that is the reason you withdrew your petition or was it the location of the two or three acres you wanted to put the plant on? A. I think that finding the location and the concept of doing it this way preceded the events that led to these documents that have been drawn up and signed. Q. And then how in the calendar did that fall compared to the condition that you'd be required to follow with the units? A. Here again, I can't remember when they purchased the property but it fell prior to that or when the purchase of the property was conceived in the idea of the location that would serve Sheridan. Q. The fact that Staff said no, no didn't have anything do with the filing of the petition? A. I can't remember how much bearing that had, but I think what I just stated had preference over that. JUDGE GEORGE: You believe that if you had proceeded to hearing on the joint cooperative venture that the Commission would have approved it? ATTORNEY KELSH: Objection, Your Honor. The question calls for speculation. JUDGE GEORGE: Well, he is the decision maker on whether to withdraw the petition, he is the decision maker on whether to proceed with this arrangement. I think it's a fair question but I don't know that he's thought about it. I'm not sure he even thought about it. Did you consider whether or not the petition had a chance in the face of Staff recommendation or that it shouldn't happen? Did you consider that beforehand? A. No. We didn't think it would be successful with that. JUDGE GEORGE: So you did consider it? A. Yes. JUDGE GEORGE: And you did this beforehand? A. Like I said, these other circumstances changed everyone's mind and strategy at that point. JUDGE GEORGE: So you withdrew the petition? A. Yes. JUDGE GEORGE: You knew that Staff said that a plant of this magnitude requires a certificate of convenience and necessity? A. Well, yes, I guess I did. JUDGE GEORGE: And yet someone giving you advice, general manager, lawyers, someone giving you advice that we can get around that requirement of the certificate of convenience and necessity by having these various documents and these various transactions, so none of them has to get one until it's up and running? A. I would agree with that. JUDGE GEORGE: You thought that sounded pretty good? A. I thought the certificate was to come at a later time. It wasn't going to be something we wanted to sidestep forever. JUDGE GEORGE: Very well. Mr. Kelsh? ATTORNEY KELSH: Yes, Your Honor. Just very briefly. BY ATTORNEY KELSH: Q. Mr. Kable, you were present when the general manager of the District was testifying? A. Yes. Q. Do you recall her testimony in which she stated that part of the reason why the cooperative venture agreement was withdrawn was because it provided for the District to design and construct the plant? A. Correct. Q. Is that consistent with your recollection? A. Yes. Q. And she also testified that the Developer objected to the extent of that. Do you recall that testimony? A. Right. Q. Is that also consistent with your recollection? A. Yes. She came in with a very high figure which discouraged their moving forth with that. Q. Thank you. ATTORNEY KELSH: That's all I have. JUDGE GEORGE: Mr. Robertson asked you whether or not at any point in this process, the idea might have popped into your head that if we didn't need to get a certificate, the Developer needs to get a certificate? I believe your answer was no. Is that --- am I remembering that right? A. Somewhere in this process we need to get a certificate. JUDGE GEORGE: Before this plant was built, though? Mr. Robertson asked you did it ever pop in your head that we don't have to get it before we build the plant, the Developer has to get it? A. It was my understanding that this could be done at the --- when the plant was transferred to us or prior to the --- one of the things that has to be in place before our acceptance. JUDGE GEORGE: Have you ever read 24-2-11 or 24-2-12? A. Yes. I can't quote it though. JUDGE GEORGE: You see language in there that says a persons cooperation, you know, on and on and on and on? It's all inclusive. It's in that language that before they build utility plants, they have to get Commission approval? A. Yes, at some point. JUDGE GEORGE: Very well. ATTORNEY KELSH: Your Honor, I move Utility Exhibits Numbers One through Four into evidence and ask that this witness be excused. JUDGE GEORGE: Okay. All parties are finished with Mr. Kable I assume? ATTORNEY HAMMER: I have more questions. JUDGE GEORGE: Go ahead and ask your questions. RECROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Kable, Exhibit Number Three which is the operation and maintenance agreement, you testified that basically once the plant was built, then the PSD takes over operation of that plant? A. Yes. Q. And you're familiar with under number two of the agreement, it goes into some pretty good detail on what the District shall do in terms of operating and maintaining. Is that going to be a contract with a company or do you actually hire full-time PSD employees to run the plant at that time? A. I think that would be handled in-house. But with employees coming and going, if that were not so, then we may have to rely on someone from an out source. Q. So there would be additional expense by the PSD to run this plant? A. Employees aren't cheap either. Q. Right. So it's conceivable that you may be running this plant for many months prior to enough houses being built and new customers coming on board to offset that cost; is that correct? A. It's my understanding that this type of plant does not require continual, you know, 24-hour observation and adjustments and so forth. Much of it is computerized and alarm related. Q. Have you begun your budgeting cycle for 2005? A. Not yet. Q. Have you billed in the cost of either Sheridan or Thornhill into that budget? A. I'm not sure this is going to materialize by then. Q. I'm just curious about your own comfort as chairman of the Public Service District and the wise use of public funds in what conceivably can still be a speculative venture. What is your comfort level on that? A. With the dollar value of the capital improvement that we're going to be receiving, I think we can handle it. If somebody is going to give us the plant, I think we can run it. ATTORNEY HAMMER: Okay. That's all I've got. ATTORNEY KELSH: Your Honor, if I may? I think the documents admitted into evidence speaks for themselves, but nevertheless given the scope of this proceeding ---. REDIRECT EXAMINATION BY ATTORNEY KELSH: Q. Mr. Kable, I would like to hand you a copy of Sheeley Exhibit Three which is the O&M agreement. I would like to direct your attention to paragraph four. A. Yes. Q. Does that paragraph essentially state that the District will be fully reimbursed for its O&M costs from Sheridan and Old Standard? A. Yes. Q. Thank you. JUDGE GEORGE: Any further questions for this witness? There has been a request that he be excused from the hearing. Yes, Mr. Robertson? ATTORNEY ROBERTSON: Yes. I do have one question regarding the O&M agreement. RECROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. It states in paragraph four --- it says that the District shall charge and Old Standard shall pay a flat monthly charge. Do you see that in the first statement? A. Yes. Q. Right. But then for the District, who regulates the rates and charges of the District? A. For this? Q. It says that the District shall charge ---? A. It would be --- I don't think it's spelled out there but we would come up with what our actual costs would be for the operation of the plant. Q. But the question I asked you, who regulates the District's rates and charges? A. They're approved by the PSC. Q. Thank you. JUDGE GEORGE: If you had a contract with another utility, do you understand that you have to submit all ---? ATTORNEY MCDONALD: What did you say? Could you repeat? Are you saying he has to approve every ---? JUDGE GEORGE: I'm just asking if he has a contract with another utility, does he believe he needs to submit it to the Commission for review? A. Okay. With what type of utility? JUDGE GEORGE: With any utility. A. Yes. I think we would. JUDGE GEORGE: Okay. There has been a request that he be excused. ATTORNEY MICHAEL: I would object, Your Honor. I'm going to recall my client --- two questions about what happened at the May 3 meeting. ATTORNEY KELSH: Your Honor, this is outside the scope of any Redirect. We've got a lot of witnesses to examine. Mr. Michael has had an ample opportunity to go over this ground. JUDGE GEORGE: I think the issue at hand is for Mr. Kable to leave the courtroom and I'm not sure I understood whether you were objecting to that or not. ATTORNEY MICHAEL: I'm not objecting. I'm just advising him. JUDGE GEORGE: Warning him that you intend to call him back? ATTORNEY MICHAEL: Exactly. JUDGE GEORGE: Okay. No objection. You may leave. ATTORNEY KELSH: Your Honor, I previously moved Utility Exhibits Numbers One through Four into evidence. I ask that you may decide on that. JUDGE GEORGE: Thank you very much. We have a motion for the admission into evidence of Utility Exhibits One, Two, Three and Four. ATTORNEY ROBERTSON: Excuse me, Your Honor. I think Mr. Kelsh said One, Two and Four. ATTORNEY KELSH: One, Two, Three and Four. ATTORNEY ROBERTSON: Okay. Excuse me. No objection from Staff. MR. FAULKNER: I would like to preserve my right to object until --- as long as I get a copies to ---. ATTORNEY KELSH: Yes. I agree to provide Intervenor with copies. JUDGE GEORGE: Okay. Hearing no objection, they are admitted into evidence, Utility Exhibits One, Two, Three and Four. You're free to leave assuming Counsel doesn't want you to stay. A. Do you request that I leave? ATTORNEY KELSH: No, I don't. I want to give you that option. JUDGE GEORGE: You may call your next witness. ATTORNEY KELSH: The District has no further witnesses to call. JUDGE GEORGE: Very well. Mr. McDonald, you may call your first witness. ATTORNEY MCDONALD: Your Honor, I would call Mr. Jonkers. -------------------------------------------------------- HERBERT JONKERS, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY MCDONALD: Q. Good afternoon, sir. Would you state your name and business address, please? A. Herbert Jonkers, 1784 Kabletown Road, Charles Town, West Virginia. Q. Is that in Jefferson County? A. Yes, sir. Q. Do you have any connection with Old Standard, LLC or Thornhill, LLC? A. Yes, sir. Q. And what is that connection? What are those connections? A. Manager. Q. For both entities? A. Yes. Q. Do you have any connection with a project called Sheridan? A. Yes, sir. Q. And what connection do you have with that? A. Manager. Q. Is that a development being done by Old Standard, LLC? A. Old Standard is an independent of LLC. Sheridan, LLC is developing Sheridan subdivision. Q. All right. Do you have some connection with the so-called Thornhill development? A. Manager. Q. And is that being developed by Thornhill, LLC? A. Yes, sir. JUDGE GEORGE: Can you help me understand exactly what Old Standard is doing --- Sheridan is developing the property? Is Old Standard just doing the sewer? A. That is a 400-acre parcel of land. JUDGE GEORGE: Okay. That is the land itself? A. That's correct. JUDGE GEORGE: And it has entered into these contracts with the Public Service District? A. Right. JUDGE GEORGE: And it intends to construct a sewage plant to serve ---? A. Sheridan. JUDGE GEORGE: Sheridan. BY ATTORNEY MCDONALD: Q. Have Old Standard, LLC and Thornhill, LLC responded to a number of discovery questions propounded to you by the Public Service Commission Staff? A. Yes. Q. I will show you a list of questions and responses together with a cover letter titled response of Old Standard, LLC and Thornhill, LLC to the Commission Staff's first set of Interrogatories and ask you if this appears to be a copy of the Developer responses to Staff's discovery questions? A. Yes. ATTORNEY MCDONALD: Your Honor, may I have the Developer responses to Staff's discovery request marked --- that the witness has just identified marked for identification as Old Standard Exhibit Number One? JUDGE GEORGE: They are attached together? Attach those documents together. They're all attached together. Okay. We'll mark that as Old Standard Exhibit One. (Old Standard Exhibit Number One marked for identification.) ATTORNEY MCDONALD: Your Honor, the cover letter indicated that there were some oversized documents and some notebooks also being supplied in response to the Staff's data request. Only one set of which was given to the executive secretary. There was a roll of drawings for the Old Standard development and a roll of drawings for the Thornhill development and four notebooks. JUDGE GEORGE: And this is the executive secretary's file. This is the entire file. I don't know what she did with those documents and what the current --- the Commission has been all over the board with where they put discovery requests and most frequently they don't end up in the official file which is the file that I work from. ATTORNEY MCDONALD: Well, I brought an extra set of notebooks. But I don't have an extra set of the drawings. JUDGE GEORGE: Mr. Weimer, would you mind if we marked the roll of drawings for Old Standard as an exhibit in this case? Do you also have a set of drawings for Thornhill? ATTORNEY MCDONALD: Your Honor, I would ask that we be permitted to mark for identification as Old Standard Exhibit Number Two a set of drawings, it says on the top sheet, Old Standard development sewer line and wastewater treatment plant project in Millville, West Virginia. JUDGE GEORGE: That document is attached to the one document? It is stapled together; right? ATTORNEY MCDONALD: It's one document. It appears to be about 30 or 40 sheets stapled together. JUDGE GEORGE: I just want to make sure it's connected to each other so I don't --- so it doesn't get misplaced. Okay. That will be marked as Old Standard Exhibit Number Two. (Old Standard Exhibit Number Two marked for identification.) ATTORNEY ROBERTSON: Your Honor, a point of clarification. JUDGE GEORGE: Just a minute. Go ahead. ATTORNEY ROBERTSON: Just to inquire at this time. What was Old Standard Exhibit Number One? JUDGE GEORGE: Responses to discovery questions. ATTORNEY ROBERTSON: Thank you, Your Honor. JUDGE GEORGE: I'll mark these drawings as Old Standard Exhibit Two. ATTORNEY MCDONALD: Your Honor, I'm trying to put in all discovery responses. Your Honor, may we have marked for identification as Old Standard Exhibit Number Three --- well, let's call it Thornhill. Sewer line and wastewater treatment plant project for Highland Farms, LLC, Charles Town, West Virginia. JUDGE GEORGE: We'll mark that as Thornhill Exhibit One. (Thornhill Exhibit Number One marked for identification.) ATTORNEY MCDONALD: May we have marked for identification as Old Standard next number a notebook about an inch and a half thick titled West Virginia Bureau of Public Health and West Virginia Department of Environmental Protection Division of Water Resources permit application for construction of Old Standard sewer line and wastewater treatment? JUDGE GEORGE: We'll mark that as Old Standard Exhibit Three. (Old Standard Exhibit Number Three marked for identification.) ATTORNEY MCDONALD: May we have marked for identification as Old Standard next number a notebook about two inches thick called Technical Specifications for Old Standard development? July 2004. JUDGE GEORGE: We'll mark that as Old Standard Four. (Old Standard Exhibit Number Four marked for identification.) ATTORNEY MCDONALD: May we have marked for identification as Thornhill Number Two a notebook about two and a half inches thick titled West Virginia Bureau of Public Health and West Virginia Department of Environmental Protection Division of Water Resources permit application for construction of the Thornhill development wastewater treatment plant? September 2004. JUDGE GEORGE: We will mark that as Thornhill Exhibit Two. (Thornhill Exhibit Number Two marked for identification.) ATTORNEY MCDONALD: All of the notebooks so far have been prepared by Potesta and Associates. May we have marked for identification as Old Standard next number a notebook about three inches thick titled EnviroQuip (phonetic), Process Equipment for Water Treatment and Wastewater Reclamation. On the inside first page, proposal Old Standard, LLC, Sheridan, WWTP. JUDGE GEORGE: So this is another Old Standard exhibit? ATTORNEY MCDONALD: Yes. JUDGE GEORGE: We'll mark this as Old Standard Exhibit Five. (Old Standard Exhibit Number Five marked for identification.) BY ATTORNEY MCDONALD: Q. Mr. Jonkers, did you ask me to respond to the Staff's data request by supplying the documents that I have just marked for evidence? A. Yes, sir. Q. Let's briefly talk about the history of the Sheridan project. Where is it located? A. On 340 next to Carriage Park. Can you hear me? Q. Next to where? A. Next to Carriage Park. Q. Carriage Park. A. That's 340 near the Old Towne turnoff. Q. And is that land owned by your company, your LLC? A. LLC, yes, sir. Q. And what briefly are the plans that you have for that land? A. It is approved and under development for 179 houses. Q. 179 houses? A. Yes, sir. JUDGE GEORGE: You've already got approval from ---? A. It's under construction. JUDGE GEORGE: It's already under construction? A. Yes, sir. We've got roads in, sewer lines in, water lines in. BY ATTORNEY MCDONALD: Q. Now, you've been through a series of potential solutions for sewer service for Sheridan; have you not? A. Yes, sir. Q. First you had a plan to pump your sewage to the JCPSD? A. Main line extension agreement would be force main back to the Patrick Henry Estates. Q. Okay. What happened to that plant? A. Well, the plant was closed down. Patrick Henry Estates was closed down, destroyed by the City of Charles Town. Then we were going to go to the Wrecking Ridge (phonetic) pump station and that was over capacity and no way to get back into town. Q. Would Charles Town not serve you? A. I couldn't get there because of the pump station capacity. So the only alternative was to enter into some sort of joint venture agreement. Q. And you negotiated with Jefferson County Public Service District, what was called a cooperative venture agreement as sort of a joint venture; did you not? A. Yes, I did. When prices came in on that, estimates were made and the fact that it --- there were absolutely no controls on my part on what money was being spent. I was going to be charged for it. I asked for the documents to be rescinded. Q. How much was the estimate? A. I can't remember, $3 or $4 million. Q. That was just to service Sheridan? A. Yes. Q. So then you sought another solution and you came up with what is essentially the current plan; is that right? A. Well, the property of Old Standard was sold by the courthouse steps, put a group together and bought the property and started negotiating on the venture agreement that we're in now. Q. Okay. Now, that gave you some control over what kind of wastewater treatment plant was going to be constructed; did it not? A. At that time we had been introduced to the folks from EnviroQuip, made presentation. The dollars were higher but certainly the quality of water coming out would preclude having to do any upgrades in the near future on the Chesapeake Bay. Limitations on all the water sources of the Chesapeake Bay were mandatory. So rather than doing an upgrade, my partners and I decided we would go ahead and bite the bullet now and put in a better plan and not have to go through any upgrades in the future. Q. What's your estimate on how much it is going to cost you to build the plant to serve the Old Standard subdivision? A. The Sheridan subdivision, about a million and a half. Q. A million and a half. And how much are you going to spend to provide sewer service to the subdivision? A. A little bit less than that because that is all outside work. Q. A little bit less. Is it still over a million? A. Yes, sir. About a million, $250,000, maybe $300,000. Q. When did you start meeting with the EnviroQuip folks? When did you get in touch with them? A. Probably in January '03 or '04. Q. Of this year? A. I can't remember anymore. Q. Well, you ---. A. It was ---. Q. You negotiated these deals in ---. A. '04. I'm sorry. JUDGE GEORGE: We've had earlier testimony, it might have been inaccurate, but Sheridan plant was going to start out with 50,000 gallons per day? A. That's correct. JUDGE GEORGE: That is accurate? A. That's correct. JUDGE GEORGE: And that the Thornhill plant was going to start at 100,000 gallons ---? A. 50,000. JUDGE GEORGE: It's 50,000 as well? A. Yes, sir. JUDGE GEORGE: And the reason that it is slightly less is because of less offsite work? A. There is less --- there is no pumping to get to the Thornhill site as opposed to the pump work to get to the Sheridan site. JUDGE GEORGE: And do these numbers, the million and a half, a little more than a million and a half, is that just for the treatment plant or is that for all the piping and connecting? A. That's for the treatment plant. JUDGE GEORGE: Okay. So there is also additional expenditures in putting out the collection line? A. Oh, yes. Yes, sir. JUDGE GEORGE: How much? A. Are you talking about collection lines in the subdivision or the collection lines that run from Sheridan to the Old Standard plant? JUDGE GEORGE: Both. How much money do you have tied up in the Sheridan subdivision to lay the collection lines and the transmission line? A. Just for the sewer? JUDGE SEWER: Just for the sewer. A. The transmission line from Sheridan to Old Standard is about $900,000. And the internal lines, I'd say about another $350,000. JUDGE GEORGE: The same question with regard to the Thornhill development, how much did you have tied up in that? A. We haven't priced those out. JUDGE GEORGE: You haven't priced those out for the Thornhill development. Now, the Sheridan development you said it would be 179 houses? A. Yes, sir. JUDGE GEORGE: How many houses of Thornhill? A. 180 for the first phase of Thornhill. JUDGE GEORGE: 180. And do you anticipate that being a second phase or a third phase? A. There is going to be a second or a third phase as well. JUDGE GEORGE: And it is going to be how many residences? A. That's a function we're negotiating with this community. JUDGE GEORGE: As you ---? A. As planned right now, the total is 595. JUDGE GEORGE: 595? A. 575 acres. JUDGE GEORGE: What about the Sheridan? It was originally 179. A. It's 179. JUDGE GEORGE: Okay. So that's the same. A. That's Sheridan. BY ATTORNEY MCDONALD: Q. So did you select EnviroQuip to provide the wastewater treatment plant? A. Yes, sir. Q. What's your understanding of what they're going to supply? A. They're supplying all of the works and the internal works, everything except for the concrete work in the building that this plant sits in. The plant is totally enclosed in a building with the exception of the pump chamber outside. So it is just going to look like a barn standing there. Nothing that's going to have any open containers, nothing like what's at Charles Town. Q. There is some engineering work that has to take place to design the line from Sheridan to the plant and the line from the plant to the river and so on? A. Yes. Q. And who is helping you with that? A. Potesta has done all of that. Q. That's Potesta and Associates --- A. Yes. Q. --- in Charles Town? Are they also helping you with permitting? A. Yes, sir. Q. What is the status of those permits that you need for the Sheridan WWTP? A. We have the Health Department permit and we're getting the discharge, wastewater discharge, January 10th. Q. What is the status of permits for the Thornhill wastewater treatment plant? A. We have the Health Department permit and we're waiting for the discharge permit. Q. Is the --- are the plants going to be virtually the same kind of plant? A. Yes, sir. Q. The same supplier? A. Yes, sir. Q. Describe the status of the construction of the infrastructure at Sheridan? That is to say, water, sewer, roads. A. We've got basically I'd say 27 lots that are graded, bedded and seeded and ready for construction. And probably another 15 to 16 lots that are approaching that. Sewer lines are in. Water lines are in. And we will be putting gravel down on these roads here shortly. Q. Is Sheridan going to be a phased development where you put in your infrastructure or a portion of the development first and then the rest of it later? A. All of the off site water has been done and that supplies water to the whole property and runs along the back so it's just a matter of running lines down the cul-de-sacs as we go. Q. Okay. A. We are doing all of the grading on site and that has pretty much been handled. We have a little bit more to do. Q. Water is to the site and water lines have been laid within the development? A. Yes, sir. Q. Grading is substantially complete? A. I want to say 60 percent is done. Q. How about your sewer lines within the development? A. Sewer is about 40 percent complete. Q. Okay. What is the schedule for construction of houses at Sheridan? A. That's a function of the Building Department in Charles Town producing building permits. They were applied for and then when this problem came up with the sewer plant, the building permits were revoked. Q. Back on the status of the infrastructure. I take it that the Thornhill development is a little behind the Sheridan development with respect to water, sewer and roads. Is that fair to say? A. We anticipate starting Thornhill sometime in July or June. Q. Have any of the proposed houses in Sheridan already been sold? A. There is a waiting list for all of the houses. There are 300 people on the waiting list. There are contracts for all of the first 27 lots. Q. Under your current plans what is the schedule for construction for sewer and wastewater treatment plants? A. We've made the deposit on the contract for delivery of the plant for Potesta. Excuse me, from EnviroQuip. And we're anticipating at this point deliveries to start in February. Q. When? A. February. Q. February. I don't know whether the Judge asked you this precise question. What is Old Standard's investment today in the Sheridan project? A. Old Standard has only invested in the sewer plant and the plans for the sewer plant and that's probably somewhere in the $125,000 range. The Sheridan, LLC obviously has a different investment because it purchased the land and has been paying for the development of the project. Q. I see. There has been no return on that investment yet? A. No. It's about five and a half million dollars out. Q. You invested five and a half million dollars? A. That's correct. Q. Is that Old Standard and Sheridan together? A. No. That's Sheridan only. Q. And what do you expect the total investment of each of those to be? A. Well, we're going to have probably two and a half million in the sewer line and the line from Sheridan to Old Standard. That doesn't include the purchase obviously of the property of Old Standard. We will have probably the better part of $9 million tied up in Sheridan. JUDGE GEORGE: $9 million tied up in Sheridan? A. By itself. JUDGE GEORGE: Are we just talking about sewer facilities? A. No. I'm talking about the project. JUDGE GEORGE: Okay. A. Building the roads, putting the sewer and water in and having it ready for home building. BY ATTORNEY MCDONALD: Q. And then the Old Standard wastewater treatment project will be another --- A. Two and a half million. Q. --- two and a half million? Where will the wastewater treatment plant be located? A. It's internal to the property at Old Standard. It's on the second curb coming into Millville, probably 200 feet, 300 feet off of the Millville Road. Q. Some distance from the Sheridan development? A. Yes, sir. About 8,000 feet. Q. Why there? Why did you decide to put the plant there? A. Because it has direct access to the discharge into the river. Q. Big receiving stream nearby? A. Yes, sir. Q. How many customers will the wastewater treatment plant serve? A. One. Q. There has been talk about the Shipley School. Is the Shipley School located on the north side of 340, just a little bit east of Sheridan? A. Yes, sir. It's on the other side of Carriage Park. And if they wish to hook on, we could make accommodations for that and that would be our second customer. JUDGE GEORGE: Who is your first customer? A. Sheridan Homeowners Association. JUDGE GEORGE: Sheridan Homeowners Association is your first customer? A. Sheridan Homeowners Association. However many there were --- Developers until such time as we turn it over to the PSD. BY ATTORNEY MCDONALD: Q. Is the Shipley School an elementary school? A. Yes, sir. Q. What is its present method of wastewater treatment? A. Septic field and I talked to mostly Dr. Nichols and Dr. Steely (phonetic) and John Miller, who is head of their maintenance operation. They would like to get rid of the ---. ATTORNEY HAMMER: Objection. Hearsay. He's about to testify to what he believe is ---. JUDGE GEORGE: Hold it. Hold it. Let's just ---. ATTORNEY HAMMER: He's about to testify to what he believes they said. That is classic hearsay. JUDGE GEORGE: Any response? ATTORNEY MCDONALD: Yes. Commission is not bound by the rules of evidence. There has been all sorts of hearsay come into this record today already. JUDGE GEORGE: We're not strictly bound by the rules of evidence, but that's correct. I'm trying to decide --- I'll allow it. I think it may be hearsay, but I'll allow it. ATTORNEY MCDONALD: It is hearsay. I acknowledge that. BY ATTORNEY MCDONALD: Q. You talked to someone and you talked to Dr. Steely ---. She's on the school board; isn't she? A. We've had several meetings with them and they would like to get out of the septic business and tie into our sewer line. Q. Now, there has also been some talk about possibly providing service to an entity called the Cliffside Inn. What is that? A. That's an inn at the top of the hill as you're coming out of Harpers Ferry. It would be on the south side of 340. Mr. Patel (phonetic) is the managing partner, I guess. He called me and wanted to know ---. ATTORNEY HAMMER: Objection. Same objection. A. And as a result, we discussed it. He said they are using right now a failing septic --- their own plant is failing and discharging all sorts of tonnage into the Shenandoah. And I said they would be welcome to get onto our system when we get it built. BY ATTORNEY MCDONALD: Q. What's the status of that? A. I have talked to him several times. He has indicated he is still interested. I've got no commitment from him. Q. You understand they're on a failing private septic system now? A. Yes, that's correct. Q. Is it true that Old Standard will never serve more than three or four paying customers while it owns the wastewater treatment plant? A. Yes. Q. Is that your intention? A. That's correct. JUDGE GEORGE: Is there even such an entity as the Sheridan Homeowners Association? A. Yes, sir. We created that entity before there was any homeowners, we created that association. JUDGE GEORGE: Are you going to inform these purchasers of various homes that you're operating as a utility system? ATTORNEY MCDONALD: Your Honor, they're not going to be operating as a utility system. JUDGE GEORGE: They may not be operating a utility systems. They may not be operating a treatment plant. They may not own the collection lines, but they service customers individually and paying someone else for treatment, that's a utility; is it not? ATTORNEY MCDONALD: I don't believe it is, Your Honor. JUDGE GEORGE: Okay. BY ATTORNEY MCDONALD: Q. To the best of your intentions, do you intend that Old Standard, LLC and Thornhill, LLC will never serve more than 25 paying customers? A. That's correct. Q. Do you intend to transfer the Old Standard and Thornhill wastewater treatment plants to the Public Service District pursuant to the contract that you've signed just as soon after construction is completed and all contractual and regulatory approvals have been received? A. Yes, sir. Q. Are you committed to complying with all applicable laws and regulations? A. Yes, sir. I think we've exceeded all applicable laws and regulations just by virtue of the fact that we're going to Chesapeake Bay limitations. Q. Are you paying Thrasher Engineering on behalf of the PSD to do inspection work for the lines being laid in Sheridan sewer lines? A. The PSD sends me a bill bimonthly and I reimburse them for that. Q. Lines are being inspected? A. Yes. Q. Thank you. ATTORNEY MCDONALD: That's all I have at this time, Your Honor. JUDGE GEORGE: I'm assuming that those inspections are done on behalf of the PSD? A. That's correct. JUDGE GEORGE: At their direction? A. Of course. JUDGE GEORGE: Very well. Mr. Kelsh, do you have any questions? ATTORNEY KELSH: Yes. JUDGE GEORGE: I do want to tell everyone that I've made arrangements to keep the hearing room for several more hours. My plan is to maybe take a supper break at some point and then come back and try to proceed to finish tonight. ATTORNEY ROBERTSON: Did you say seven more hours? JUDGE GEORGE: I said several more. CROSS EXAMINATION BY ATTORNEY KELSH: Q. Mr. Jonkers, were you present when Counsel for the Town of Bolivar expressed some concern about possibly stealing Cliffside Inn's customer from the Harpers Ferry-Bolivar PSD? A. Yes, sir. Q. Is the Cliffside Inn a water customer of the Harpers Ferry-Bolivar PSD to the best of your knowledge? A. That's what I understand. Q. I would like to hand you a copy of Utility Exhibit Number Three. I would like to refer you to page 16 of that. There's a general sewage permit there for VDS, LLC. Do you see that? A. Yes, sir. Q. And is that the name of the ---? Well, does that indicate that it serves the Quality Inn and Conference Center? A. Yes, it does. And it has been renewed. Q. Okay. And if they were a customer of Harpers Ferry-Bolivar PSD, would they have their own NPDES permit? A. No, they would not. Q. Thank you. I would also like to hand you a copy of the March 1 letter of intent for Old Standard, LLC which has been marked as Sheeley Exhibit Number Two. On page two of that document there is a description of facilities to be built and tendered over to the District? A. Yes. Q. Has your intention changed at all with respect to those facilities? A. No. As a matter of fact, it's --- we've actually increased the stringency which our treatment is being --- that we're using for our treatment by putting some additional filters on which were suggested by the Health Department and EnviroQuip. Q. So if anything, you're going to construct a better plant than indicated in there? A. That's correct. Q. In response to a data request from Staff, Old Standard and Sheridan indicated the Old Standard plant would likely be expanded to 125,000 gallons per day. In the cost estimate for the Sheridan subdivision, engineering documents show an estimate of 280 gallons per day for the Sheridan development. Do you recall that? A. Yes. Q. If that estimate proves true, essentially all but 50,000 gallons is going to be at the plant --- is all of that required to be available for Sheridan? A. That's correct. Q. Now, if the District expands that plant to 125,000 gallons, and again assuming it's still 280 gallons per day per household is used, would you agree with me, subject to check, that that will only permit the addition of 137 more homes? A. Subject to your math being right, yes. ATTORNEY MCDONALD: Did you say 130,000? ATTORNEY KELSH: 137. BY ATTORNEY KELSH: Q. Some people in Jefferson County speculate that this plant is really intended to serve developments in the county other than Sheridan. Do you or any company with which you are affiliated have an ownership interest in property which could receive sewer service from the Old Standard plant? A. Other than the property that Old Standard now occupies, we don't have any other property. Q. Okay. Now, your testimony was that at Sheridan you've done grading. You've laid water and sewer lines. You're pretty far along with that; correct? A. Yes, sir. Q. How far along are you at Old Standard? A. Nothing. Q. You just got a pile of dirt? A. That's it. We've done remediation through the West Virginia Volunteer Remediation program at the site. ATTORNEY KELSH: That's all the questions I have of this witness. If I may have my exhibits? Thank you. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: Thank you, Your Honor. CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. On the Sheridan property I'm not sure I followed you. Have you started the sale of lots yet? A. We haven't gone to closing. Q. Excuse me? A. We haven't gone to closing. Q. Have you sold any? A. We've sold the whole project. There is a difference between going to closing and selling. Q. Okay. And you can't go to closing until when? A. Until we can deliver building permits. Q. You can't --- and what's the hold up on that? A. What we're sitting here for. Q. Okay. You can't --- in other words, you're not going to get any return on your investment until the sewage is --- operational sewage system of some type is started at Sheridan? A. That's correct. Q. Well, why have you gone this far with the project without getting your sewer system lined up and secured? A. You know, it's probably just a function of --- when you get a letter from the PSD saying they're going to supply you with a sewer, go ahead and start construction. And then when the whole thing goes down, then you have to rearrange and look at different alternatives which is what we did. Q. Which PSD gave you that letter? A. You don't need a final approval in Jefferson County. Q. I know that. I just asked you which PSD gave you that letter? A. Jefferson County. There is only one PSD in Jefferson County. Q. Actually I admit that's correct. Be that as it may. When did you get the letter? A. When I bought the property the letter was --- the mainline agreement was already in place. Q. That's the cooperative venture you were talking --- we were talking about? A. No. It's the mainline extension agreement which was in place back in 2001. Q. And that was to serve Sheridan? A. Yes. Q. Is that an alternate mainline extension agreement --- A. Yes. Q. --- with Jefferson County Public Service District? A. Yes. Q. You said it was in place. Was it approved by the Public Service Commission? A. Yes. Q. What happened to it? A. No capacity. I just went through that a few minutes ago. Q. In other words, Jefferson County's letter to you was basically their statement that they would collect the sewage and transmit it to Charles Town for treatment? A. That's right. Q. Okay. That fell through. Now, when you heard that the PSC Staff took the position that both the District and the Developer should file a certificate, that took place sometime in March of this year; is that correct? A. I have no idea. Q. No? A. No idea. Q. Well, provision of sewage is the only thing that's holding up your return on investment and you have no idea when that happened? A. That's right. We already rescinded that request. Q. Rescinded ---? A. So I'm not worried about ---. This happened after we rescinded. Q. You rescinded the cooperative venture agreements --- A. Right. Q. --- before the Staff took their position in this case? A. Yes. We did that formally with the Commission. We did it formally with the Commission before Staff took its position. I didn't do anything informally, I just said we are going in a different direction because I wasn't going to pay the price which I told you a few minutes ago. I wasn't going to pay the price the venture came up with --- for the PSD as opposed to rebuilding the plant. Q. Who did you communicate your decision to not pursue the cooperative venture? A. The PSD. Q. Okay. A. Otherwise, we wouldn't have gone through all those exercises. Q. You understand it could take as many as 270 days to get a certificate through the Commission? A. That's my understanding. Q. That would almost be an intolerable delay in your situation right now; wouldn't it? A. It would, but I guess we would survive. Q. Okay. Now, you were present at the meeting on May 3, 2004 with the Jefferson County Board of --- excuse me, at the Board meeting of Jefferson County Public Service District? A. Yes, sir. Q. In fact, correct me if I'm wrong, but according to the minutes you presented the four agreements for Old Standard to the Board at that meeting? A. Correct. Q. Okay. And was Mr. Welsh present --- or Mr. Kelsh present at that meeting? A. Yes. Q. Did either you or he tell the Board that it would take too long to apply for a certificate before the construction was planned? ATTORNEY KELSH: Objection. Irrelevant issue. JUDGE GEORGE: I'll overrule it. Go ahead. BY ATTORNEY MICHAEL: Q. Before you answer I would advise you that there are tapes of the meetings. So to the best of your knowledge ---. A. You can listen to those tapes until you're blue in the face. Q. And your answer is? A. No. Q. Neither one of you told them that it would take too long to file for a certificate? A. No. Q. Were you also present when Ms. Susan Sheeley stated some concerns or objections superseding the agreement? A. I don't remember anything she had to say. Q. You don't? A. No. Q. Okay. Now, let me just get this straight on the Homeowners Association. At this point, the wastewater plant is in operation. The Jefferson County Public Service District is operating the plant; correct? A. At this point, no. Q. I'm talking about --- let me rephrase that. At the point that the plant is in operation, it was being operated by Jefferson County Public Service District. A. Right. Q. They will submit a monthly bill to Old Standard? A. No, the customer would be Sheridan Homeowners Association. Q. Jefferson County PSD has an O&M agreement with Old Standard? A. Yes, it's affected the Homeowners Association. Q. Now, I don't know about that. That's a relevant part. The O&M agreement says that it was between Old Standard and Jefferson County. And it says that Old Standard would pay Jefferson County monthly O&M; correct? A. Old Standard has effectively guaranteed they will be held responsible, yes. Q. Unless the agreement says Old Standard will make the payment. That's why ---. A. Okay. ATTORNEY KELSH: The agreement speaks for itself. ATTORNEY MICHAEL: Let's see the agreement. The agreement --- read the agreement. ATTORNEY KELSH: I'm going to get it for you. It's Exhibit --- I think it's Plaintiff's Exhibit Three. Thank you, Your Honor. JUDGE GEORGE: What's the question, Counselor? BY ATTORNEY MICHAEL: Q. My question was, under this agreement which is between Old Standard and Jefferson County PSD, made May 3, 2004 it has been marked as Sheeley Exhibit Three, under that agreement the District will operate and maintain the treatment --- the wastewater treatment plant and shall charge and Old Standard shall pay a flat monthly charge for that service; correct? A. That's what it says. Q. All right. Now, it also says in here that Old Standard is responsible for collecting payment for those served by the wastewater treatment plant in a manner determined by Old Standard and its exclusive discretion; correct? A. Uh-huh (yes). Q. It doesn't mention Homeowners Association anywhere in here; does it? A. No. Q. So ---. A. It doesn't need to. It says all users served. Q. How is Old Standard going to collect the money from the people that are being served? A. Send them a bill to the Homeowners Association. Q. And how is the Homeowners Association going to collect the fees? A. They get Homeowners Association dues. Q. And those dues will be based on the bill that you get from Jefferson County, I believe? A. Flat rate. Q. Divided by the number of members in the Homeowners Association; is that right? A. I guess. Q. So the first person that buys a house is going to pay the entire monthly fee for Jefferson County PSD? A. It's based on gallon usage. Q. The answer is yes? JUDGE GEORGE: He said it was based on gallons. BY ATTORNEY MICHAEL: Q. Whatever it's based on ---. JUDGE GEORGE: He said a minute ago it was flat rate. Now it's based on gallons. A. It's flat rate for so many gallons. That's the way Jefferson County PSD charges. That's what we're going to charge. BY ATTORNEY MICHAEL: Q. Do you have any idea what that rate is going to be? A. It's $48.50. Q. For what? A. For so many hundred gallons a month. Q. And the District set up to the Homeowners Association? A. Yes. Q. And the Homeowners Association actually has a rating schedule somewhere? A. Yes. Q. And is the Homeowners Association going to be charged for services under the sewer services? A. Yes. Q. They have separate fees for those sorts of things such as electricity or ---? A. No, the wastewater was the main one. Q. Mr. Jonkers, is that flat fee that you just mentioned the same as the fee that the Jefferson County PSD total for its customers? A. Maybe six percent a month cheaper. Q. So it's Jefferson County tariff, six percent off it? A. Yes, just rounded it off. Q. The concept of the idea is to apply --- under your agreements, to apply for this certificate at the point where you're ready to transfer the assets to the District, that idea --- whose idea was that? A. I couldn't tell you off the top of my head. It was --- a lot of people put their heads together to come up with this. Q. Well, can you give me a list of names that people might be on? You can't remember that either; can you? A. No. ATTORNEY MICHAEL: Your Honor, I think I'm done with this witness. JUDGE GEORGE: Mr. Hammer? CROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Jonkers, I just want to ask a few questions about responses to discovery that has been submitted as Exhibit One, Old Standard Exhibit One. In response to question number eight, the question was, a copy of all correspondence between the Developers and the Sheridan and Thornhill properties and the District regarding installation of alternative sewage treatment facilities. And your response was this information will be provided by JCPSD. Is that based upon data here? A. Ask him. I don't know. Q. I don't see it that's why I'm asking. ATTORNEY KELSH: Your Honor, may I? A data request was issued by Staff to both the District and to Mr. McDonald. The District also furnished the response to that data request. We have not moved for its admission into evidence. We did furnish that data response to Staff. ATTORNEY HAMMER: If they intend to move this into admission, I would just ask that the answer be complete. And true copies of those letters to be included ---. JUDGE GEORGE: You can pass those copies around. ATTORNEY HAMMER: This is the first time I have ever seen this document. I'm not going to pretend it's irrelevant. It's not in this stack of documents that we were provided. JUDGE GEORGE: Very well. BY ATTORNEY HAMMER: Q. Sir, you testified earlier that you were a manager of Old Standard, LLC, and that you were a manager of Sheridan. And I think you said you were a manager at Thornhill? A. That's correct. Q. What does manager mean? A. You have LLC managers and you have members? Q. What's the difference? Do you have an ownership interest? A. I don't, no. Q. Do you stand to profit as a result of these developments? A. Well, ---. ATTORNEY MCDONALD: Your Honor, that question may be objectionable. Could I have it restated, please? JUDGE GEORGE: He said do you stand to profit in these developments. ATTORNEY MCDONALD: I'm not going to object to that question. ATTORNEY HAMMER: Excuse me? ATTORNEY MCDONALD: I'm not going to object to it. A. I don't work for a living for nothing. BY ATTORNEY HAMMER: Q. I'm not assuming that, sir. Do you stand to profit on a percentage basis or on an annual salary? I don't really get what your compensation is tied to. ATTORNEY MCDONALD: That's objectionable. That's confidential and that has no bearing on any issue in this case. ATTORNEY HAMMER: Your Honor, to the extent that this witness has testified about various factual issues, if he has a pecuniary interest in the outcome of this decision, that may reflect on his credibility. ATTORNEY MCDONALD: Are you challenging credibility? JUDGE GEORGE: Hold it. Just ask --- just answer questions you're asked. It's a legitimate question. Proceed. ATTORNEY MCDONALD: It is not. Note my objection. JUDGE GEORGE: I heard your objection. I heard his response. I've made my ruling. BY ATTORNEY HAMMER: Q. Sir, do you receive a flat annual salary or is there some percentage basis on which you're compensated? A. Neither one. Q. Neither one? A. No. Q. What is your compensation fee based upon? And I'm not asking a figure. I'm just asking the formula, what is it based on? ATTORNEY MCDONALD: I object to this question. It's highly personal and confidential. And I think it has absolutely nothing to do with this other than certain folks are trying to use this honorable Public Service Commission as a whipping way against development. This is not a proper question. JUDGE GEORGE: Overruled. Go ahead. BY ATTORNEY HAMMER: Q. Do you understand my question? A. Say it again. Q. What is your compensation fee based upon? And I'm not asking a specific dollar figure, but I'm asking a formula for how it's compensated. A. I get reimbursed for expenses. Q. You just testified earlier you don't work for free. You only get reimbursed for expenses. You don't work for free? A. That's right. And that's all I'm going to tell you. Q. Well, I'll ask again, sir, what's your compensation system based upon? ATTORNEY MCDONALD: Objection. A. I'm not going to tell you. JUDGE GEORGE: It's overruled. ATTORNEY HAMMER: Your Honor, the witness has refused to answer. Do you want to instruct him to answer? JUDGE GEORGE: Answer the question. A. My compensation has nothing to do with anything here and I have no intention of answering the question. ATTORNEY HAMMER: Your Honor, then I ask that this witness' testimony be struck in its entirety because I'm unable to challenge the creditability and veracity of this witness due to his absolute refusal to ---. A. And I ---. JUDGE GEORGE: Can I have a response to that, Mr. McDonald? I'm trying to grant. ATTORNEY MCDONALD: The witness has been very responsive to legitimate questions both before --- this body to him. The question about his personal compensation ---. JUDGE GEORGE: I ruled that at least the overall basis of the compensation is a legitimate question and he has asked the question. And I have instructed the witness to answer. He has moved to strike the witness' entire testimony if he doesn't answer. ATTORNEY MCDONALD: I think that would be highly prejudicial and wrong if you were to do that, Your Honor, but that certainly is your prerogative. JUDGE GEORGE: Okay. It's your choice. You can answer the question in general terms or we can strike your testimony. A. I don't get paid anything other than reimbursement for my expenses. I have answered the question. BY ATTORNEY HAMMER: Q. Sir, are you saying that you don't profit in any way, shape, or form from these developments? A. No, I do not. Q. You're working for free on these developments? A. I'm reimbursed for my expenses. ATTORNEY HAMMER: Your Honor, we've come a full circle here. Again, this is a ---. JUDGE GEORGE: Actually he has answered. A. I answered the question. JUDGE GEORGE: He may be committing perjury, but he says he's ---. A. Don't start talking about perjury. I am not perjuring myself. I'm telling him what the compensation package is. That's what he asked me. That's what I ---. JUDGE GEORGE: I'm telling Mr. Hammer that you've answered the question. Whether or not anybody is going to believe you or not is a separate issue. BY ATTORNEY HAMMER: Q. Sir, who owns these entities? A. Highland Farms, Thornhill, Sheridan, Old Standard. Q. Who owns those? ATTORNEY MCDONALD: Objection. The membership of the LLC has no bearing on any issue in this case as to whether the JCPSD has violated a law in the State of West Virginia or whether the Developer is in violation of the law in the State of West Virginia. ATTORNEY HAMMER: Someone has already testified as to who his partners were in those LLCs. ATTORNEY MCDONALD: It wasn't this witness, Your Honor. JUDGE GEORGE: He was naming one of those partners back there with Mr. Kable. ATTORNEY HAMMER: There was no objection earlier with Mr. Kable. I think he was being asked on Direct about that and now I would like to get this witness' testimony about who owns those LLCs. ATTORNEY MCDONALD: Objection. The structure, ownership of the LLCs has no bearing on any issue in this case as to whether the JCPSD has violated a law of this jurisdiction or whether the Developers have violated a law of this jurisdiction. JUDGE GEORGE: I'll overrule it. BY ATTORNEY HAMMER: Q. Name the entity. A. Highland Farms. They are two non-resident members and two members who live here in the community. Mr. Capriati and myself. Q. Who are the non-resident members? A. Mr. Yost and Mr. DiBalsac (phonetic). Q. Is there any other corporation of any form, structure or partnership that owns an interest in Highland Farms? A. No. Q. And with regard to Old ---? A. Yes. I'm sorry. Yes. Q. Who else? A. My family corporation owns my interest. Q. Your family corporation? A. Yes. Q. What's the name of that corporation? A. How deep are we going to have to go there? I'm not going any further. What he's asking is totally irrelevant. ATTORNEY KELSH: Your Honor, I think this has really gotten ridiculous. We're here on a complaint of whether the District violated its duties and obligation to the public utility. Mr. Jonkers is not a public utility, yet he makes money --- we all make money. That doesn't corrupt us. I think that this is so far afield. And I think it's regrettable that you're ruling to put Mr. Jonkers in a position --- there is just no relevance to this. I mean, I might as well --- I mean, I'm going to ask --- you know, can I inquire as to the Staff members compensation? Would that be relevant? JUDGE GEORGE: Mr. Michael, do you have a response? ATTORNEY MICHAEL: I would just like to point out the Court's consideration. Perhaps other Counsel might take a step back. They had no hesitation for bringing my client's motivation into play and painting over the thrush of using this procedure as a stalking horse for other objectives. Well, now Mr. Jonkers is on the stand and bias is certainly an appropriate issue for Counsel to get into and unless you stop objecting and get it on the ---. ATTORNEY HAMMER: Your Honor, I'm very confused about witness' response and now Counsel's representation. The response earlier was that he gets nothing but expenses. Counsel has just said that he does get paid. ATTORNEY KELSH: Your Honor, Mr. Jonkers obviously knows ---. JUDGE GEORGE: We moved to the issue of compensation --- to the issue of ownership. We're not talking about compensation now. We're talking about ownership. ATTORNEY KELSH: Right. ATTORNEY HAMMER: That's how he's compensated apparently. That is where this is all ---. ATTORNEY KELSH: That is not ---. JUDGE GEORGE: I think it's a legitimate question. I'll overrule the objection. All we're trying to do is find out who owns this entity that's going to construct this wastewater treatment plant and I think that's relevant. ATTORNEY MCDONALD: What is the question? BY ATTORNEY HAMMER: Q. What's the name of your family corporation? ATTORNEY MCDONALD: Objection, Your Honor. It has no relevance to any issue in this case. JUDGE GEORGE: Overruled. I've already overruled that once. ATTORNEY MCDONALD: I'm going to continue to object, Your Honor, because I believe your rulings are continually wrong. JUDGE GEORGE: Well, that's fine. Have a continuing objection to that question. But I've already made my ruling. The ruling is, he's just trying to find out who owns this entity that is going to construct this wastewater treatment plant ---. ATTORNEY MCDONALD: No. That is not what he is asking. He is asking who the members are of the LLC package. It has nothing to do with this case to my knowledge, Highland something, LLC. We haven't even been talking about Highland. This is something that Counsel has invented. JUDGE GEORGE: Who is Highland? I assumed we were talking about the LLC. ATTORNEY HAMMER: It's one of the various corporations in which this witness is involved. I believe, although I may be mistaken because I'm new to these documents, that they're an Applicant on one of these permits. I could be mistaken. And I can move on to the other corporations as well. I just try to find out who owns these things. ATTORNEY MCDONALD: It doesn't make any difference who owns them, Mr. Hammer. What's important here is that we have entities who are accused of violating the law of West Virginia. Did they or did they not? ATTORNEY HAMMER: Let me put it this way. If we had had a hearing to decide whether the Certificate of Necessity, then ownership would have been a factor and the public would have gotten into it. And that may be part of our argument in this case. You know, the identity of the Developer is not even known here at this point and it's all because we haven't gone through the process laid out by the West Virginia Code. ATTORNEY MCDONALD: The Developers and the LLCs are --- they're members of public information. It's on West Virginia Secretary of State's website. There is no secret about the ownership of the entities, of Eastways water treatment ---. ATTORNEY HAMMER: Then what's the objection? If there is no secret, then let's just hear the answer. ATTORNEY MCDONALD: Well, it has nothing to do with the name of his family corporation, Mr. Hammer. JUDGE GEORGE: You're free to inquire as to the ownership of the entities that are going to construct this wastewater treatment plant. BY ATTORNEY HAMMER: Q. What's the name of your family corporation? A. Langbrook (phonetic). Q. I can't hear you. A. Langbrook, LLC. Q. I still can't hear you. Sorry. A. Langbrook, LLC. Q. Langbrook? A. Yes. Q. Do you receive compensation from Langbrook? A. No. ATTORNEY MCDONALD: Objection. BY ATTORNEY HAMMER: Q. You have no ownership stake in Langbrook? A. No. ATTORNEY MCDONALD: Objection. Herb, give me a chance to object to the question before you answer it. JUDGE GEORGE: State the nature of your objection. ATTORNEY MCDONALD: Whether he is compensated by a family corporation or has an ownership interest in a family corporation has nothing to do with any issue in this case, Your Honor. It's totally irrelevant and immaterial. JUDGE GEORGE: The corporation is constructing this plant or at least the corporation that owns stake in the corporation or partnership that owns a stake in something that is constructing this plant. ATTORNEY MCDONALD: Sheridan, LLC is constructing one plant. Thornhill, LLC is constructing another plant. Not Langbrook. Not a family corporation. LLCs. The entity under the law of West Virginia. JUDGE GEORGE: The way I understand it --- I could be wrong, but the way I understand it is Mr. Hammer is just trying to see who is involved or who owns those LLCs. ATTORNEY MCDONALD: No, sir. He asked the question are you compensated by them and do you have an ownership interest in them. That is the question that I most recently objected to. It has nothing to do with this case or with who's building the wastewater treatment plant. ATTORNEY HAMMER: His answer was no. And I'll move on. JUDGE GEORGE: Go ahead. Move on. BY ATTORNEY HAMMER: Q. I'm moving over to the Old ---. ATTORNEY MICHAEL: Your Honor, I object to him talking to the witness while he's on the stand. Mr. McDonald just whispered something to the witness. I don't know what he's saying. JUDGE GEORGE: Go ahead. ATTORNEY MICHAEL: He knows better than that. BY ATTORNEY HAMMER: Q. With regard to Old Standard, LLC, who are the owners of Old Standard, LLC? A. We got five ---. Q. For some reason I think --- I am having a hard time hearing you. A. Capriati. Lee Snyder. DiBalsac, Yost and Langbrook. Q. Langbrook you said, the last one, your family corporation? A. Yes. Q. Do you receive any compensation from Old Standard either directly or through any of these other owners for your work on this project? ATTORNEY MCDONALD: Objection. Asked and answered. BY ATTORNEY HAMMER: Q. I'm talking about Old Standard. JUDGE GEORGE: I think he has said that he doesn't get paid by Old Standard. ATTORNEY HAMMER: I'm sorry. I'll go on. BY ATTORNEY HAMMER: Q. Those are the entities whether corporate or not that own --- partnership or not that own an interest in Old Standard. Now, moving on to the Sheridan subdivision. Who were the entities for that interest in that corporation and the policy ---? ATTORNEY MCDONALD: Objection. It has nothing to do with anything. It has nothing to do with the utility service, Your Honor. JUDGE GEORGE: Overruled. ATTORNEY MCDONALD: We're talking about a real estate development. JUDGE GEORGE: I thought Sheridan was a vested real estate development corporation. He's not talking about Thornhill or Old Standard. Why do you inquire as to who owns a real estate development? ATTORNEY HAMMER: I thought we heard testimony before that Sheridan contracted directly with Old Standard and Old Standard has entered into this contract with the PSC. Now, if I'm wrong ---. JUDGE GEORGE: There is some type of affiliate connection or some connection between the two but I don't think Old --- I don't think Sheridan is building the plant. So why do you inquire as to who owns Sheridan? ATTORNEY HAMMER: If there is cross ownership in these various corporations, these common entities, then I think that reflects upon the process in which they engaged here to avoid getting Certificate of Necessity. JUDGE GEORGE: I think you've gone one step further than I want to go. So move on to a different ---. ATTORNEY HAMMER: Let's move to Thornhill then. JUDGE GEORGE: Okay. BY ATTORNEY HAMMER: Q. Who owns interest in Thornhill? A. Same as Highland. Q. Thornhill is the same as Highland? A. Uh-huh (yes). Q. They have the exact same owners? A. Same names. Q. Any difference in the ownership whatsoever? A. Same names. Q. I'm asking a different question. Any difference in the ownership whatsoever? A. They are the same names. I don't know what you're asking me. JUDGE GEORGE: He's already testified that they are the same. BY ATTORNEY HAMMER: Q. And you only received expenses with regard to that project as well? A. Yes. Q. So you have no income from any of these projects, other than reimbursement of your expenses? A. Right. Q. You understand, of course, that you're not the only businessman in Jefferson County. There are many other businessmen, of course? A. Right. Q. Well, you understand that you agreed earlier with your Counsel in describing, I think, the property that --- the stream that Old Standard discharged into or supposedly discharged into it, has a big receiving stream? A. I didn't say that. Q. Those were your Counsel's words and you agreed with that. A. Whatever I said. Q. Okay. And the big receiving stream you're taking about is the Shenandoah River? A. That's correct. Q. And would you agree that the Shenandoah River is both a vital ecological, historical and tourism watershed? A. I have no idea how you would describe it that way. Q. You do agree with that? A. I'm not agreeing or disagreeing. I'm letting you pronounce ---. Q. I'm asking you do you agree that it's a vital historical watershed? A. It's vital to the economic benefit and growth of this community because of the water that provides in the --- the water it provides. Q. And because the tourism it provides, too; isn't that correct? A. Correct. ATTORNEY MCDONALD: Your Honor, I'm going to object. We're getting into the issues that are outside the proper scope of this proceeding. JUDGE GEORGE: I'll sustain. ATTORNEY HAMMER: If I may respond very briefly, Your Honor? JUDGE GEORGE: Go ahead. ATTORNEY HAMMER: The sole reason I'm getting to this is because it goes to all of our statuses and intervenor here and why we are concerned about tourism. ATTORNEY KELSH: Your Honor, we've all already been granted Intervenor status. I don't think that that issue is ---. JUDGE GEORGE: I think you --- I do have several parties in the issues of these proceedings. It may well be the certificate proceeding. ATTORNEY HAMMER: But if there had been a certificate proceeding, then issues such as the impact on the local economy, vis-à-vis tourism, would have been an issue they would have had a chance to address; correct? ATTORNEY MCDONALD: Objection. I don't know how this witness knows what goes on with PSC certificate cases. It calls for a legal conclusion. JUDGE GEORGE: I agree. It's asking the witness to speculate. He may not be as much as an expert on certificate cases as many in the room. ATTORNEY HAMMER: I think that's all the questions I have, Your Honor. JUDGE GEORGE: Very well. Mr. Faulkner? MR. FAULKNER: Yes. CROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Jonkers, regarding Sheridan, when you conveyed the property to these individual owners, you said you already have a waiting list, that will be a fee simple transfer. They will actually own that property themselves; is that correct? A. That's correct. Q. So you have individual owners. So if you have 178 houses and all of them are sold, that's 178 individual owners? A. That's correct. Q. Because in your response to the Staff Interrogatory you're still saying that Sheridan will only be one customer to Old Standard? A. That's right. Q. Because a Sheridan entity is going to collect fees and then pass on first to Old Standard and then ultimately on to the PSD when they take this over; is that correct? A. Yes. Q. Are you aware that the PSC now, about two months ago, overruled an arrangement, a third-party arrangement, along those same lines with the town of Harpers Ferry, that a third-party cannot collect utility fees for a public utility? A. I have no idea. Q. Because if that is upheld in this case, then there will be 178 customers, not one customer? ATTORNEY MCDONALD: Objection. Calls for a legal conclusion. JUDGE GEORGE: Sustained. BY MR. FAULKNER: Q. You've mentioned and several other witnesses have mentioned 125,000 gallons per day is what was being proposed for Old Standard as far as a final potential billing? A. Final potential, yes. Q. Are you aware that you had submitted a third stage for 250,000 gallons per day to the State Department of Health at an earlier point? A. The original waste --- allocation requested was 250. Q. And that that had been turned down by the Health Department. They only approved 125,000 gallons as of August 27th? A. Yeah, when we put the package together, we said we'd stop at 50,000 gallons and what happens after we pay is PSD's business. Q. So potentially this could still be billed out to the full 250,000 gallons then? A. To 125 because that's all that's provided for. Q. You had also stated in your earlier testimony that this was only going to serve Sheridan development? A. Sheridan. Q. Again, are you aware that in your earlier submission to the Department of Health and Human Services that you list the Kilem (phonetic) Estates development, Dr. Gibson development, Gibler's Rest development, Old Standard Quarry development and Industrial Park and the hotel. And that hotel is different because you also list Cliffside Inn. So you list quite a few developments. A. That's right. With 50,000 gallons you're not going to do that; are you? Q. But at 250 you could? A. I don't think so. Q. Would you --- you testified under oath you were only going to serve one development and yet in earlier submissions to another state agency, you're listing quite a few other developments. Can you reconcile those two statements? A. I can reconcile them very clearly. If you've been listening, I said 50,000 gallons. Q. Yes. A. What was submitted previously is not what I'm testifying to right now. Q. Okay. In the Commission Staff's first set of Interrogatories to the Jefferson Public Service District there is a land use covenant which is a voluntary remediation agreement between Old Standard and the Department of Environmental Protection in the State of West Virginia. Can you explain to the forum what --- why does remediation have to occur on the site? A. The original piece of property had been the repository of a couple million yards of burnt lime, some railroad ties, some tires, some other debris, some six buried tanks, paint thinner and paints, et cetera, and it dumped. Of the 411 acres, we have remediated 300 of them. They have been released from their remediation process. I have cleaned up a great number of items in question. We have eliminated the six buried tanks and have been cleared back to where those tanks were. The basic thing we still have to deal with is the burnt lime that's on site although it's not toxic. As to the problems. We still have to deal with getting rid of the debris. Q. And how much of this remediation took place on what you described as a parcel C which is where this plant was going to ---? A. Parcel C has been --- got a clean bill of health from the West Virginia Department of Environmental Protection and was --- nothing was on the site ---. Q. There is no remediation on that parcel? A. On that parcel. Q. When did the 411 acres get subdivided? ATTORNEY MCDONALD: Objection. Not relevant to any issue in this case, Your Honor. JUDGE GEORGE: Sustained. Move on. MR. FAULKNER: I'm done, Your Honor. JUDGE GEORGE: Very well. Mr. Robertson? ATTORNEY ROBERTSON: Yes, Your Honor. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Jonkers, let me ask you a couple of questions first. In Old Standard's response to the Staff's data request which has been put into the record by Mr. McDonald, it was talking that Old Standard would serve one customer; correct? A. Correct. Q. Also the part of the responses that were filed helped the permit and they've also been attached to the Staff Memorandum in this case as Staff's Number Five. And it regards --- I'll let you look at this. But first the Health Department permit dated August 4th, 2004. Look at that. And are you familiar with that document? And that is ---. JUDGE GEORGE: Respond verbally. A. Yes. ATTORNEY MICHAEL: Which project, Ron? ATTORNEY ROBERTSON: The Old Standard. ATTORNEY MICHAEL: Thank you. BY ATTORNEY ROBERTSON: Q. And this relates to the Health Department permit to construct; is that correct? A. I'm sorry? Q. I said this relates to the Health Department to construct in the Sheridan development? A. I'm not understanding your question. Q. Well, this was the permit for the project Old Standard development. That's the title on the Health Department permit? A. It's for Sheridan. Q. For Sheridan. Exactly. But then can you go down through --- because this was actually --- let me go back. It was sent to Old Standard, LLC in care of yourself, Herb Jonkers. That's on the Health Department permit; correct? A. That's right. Q. Okay. Then if you can go down a little bit of the page, it says that --- can you just read the line that --- where it says, facilities are initially --- just read that particular statement? A. To serve 178 single family dwellings in the Sheridan subdivision. Q. So would you agree that 178 is different from one or two customers? A. 178 people will be paying as to a single customer of the plant. This is using up the capacity. It has nothing to do with how many people are going to be paying. Q. Right. But the permit from Old Standard --- for Old Standard of August 4th, 2004 it's the intention to serve up to 178 lots? ATTORNEY MCDONALD: Asked and answered. I object to the question. It's already been answered. JUDGE GEORGE: You can ask it one more time. BY ATTORNEY ROBERTSON: Q. With this permit was --- is the intentions of Old Standard a permit --- Old Standard is on there, is to serve 178 lots according to the Health Department permit; is it not? A. We're playing semantics. We're not playing with what we're doing ---. JUDGE GEORGE: You do plan to serve 178 lots? A. Eventually. Back then we served 178 lots. JUDGE GEORGE: 178 lots is going to be paying a monthly fee to someone, but not to you? A. Not to me. BY ATTORNEY ROBERTSON: Q. And when you say --- you answered the Judge not to you. Can you tell me the entity that you were speaking of? A. Old Standard. Q. Okay. Then ---. JUDGE GEORGE: Who is going to control the Homeowners Association? A. The Developer when the lots are occupied, the Homeowners Association go to the homeowners. BY ATTORNEY ROBERTSON: Q. The Developer in this case is not Old Standard but it's Sheridan, LLC? A. Sheridan, LLC. Q. And 50 percent of the lots you sold the Homeowners Association goes to the homeowners? A. That's correct. Q. Let me give you back the Health Department permit for a second. That Health Department permit issued to Old Standard, it talks about a 50 gallon per day treatment plant; correct? A. 50,000. Q. Gallons per day. It also includes line extensions to construct? A. Right. Q. Do you know the line extension that is in the Sheridan development? A. No. This is an outside venture. This is from Sheridan to the plant. Q. This is from the outside of the property line of Sheridan all the way down to the treatment plant? A. That's correct. ATTORNEY MCDONALD: Ron, do you mind identifying the permit number that you're referring to for the record? ATTORNEY ROBERTSON: Yes. The permit number I'm speaking of it's dated August 4th, 2004. The permit number, it's 16170. ATTORNEY MCDONALD: Thank you. BY ATTORNEY ROBERTSON: Q. Then there was I guess an amendment to Old Standard's permit to construct by the Health Department. You can read that one. And this particular permit number, it's 16229 and is dated September 17th of 2004. And this was also addressed to Old Standard in care of Herb Jonkers. Can you tell me the purpose of the amendment permit, Mr. Jonkers? A. To be perfectly frank with you, this is the first time I've seen this one. The original waste load documentation having been 250,000 gallons as I said earlier. There was some covenant made back through the engineering office, Mr. Ammirato and Potesta that the waste load allocation and the approval didn't match. I did not realize that we had gotten a second update. I was still working on the 50,000 gallons and 125, that are on there. Q. Right. With this additional Health Department permit, if you could just read --- if you could, just go ahead and read? It does relate in the note that it relates to the contingent upon the permit issued back in 16170, the earlier permit that Old Standard received from the Health Department. A. Do you want me to read it? Q. I was asking you, do you agree that this permit was to expand the original plant? A. The original what? Q. The original capacity of the plant. The amendment with the Health Department permit. A. That's obviously what it says. But I can tell you, that's not the plant that I ordered. I ordered the plant 50,000 upgradeable to 125,000. But not purchased the plant that goes to 250. Q. Right. But at least you would say that at least Old Standard does now have a permit for it; correct? A. Yeah, it looks like it. Q. And it was sent in care of you? A. Yes, it sure was. Q. I'm going to take you over into Thornhill. And this was a response from your Counsel regarding sewage for the Thornhill development phase one as it states the project. And I'll state two for the Judge's knowledge and things, too. This is permit number 16284 and it was issued dated October 22nd, 2004. And with this, this was filed by the Thornhill development or Thornhill, LLC; is that correct? A. Yes. Q. And could you read up above the sentence before it says, note, what the facilities are initially to serve ---? A. 179 single family dwellings Thornhill development, phase one. Q. So that's phase one. So that is also over 25 customers or 25 single lots; would you agree? A. 179. Q. Thank you, Mr. Jonkers. ATTORNEY ROBERTSON: I don't have any further questions. JUDGE GEORGE: Do you have Redirect? REDIRECT EXAMINATION BY ATTORNEY MCDONALD: Q. Mr. Jonkers, is it Old Standard's intention never to serve more than 25 paying customers? A. No, sir. Q. If it looked like the Old Standard wastewater treatment plant and system was about to bump into a regulatory requirement that would require you to get a Certificate of Convenience and Necessity, would you do that? A. Yes, sir. Q. Is it your intention to use every effort to transfer the completed wastewater treatment plant to the Jefferson County Public Service District upon completion of construction and requirement with all regulatory permitting requirements? A. That's correct. Q. Thank you. ATTORNEY MCDONALD: No further questions. JUDGE GEORGE: Anyone with Recross? MR. FAULKNER: Your Honor? JUDGE GEORGE: Yes, sir. RECROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Jonkers, are you aware of the Public Service District's plans to build a wastewater facility on Cat Hill Run near Halltown? A. Cat Hill Run? Q. The run that comes --- sort of parallels the Winchester line coming past the old --- the paper board plant there. A. That's Flowing Springs. Q. That's what, again? A. That's Flowing Springs. Q. All right. The Flowing Springs then. Sorry. The Flowing Springs that flows from the Halltown area toward the Shenandoah? A. I seen references made to that in the record, yes. Q. And how far from your looking at the references in the paper, how far is that plant from Sheridan development? A. Probably closer. Q. Maybe within 1,000 feet or less? A. Oh, no. Q. It's across 340 which isn't that far from the Sheridan. A. Yes, but it's about a mile. Q. Well, then we must be talking about different plants. I've seen documents showing a plant by the Halltown area which is within 1,000 feet of Sheridan. If such a plant existed or ---. A. The only plant that I'm aware of is on the upper quarry on the other side of 340. I don't know what you're talking about. Q. The key is the fact that it is closer. Why not work with the PSD to have that plant serve Sheridan instead of putting it in a rural district down by the Shenandoah? A. Time. Q. Time? In what sense? A. Time is money. Q. What I mean is, time --- because this one might get approved and the other one might take a while? A. Right. Q. And the other ones might take a while because why? A. People like you coming in here complaining. The next thing you know you got another year or two going by. Q. I'm asking a serious question. A. I'm answering it seriously. Q. You're not answering my question which is the issue of the state regulatory structure. Would the PSD, since it is a plant of their own, have to go for a Certificate of Convenience for that plant on the Flowing Springs? A. It looks like you were writing letters to stop everything. Q. Again, this is not responsive to the issue. The issue is ---. A. I'm responding. JUDGE GEORGE: I think his answer is yes. The regulatory process slows it down, slows the process down too much for him anyway. MR. FAULKNER: Right. That's all, Your Honor. ATTORNEY MCDONALD: Your Honor, I don't think they have a plant for --- a Cat Hill Run plant. ATTORNEY KELSH: They don't. JUDGE GEORGE: Anything further of this witness? You may step aside. Mr. McDonald, you may call your next witness. ATTORNEY MCDONALD: Thank you, Your Honor. I call Vince Ammirato. --------------------------------------------------------- VINCE AMMIRATO, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY MCDONALD: Q. Would you state your name and business address, please, sir? A. My name is Vincent Ammirato. Charles Town, West Virginia. JUDGE GEORGE: Would you mind spelling your last name for us? A. A-M-M-I-R-A-T-O. JUDGE GEORGE: Thank you, sir. BY ATTORNEY MCDONALD: Q. By whom are you employed and in what capacity? A. I'm employed by Potesta and Associates as a Senior Engineer. Q. What is Potesta and Associates? A. Potesta and Associates is an engineering and developing consulting firm. Q. Okay. Do you have any connection with the Old Standard wastewater treatment plant project? A. We are --- Old Standard and Thornhill, LLC are our clients. We are contracted to design these collection systems. Q. All right. Would you briefly describe the scope of your work for Old Standard, LLC? A. Old Standard --- our scope of work was for a design of a collection system consisting of approximately 7,300, 7,200 and some feet of force main starting at the Sheridan development, going down to 340, down to US 27, cross over onto Old Standard quarry property then switch to 12 inch gravity mains about 4,300 plus feet of gravity mains. And that takes you to the wastewater treatment plant. There we have the head works for the plant. We go up with EnviroQuip to install the accessories for the plant. Then there is about 4,300 plus feet of discharge to the Shenandoah River. Q. Vince, what are head works? A. Head work suggests the, I guess you might say, pre-treatment to the plant, there is a grit chamber drain there. There is an equalization tank. There is a lift station to get it to the plant's --- it equalizes out the flow to meet the requirements of the wastewater treatment plant. Q. What is the proposed capacity of the wastewater treatment plant? A. The initial capacity is 50,000 gallons. It is designed for 125,000 gallons. So the plant is planned for 125,000. The bases are 125,000 install additional --- these membranes by reactors, additionally made for the expansion. They were not included in the initial plans. Q. How many households can be served with a 50,000 gallon per day capacity wastewater treatment plant? A. You can say they are --- say, three bedroom, four person house would be about 179 homes, residential homes. Q. There has been some talk about a waste load allocation. What is a waste load allocation? A. Well, that's just an allocation that you apply for from the West Virginia DEP. They take into consideration the receipt and the stream's ability to simulate the load. You apply for a load and they will give you the criterion you need for demand --- different quantitative limits you have to meet and discharge to be able to meet the receipt and the pH of the stream. You have to give them receipt, depending on the pH in the stream and they do a model of the stream and all sorts of things. Q. I've marked a number of exhibits which were responses to data requests. Some of which --- maybe all of which --- at least some of which you provided to me as one of those, the application to the DEP for a waste load application. A. Yes. Q. Mr. Robertson presented Mr. Jonkers with a Health Department permit that was fairly recent --- A. Uh-huh (yes). Q. --- that was different from the one that we submitted in discovery. Did you have something to do with that more recent Health Department permit? A. Yes, the 250,000 gallons waste load allocation. That's the one you're referring to, I believe? Q. Well, I didn't see the document that he referred to. But he said ---. JUDGE GEORGE: That's it. BY ATTORNEY MCDONALD: Q. He suggested that the Health Department ---. JUDGE GEORGE: Do you have that document? ATTORNEY KELSH: Yes. I received all this in your responses, Mr. McDonald. I mean, that was ---. ATTORNEY MCDONALD: Okay. A. They do have waste allocation --- allocation of 50,000, 125,000 and 250,000 gallons. That's just the waste load allocation. This does not give you the approval to construct the plant. This means the DEP has looked at the receiving stream's ability to simulate that load. It does not give to you the ability to construct the plant. BY ATTORNEY MCDONALD: Q. This says major modification is that the initial 50,000 GPD wastewater plant will be expandable to a 250,000 GPD plant, not 125,000 GPD plant as indicated in the earlier permit. A. That's just the ability to --- that just reserves your capacity if you want to expand the plant. That just tells you the DEP has looked at the receiving stream and waste load allocation. ATTORNEY MICHAEL: Your Honor, I object to these questions as being non-responsive. Counsel is talking about the Bureau of Health permits. The witness is talking about the DEP waste load allocation. ATTORNEY MCDONALD: I'm confusing him. JUDGE GEORGE: I think they're related. ATTORNEY MICHAEL: They may be related, but they're not honored as the same ---. I restate my objection. JUDGE GEORGE: Why don't you clear it up, Mr. McDonald? BY ATTORNEY MCDONALD: Q. I thought that's what that series of questions ---. Let me tell you what my understanding was. Eventually you had a big waste load allocation and so you went and changed the Health Department permit? A. No. We had a waste load allocation as granted by the West Virginia DEP. Period. Q. And so you went to the Health Department and got a different permit? A. No. That is just part of the process. You have to have a waste load allocation to allow --- to discharge in the receiving stream. Once you have the waste load allocation, then you prepare your construction documents, your plans, your specifications, health requirements. You submit all of those to both the Health Department and the DEP. They review those and give their comments and approvals or rejections, whatever they want to do. But you only have the ---- you have the waste load allocation, the DEP. You have the Health Department's permit for 50,000. The West Virginia DEP has just issued a draft NPDES permit which has gone through the public comment period. There is a public hearing scheduled for December. So there are some things you have to do before you construct the plant. A. Waste load allocation, Health Department permit and the DEP NPDES permit. Q. And for the Sheridan plant, you have a Health Department permit? A. The Sheridan subdivision --- there is a Health Department permit for the Sheridan subdivision. Q. Do you have a Health Department permit to build the Sheridan wastewater treatment plant? A. Old Standard, yes. There is a --- we do have the Health Department permit for 150,000 for Old Standard. Q. Okay. A. Old Standard is the entity that has the wastewater treatment plant. So the Health Department has issued the permit to Old Standard for 50,000. Q. And that's what the construction would be, 50,000 gallons per day? A. Yes. If it goes beyond that, you're supposed to go through a modification process. You have to buy more --- you have to go to the 125,000, you have to buy --- you have to install more membranes plus you have to go get a modification of the Health Department permit and the DEP's discharge permit. Q. Now briefly describe the wastewater treatment plant plans. A. The wastewater treatment plan process is to provide a design by EnviroQuip, Incorporated. It is essentially an activated sludge process. But it is enhanced with these fine membrane reactors that allow them to come to --- much higher, just a much higher quality discharge. Q. Higher quality than what? A. Than a conventional activated sludge treatment plant. You know, wastewater treatment plant process receives the wastewater. It's aerated. It's clarified. It appears to --- UV disinfectant before final discharge to the Shenandoah. The waste --- the activated waste sludge is pumped to a sludge holding tank for possible disposal. Q. Is there any special treatment for phosphorous removal? A. Yes. We made a request that to incorporate phosphorous removal step, there is a chemical participation process where alum is injected that takes out the phosphorous. It gets you down to less than one milligram per liter. Q. Gets you down to what? A. Less than one milligram per liter. Q. Is it important to remove phosphorous from the wastewater effluent? A. Yes, to reduce the nitrogen level going to the river, to prevent such things as algae blooms and ---. Q. Does the wastewater treatment plant you're familiar with and are designing comply with all West Virginia DEP and Department of Health and Human Resources requirements? A. Yes, sir. Q. In your professional knowledge will the wastewater treatment plant effluent leave Chesapeake Bay initiatives for water quality? A. It's my understanding. I'm not that familiar with Chesapeake Bay initiatives. But if this transpires, --- the people from there have told me that it would. Q. Thank you. ATTORNEY MCDONALD: No further questions. JUDGE GEORGE: Mr. Kelsh? ATTORNEY KELSH: Thank you. CROSS EXAMINATION BY ATTORNEY KELSH: Q. Mr. Ammirato, you mentioned the whole standard and procedure of waste load allocation? A. Yes. Q. And that was issued by DEP? A. Yes. Q. When DEP issues those waste load allocations, does it look at how the receiving stream is used downstream in terms of recreation water use? A. How it's used downstream, yes. Q. Okay. So they take into account that, for example, the Town of Bolivar may pull water from their --- for their water system? I'm not sure if that's the case or not. But they would look at that; wouldn't they? A. There is a set of parameters they would look at. Q. And I know that the Shenandoah flows into the Potomac and the Potomac is the major water source for the Washington, D.C. municipal area. They would look at that and they would take that into consideration when they issue that stream load allocation? A. Yes. Q. Okay. You also testified that Sheridan had received a permit for its collection system; is that correct? A. Yes, sir. Q. And in that process --- and that was issued by the Bureau of Public Health? A. Yes, sir. Q. And in that process does the Bureau of Public Health look at the possible interaction of that system with the charts and geography of the area? A. Well, there are different plans. I would assume they would take that into consideration, yes. Q. Okay. Thank you. ATTORNEY KELSH: That's all I have. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: No questions, Your Honor. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: No questions, Your Honor. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: Nothing, Your Honor. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: I have a few questions. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. First of all, as a senior engineer at Potesta are you a registered professional engineer in the State of West Virginia? A. Yes. Q. Looking at --- how many would you say --- did you actually in looking at the membrane plants, have input as to the design of the membrane plants? A. No. That was selected prior to our --- that was in Potesta's parameter. Q. And who gave that to you as a parameter? A. Old Standard. Q. And also that would have appropriated for the wastewater plant also? A. Yes, sir. Q. So looking at the membrane plant as your qualifications, how many of these membrane plants have you looked at as an engineer? A. Well, I don't know what you mean by looked at. I've --- literature and several I've looked at physically, you know, as far as the specifications. Several of them. Q. Have you taken a membrane plant with a particular design requested by a company for treatment of sewage and given ---? A. No. This would be the first time. This would be our first time we worked on a membrane plant. Potesta, I guess, I should say. Again, we are not the supplier of the membrane plant. We are essentially --- it is just an elementary system. Supplied by our ---. Q. That is the Environment ---? A. EnviroQuip is the manufacturing supplier of the MBR system. Q. So that actually --- does it come in one packet or something and then you put things together as ---? A. It only comes in one packet. It comes together as parts and pieces. The lower stand would be the pre-made pumps, the aerators and the membrane units. So it's not what you call a package plant. It is --- you might say modules or elements. Q. Right. And as the consulting engineering firm you or any other engineering firm would oversee, like the construction and the piecing of the equipment and everything to make sure it's designed to work as it's planned? A. Yes. We had a non-contract to do the construction oversight. We strictly provide them with the collection system, the accessories to the wastewater treatment plant and several of the plumbing machines. Q. One other question I have. You said that this particular membrane plant was also like an aeration plant? A. The base --- to me it's an activated sludge process which is pretty common to the wastewater treatment plant. It is just that this has an extra feature saying we'll have these membranes and allow you to achieve --- to produce a much higher quality element. Q. How much have you had experience with aeration plants? Just solely aeration plants? A. Personally the only test that I believe --- while I was on staff is work not of one person --- we get several people on a job to work on an area of expertise. Q. So let me ask you this. With the aeration plant then there will be an addition of the membrane technology and that would be taking it one step further as to improvement of the discharge of the water quality? A. Yes, that's how I would phrase it, yes. Q. So that's a good summary of this particular type plan? A. Yes, that would be my summary. Q. You talked about also the --- when the West Virginia Department of Environmental Protection issued a waste load allocation to Old Standard? A. Yes. Q. Then also in your knowledge regarding sewer plants, is there still another outstanding permit at the West Virginia DEP as to a discharge permit? A. The West Virginia DEP has to issue a NPDES permit to allow discharge into the receiving stream. They have issued for Old Standard a draft permit to a hearing of a public comment and now it's going to go to a public hearing in December. That's the draft permit that's at issue. Q. Let me ask you this to see if I'm on the same page. Is that actually the --- what the NPDES permit brought Old Standard, is that the agreement that's set currently for January 10th? So it's in January in Charles Town? A. I'm sorry. January. Sorry about that. Q. I just want to make sure that we're all on the same page. A. Yes. Q. Thank you. ATTORNEY ROBERTSON: I have no further questions of this witness, Your Honor. JUDGE GEORGE: Counsel having no questions. You may step aside, Mr. Ammirato. You may call your next witness. ATTORNEY MCDONALD: I call Jason Allen. --------------------------------------------------------- JASON ALLEN, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY MCDONALD: Q. Would you identify yourself, please, sir, name and business address? A. My name is Jason Louis Allen. I work for EnviroQuip, Inc. out of Austin, Texas. Q. All right. What are your responsibilities with the firm of EnviroQuip in Austin, Texas? A. I'm a project manager and sales support for the NDR Division of the company. Q. I will ask you to keep your voice up if you would. What connection, if any, do you have with Old Standard, LLC and the Sheridan development? A. I began inception for developing the project for Herb Jonkers in Old Standard, LLC. Q. What did he ask you to do with respect to providing wastewater treatment assistance? A. Essentially he gave us a plumb rate to design around, specific for parameters for waste load characteristics. We did design a preliminary system for him, provided him with preliminary costs. And from that point on, we developed a submittal and began working with Potesta in proceeding to get this project through West Virginia DEP approval. Q. All right. Describe flow rates for the plant. A. The initial flow rate for the plant is supposed to be 50,000 gallons per day. The plant has been ultimately designed for 125,000 gallons per day capacity. JUDGE GEORGE: Staff will agree to that? ATTORNEY ROBERTSON: Yes, sir. JUDGE GEORGE: Thank you. ATTORNEY ROBERTSON: It can be expanded by simply ---. JUDGE GEORGE: I asked Staff if he would do that, he said yes. BY ATTORNEY MCDONALD: Q. What would be required to expand the plant from 50,000 gallons per day? A. The addition of three membranes per basin, so a total of six membranes. The equipment, and everything has already been sized for the 125. Q. Are there treatment limitations for the plant? A. We do have some discharge affluent requirements that were needed to be for the Chesapeake Bay water shed. That's the only limit that I'm aware of and we're not going to have a problem meeting those limits. Q. What are those limits and are they new? Are they on the books now? Are they upcoming or ---? A. I don't think they're necessarily new. The Chesapeake Bay watershed has a criteria based on flow rate for their discharge limits. That discharge limit essentially built around a 400,000 gallon per day flow rate. Anything above 400,000 gallons per day has a tight limit. Anything below has a little less stringent limit. Generally with the water and wastewater plant are things like BOD, TSS, total nitrogen, total phosphorus. Those are the general characteristics that make up the wastewater and influent stream. Q. And those are the parameters you're looking to meet to comply with Chesapeake Bay regulations? A. Specifically the Chesapeake Bay and what we're targeting right now is less than five milligram per liter on BOD, less than five milligram per liter on TSS and less than 2.5 milligram per liter on ammonia nitrogen and less than one milligram per liter on total phosphorus. Q. Is the size of the system you are constructing for Sheridan and Old Standard larger or smaller than a conventional wastewater treatment plant? A. If you were to provide this system as a conventional plant, you would be looking at a footprint anywhere from twice to three times the size of the footprint that the environment package would offer. Q. Would it be fair to characterize --- why don't you characterize for us MBR technology? What does that mean and what does it provide? JUDGE GEORGE: Quickly. A. Specifically to EnviroQuip, MBR is a membrane bioreactor. Essentially what it is is a flat plate sheet that we get filtration from. This sheet is one of the only flat plate bioreactors or MBR's that was specifically designed for wastewater treatment. Essentially what we have is two --- we'll have two dual trays with MBR cassettes, these large rectangular boxes. In each box --- you'll have a series of plates in each one of the boxes. Essentially you'll pump wastewater into the --- into one of those basins and then you'll be able to draw clean water or Permia (phonetic) through those plates and discharge that into a receiving line through the UV disinfection system. One of the notable things with our system is that we generally are not --- of a lot of tangible pathogens like fecal chloroform and other pathogens that most wastewater plants will monitor. BY ATTORNEY MCDONALD: Q. Is it fair to say that this technology is about as advanced as there is? A. It's definitely one of the --- it's on the leading edge of what's called the best available technologies out there or BAT technologies for wastewater treatment. Q. Describe briefly what services EnviroQuip will supply to Old Standard after completion of construction? A. Well, generally we'll start before completion of construction, we'll come out and have kickoff maybe with those that are going to actually construct the plant. We've already been in contact with Potesta on a regular basis, but we'll come out and visit with those that are going to construct the plant. We'll then proceed. After the plant has been constructed but before any of the equipment has been in place, we'll come out and do site inspections of the basins. We'll do site inspections of the surrounding buildings. And we'll actually walk through the whole process with the facility contractors who are building the plant and then the facility operators who will be operating the facility. We will come out and see much of the equipment has already been installed. We'll come out and spend several days with the operators of the plant. We'll essentially give them a training session. Several O & M and IOM books which essentially will be their bibles and how they operate the plant. And we'll also indicate to them how they can interface with us if they ever need to have anything troubleshot. Q. Thank you. Briefly discuss the maintenance and operation --- the ease of maintenance and operation required to operate this plant. A. I think the best way to do that is barring any regulatory body in that --- I say that a lot of regulatory bodies in the country here have specific mandates on the time they want an operator to be on site on a facility. If we were to bar all that regulatory input from anyone, generally speaking on a weekly basis we would require an operator to show up at the plant once a week. During that once a week visit he would be checking all the rotating equipment and all the blowers and pumps to make sure that everything is sound. He would essentially take and collect a sample of material from one of the basins for regulatory monitoring. He'd send that to laboratory for testing. He would do any kind of data logging then he might need to check the flow rates to the plant. And you check that the flow rates are sufficient on influent and on effluent. Wash down the screen once a week and if he --- disposal bin for the screen. Once a month we brought --- the operator would come out and inspect the instrumentation of the plant. We'll have result --- oxygen meters and meters which need to be removed from the basins, washed, recalibrated and placed back in the basins. This is something that, you know, would take about an hour for an operator. And then we would also require biannual cleaning of the membranes and I think in your case, because you have a hardness issue, we'll also do a cleaning for scaling for magnesium and calcium hardness. Generally speaking the majority of our plants that are operated overseas are operated remotely. They do not require an operator on site. If we wanted to operate this plant from Austin, Texas, we could do that. Q. Thank you. Do you concur with Mr. Ammirato's statements about removal of phosphorus from the wastewater affluent? A. Does a chemical addition admit that affluent or if --- you go down to actually .5 milligrams per liter or less, so I do concur. Q. Does the company provide a warranty in association with its sale of this equipment? A. We actually have provided a warranty. There were questions on the warranty that came back from the West Virginia DEP. We satisfied those questions that came back and they went ahead and approved the permit. But we have supplied a warranty for this plant. Q. There's been some concern expressed that the sewer lines might break. Does this technology have any features which will assist in the detection of any broken sewer line? A. I don't know if it necessarily has a feature, but we are --- we do have a problem with breaks in this system. Generally with this type of technology you don't want anything going between the plates of the system, that's why we offer a flat screen that helps remove all of that material. In this system we're also going to provide a grit chamber for grit material which is that small particle material that might be getting into our collection system. This is going to be a tight system. It's going to be new. We're not going to anticipate the INI which is infiltration into the collection system. If we do see a spike in grit coming to that grit chamber, we're going to know that we have a problem with the collection system somewhere. And we would definitely make sure someone is aware that they need to do a maintenance or do an inspection of their collection system. Q. Is the location of your company riding on the performance of this wastewater treatment plant? A. I guess I could best say it this way. If I went and did a site inspection of the plant and I determined that the basins --- the building --- the supporting pipe and anything that wasn't up to snuff, I have the authority to say I'm not going to put my equipment in this plant. If we have a plant that does not operate well, that will essentially serve to just drive us out of the market. The market is so tight and it's so competitive right now that we would not --- we wouldn't take that risk. ATTORNEY MCDONALD: I tender the witness. JUDGE GEORGE: Mr. Kelsh? ATTORNEY KELSH: I have no questions for this witness. JUDGE GEORGE: Mr. Michael? ATTORNEY MICHAEL: Yes, Your Honor. CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. Mr. Allen, is this the first plant of this type that will be installed in West Virginia? A. No, we have the CFFI facility. It's another membrane of the bioreaction plant. It's just a small scale ---. A CFFI facility Joe Jenkins (phonetic) is associated with is also an MBR plant that we provided. Q. And how many of those are in operation in West Virginia? A. I believe that's the only one in operation. Q. How small a scale are we talking about in that? A. That plant, I believe, is somewhere in the neighborhood of about 6,300 gallons per day. Q. So just so some customers is maximum? A. Actually it's a private --- it's not necessarily a customer-related ---. Q. How many households do you serve? A. Roughly divided by 75 to 150 gallons per day depending on the region and the county you're in that's your daily allocation. ATTORNEY KELSH: What county are you ---? A. I'm not familiar with that. ATTORNEY KELSH: What's the name of the outfit? A. I believe it's CFFI --- but the conservation flow. ATTORNEY KELSH: Your Honor, I'm ---? JUDGE GEORGE: Okay. Go ahead. BY ATTORNEY MICHAEL: Q. So to your knowledge this new technology has never been reviewed by the Public Service Commission engineering Staff in the context of this certificate case? A. I could never --- I can't answer that question for you. I know we're chasing more than a dozen projects in West Virginia. Specifically in Berkley County and Jefferson County right now anywhere from a range of 3,000 gallons per day to 3,000,000 gallons a day. Q. And do you know if any of those are part of the certificate case? A. I couldn't answer that for you. ATTORNEY MICHAEL: That's all I have. JUDGE GEORGE: Mr. Hammer? CROSS EXAMINATION BY ATTORNEY HAMMER: Q. What's the expected useful item of this particular facility? A. We make projections out over 20 years. Essentially our projections are replacement. We're going to essentially warranty the membrane plates for the first five years. If ever a membrane plate fails in the first five years, we're going to replace that at no cost. If it can be shown that it was, you know, manufacturer defect and not someone --- analysis of the membrane bioreactor. And we do our replacement costs up to 20 years. And essentially right now what we're doing is we're telling our customer to anticipate replacement of 10 percent of the units that are on site per year after the ninth year. Q. How long have you been installing these membrane plants? A. Caboda (phonetic) is the parent company. They've been installing plants since 1992. There are approximately --- there's just under 1,500 plants operating worldwide. Q. You've never gotten to the point with this new technology of cutting --- actually having the plant in operation for 20 years? A. We're very close. Q. 1992 was the first? A. 1992 was the first official. It doesn't count any of the R&D development that went before '92. '92 was the first, you know, client/customer relationship. Q. So for actual on the ground plants certain customers started in 1992? A. That's correct. Q. These plants come in various sizes I take it? A. We can --- anything from just a couple hundred gallons a day up over several million gallons per day. Q. Do you have pre-established sizes say over 50,000 gallons? A. We just developed --- I know there's been a lot of growing around the package plants. Until several years ago, that was a viable option and we proceeded it with a package plant in stainless steel. The cost of materials have gone such that we don't promote that package plan any longer. But we have developed a relationship with a company by the name of Waste Tech and we offered a five, ten and 20,000 gallon per day package plant in three different configurations. Q. Now, is the sizing for, a 50,000 gallon per day plant different than the sizing for a 125,000 gallon per day plan? A. It all depends on a number of parameters. But there are --- generally speaking yes, there are differences in the size. Q. And this particular plant is already sized for 125,000 gallons? A. That's correct. Q. So they didn't pick the 50,000 size? A. No, they asked us to design specifically for 50,000 gallons. And one thing that our company does with developers is we know that their demand flow is going to vary over time and so one of the, I guess, the things that's --- I guess that our system accomplishments is we can allow that. If we have several systems that all of the max build out flow rate cannot be reached in ten years, we'll still target that flow rate and inception and then I'll allow the customer to come to that flow rate whenever they need by simply adding membrane plants. Q. So you're asked to do 50,000, in this case but you did 125,000? A. No, sir. We were told that the initial treatment flow requirement was going to be 50,000 gallons per day. But they wanted the capability to expand to 125,000 gallons per day. Q. And that's why you signed it for 125,000 gallons? A. That's correct. Q. And taking your typical dwelling unit, single detached family home. How many customers are served by 125,000 dollar --- 125,000 gallon per day plant? A. Again, that's a question that I think Vince Ammirato already answered and I'm going to defer to that because we --- generally across the county you see different elevation notes. Q. Not to do comparative testimony here. But I heard Vince say this 50,000 gallons per day did 179 residential units. A. I think the number they use here to project the 75 gallons per day per household. Q. Okay. A. And so I have no --- I can't answer that question because it's a regional question that we don't necessarily --- we don't necessarily answer. Q. It falls within a range is what you're saying, a high or low range depending on regional water patterns? A. Yeah, and it's --- and again, it's just --- that will be a question for Vince to testify to. I think he has already answered it. Q. On average how many residential units will a 125,000 gallon plant ---? A. Again, it renders on --- there are too many variables. One, there's minimum temperatures. If you have a low flow toilet system, if you have a new collection system, if you have an old collection system that gets a lot of ---. So I can't answer it for you. Q. Well, we're talking about Jefferson County. A. Just I can't answer that --- that's a regional question that I think I would defer to Vince on. Q. Well, in your sales support and supporting this particular project? A. We were given the flow rate and design form on that. We weren't developing the allocation. Q. Well, what have you already designed for? A. I have already answered that, 125,000 gallons. Q. Okay. You didn't design for a flow rate based on a set number? A. No, we didn't break out the allocation ---. Q. I got you. You were just told you might have capacity up to 125,000. A. I was given the waste load, the wastewater characteristics and the flow rate. I was told we want to meet 50,000 gallons per day, and have the inception of --- with the ability to just essentially go to 125,000. ATTORNEY HAMMER: That's all the questions I have. Thank you. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: Just one question. CROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Allen, this area has problems with a lot of flooding. In the last ten years we've had major runoffs and major hurricanes break up over us. What happens to your system when a surge or possibly like '96 in January we had 40 inches of snow melt within two days. A. Well, we'll take it --- if I have equipment in the basins to treat 50,000 per day, I have the ability to treat twice that amount for 24 hours, so I could actually treat 100,000 gallons per day. As well the county here has equalization basin. So I imagine what you would do is do a flow model like you would do for any hydrology problem, you would go ahead and bleed down the volume that you're holding in your EQ. Basically, go ahead and run your bioreactor EQ for a 24-hour period. And then fill your EQ station. Now, if you had longer durations and that's something that we would ask the client, we could also give well above two and three EQ for several days by the addition of the flux enhancer. So it is a good question. It's a regional question. But we cannot handle spikes in flows and in ---. MR. FAULKNER: Thank you. JUDGE GEORGE: Are you going to have Redirect? ATTORNEY MCDONALD: No, sir. JUDGE GEORGE: Okay. That's good. Now, we're going to take a supper break. ATTORNEY ROBERTSON: Your Honor, if you don't mind? We got two very quick questions from Staff. JUDGE GEORGE: Okay. I'm sorry. I didn't call you at all; did I? ATTORNEY ROBERTSON: No. JUDGE GEORGE: Okay. ATTORNEY ROBERTSON: We're somewhat used to being sometimes ignored. JUDGE GEORGE: I miss Staff more than I miss any other party. I don't know what it is. ATTORNEY ROBERTSON: I have a few questions. JUDGE GEORGE: I'm sorry. CROSS EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Allen, the 50,000 gallon a day plant expandable to the 125,000 gallon per day plant, do you use those total numbers? You did not use so many gallons per day per residential or family structures? A. That's correct. That's the regional engineers. That's his problem. That's his --- not problem, but that's his job. Essentially I don't have --- I don't live in Jefferson County so we often require the regional engineer development plan for ---. Q. At least I don't believe that, thank you. The other thing is when you talk about looking at troubleshooting, is that something like an 800 number or an e-mail address or something like that where you get immediate responses if something happens to one of these plants? A. Currently we're setting up to monitoring all our plants essentially on our Blackberry (phonetic) unit. We have a division in our company that does nothing but start up troubleshooting and --- plant work. So essentially the head of that division now is going to have access to all of our operating facilities and in Blackberry. So you're going to be able to get to that person 24 hours a day if need be. Typical protocol, if you had a problem with plant here, if we couldn't troubleshoot it remotely, then we would first send a regional representative who could be here within hours. If that couldn't be worked, then we would have a --- we would have a company representative here within 24 hours. Q. One other thing that you talked about, once this particular plant was up and running and let's say things going true to form, it's been --- you actually have a training plant operator possibly visiting once a week? A. There's not the need for it. Generally after the training session is completed and we will come back and do follow-up visits if they are part of my client and generally though we don't find that it's necessary. But I'll convey that to you that really is the case. Q. Right. But at least in somewhat here if the District was offering it or the developer or somebody on behalf of the developer was operating, that they --- everything was working fine, they would not stop by? Once a week to make sure everything was ---? A. Right. That's what we --- essentially, that's what we would dictate. And again, I don't know if there's a regional requirement here that says an operator has to be on site four hours or X hours a day. I'm not aware of that. Q. I just have one last question. Those with the membrane plant two --- looking at this, does it have anything regarding a back up power in the particular design? A. We do have a generator, back up generator here for this facility. Most all of our facilities have back up generation. Generally there's a regional requirement there. The back up generators usually are diesel. With the amount of fuel storable anywhere from an eight hour to 24 hour storage capacity --- or fuel source capacity for plant electric. I think there have been contingencies here for back up generation. ATTORNEY ROBERTSON: Thank you. JUDGE GEORGE: Very well. You may step aside. ATTORNEY MCDONALD: Your Honor, I move the Defendant Exhibits. JUDGE GEORGE: They have all been admitted into evidence as Old Standard Exhibits One, Two, Three, Four and Five and Thornhill Exhibits One and Two. ATTORNEY KELSH: Is he moving the admission of those letters that were attached? JUDGE GEORGE: If it's attached to the exhibit at this point, unless somebody does something, the whole thing will go in. ATTORNEY KELSH: Okay. I don't think those letters are included and I want copies of these exhibits, so. JUDGE GEORGE: Do you want to look at the exhibits as they've been marked? ATTORNEY KELSH: No. I actually haven't seen those. But I'm pretty sure those letters were not included in the exhibit. I just want to be clear for the record as to whether they're included or not included. JUDGE GEORGE: If I have the letters that were responsive this morning --- that the word PSD was defined? ATTORNEY KELSH: Yeah, what happened was they tendered the discovery responses but it does not include those letters. I just want to be clear as to whether the record is going to include those or not include those? ATTORNEY MCDONALD: I'll stipulate to it. I'm putting in only the data responses supplied by the developer. It's not the data responses supplied by the Jefferson County Public Service District. Your Honor, may the witnesses be excused? JUDGE GEORGE: Your witnesses will be excused if there are no objections. Any objection to any of these witnesses being excused? Do you have any additional witnesses? ATTORNEY MCDONALD: Your Honor, the developers rest. JUDGE GEORGE: Okay. Very well. We need to take a supper break. And we will resume the hearing after our supper break. I understand that we need to both leave the building and return to the building through the back entrance over here to my right. And I would like to do this supper break in 45 minutes if there is no problem. ATTORNEY HAMMER: Your Honor, just a procedural thing. How much is left of this hearing? Because if it's less than an hour, we might as well finish it now. JUDGE GEORGE: Well, we've got --- how many witnesses are you going to have ---? ATTORNEY HAMMER: I have none. JUDGE GEORGE: You don't have any witnesses? Okay. How many witnesses for Bolivar? ATTORNEY HAMMER: None, Your Honor. JUDGE GEORGE: No witnesses. How many witnesses does Staff have to put on? ATTORNEY ROBERTSON: At least one, Your Honor. JUDGE GEORGE: One witness? ATTORNEY ROBERTSON: One. JUDGE GEORGE: And are you going to recall the witnesses, Mr. Michael? ATTORNEY MICHAEL: Yes, Your Honor. I'll be calling Ms. Sheeley for two questions. JUDGE GEORGE: If we only have one more witness, it may be better if we --- I know there are probably diabetics in the room. If anyone needs to take a break, a supper break now for medical reasons, we can do so. ATTORNEY MICHAEL: Let me ask this. I have right now almost 15 to 7:00. I guess I'm the only one, I'm a diabetic. I don't know if any other parties or Counsel --- we could possibly even take just a 15 minute break, I can grab something. I mean, I'll take a shot break. But I know ---? JUDGE GEORGE: If someone needs to eat, I'm not going to ---. ATTORNEY MICHAEL: I mean it's --- I mean, which ever --- however you want to handle it it's fine. ATTORNEY MCDONALD: Your Honor, even if you don't take a supper break or take a short supper break, I request a break at this juncture in any event. JUDGE GEORGE: Well ---. ATTORNEY MCDONALD: My stomach's okay, but my bladder sure isn't. JUDGE GEORGE: Let's do it this way. Let's take a half hour break. And if you want to rush out for fast food and eat something, that's fine and if not, that's fine too. I've got about 15 till so we'll probably resume the hearing at 15 after and I'll be a little lenient if somebody's late by a few minutes anyway. ATTORNEY MICHAEL: Thank you, Your Honor. SHORT BREAK TAKEN JUDGE GEORGE: I appreciate everyone's prompt return to the hearing room. At this point the Developer has rested. And Mr. McDonald, you have no evidence; right? ATTORNEY MCDONALD: That's correct. JUDGE GEORGE: And Bolivar has no evidence; right? ATTORNEY KELSH: Correct, Your Honor. JUDGE GEORGE: Mr. Michael, you want to recall one of your witnesses? ATTORNEY MICHAEL: Recall my only witness, Your Honor, for rebuttal. JUDGE GEORGE: Okay. Obviously, the witness is still under oath. You are still under oath. --------------------------------------------------------- SUSAN RISSLER SHEELEY, HAVING BEEN PREVIOUSLY SWORN, RECALLED TO TESTIFY: --------------------------------------------------------- REDIRECT EXAMINATION BY ATTORNEY MICHAEL: Q. Ms. Sheeley, you've been here throughout the testimony today? A. Yes. Q. You recall that there's been some discussion by several witnesses concerning the May 3, 2004 Board of Directors meeting of the Jefferson County Public Service District? A. Correct. Q. And you were present at that meeting? A. Yes, sir. Q. You testified earlier about a statement that --- applying for a certificate first would take too long? Did you take notes of that meeting when you were present? A. Yes. Q. And have you reviewed those notes? A. Yes, I did review them. Q. And would you like to kind of correct your previous testimony? A. Yes, I would. When I was asked who made the statement regarding the fact that applying for a Certificate of Convenience and Necessity --- someone asked who did say that. And I said Herb Jonkers. I need to correct that after reviewing my notes and it was PSD legal counsel Mr. Kelsh. Q. And you took these notes contemporaneously during the meeting? You took these notes during the meeting? A. Yes, sir. Q. And in your notes --- Mr. Kelsh's name is in your notes? A. Yes, sir. Q. Okay. One other topic. Let me ask you. Do you recall the discussion about the comments or the objections you made at that meeting to the agreements that were being discussed? A. Yes, sir. Q. And there has been testimony that your comments had nothing to do with the topic? A. Right. Q. Do you have --- let me hand you this and ask you what that is. A. This is a document that I read at the PSD May 3rd meeting. Q. I would ask you to read now just exactly from that document the same language that you read at the May 3, 2004 Board meeting. A. Okay. ATTORNEY KELSH: Object and I don't see the relevance as to the issue in this case, Your Honor. JUDGE GEORGE: Overruled. A. The address is the Jefferson County Public Service District via Fax. 210 West Third Avenue, Racine, West Virginia 25438 regarding Thornhill, LLC. Dear sir, or madam. I am writing this letter at the request of Susan Rissler Sheeley and Patricia F. Rissler who are concerned about the proposed Thornhill subdivision. As you know, the Public Service Commission Staff has recommended that the Jefferson County Public Service District must first obtain a Certificate of Convenience and Necessity before undertaking a construction project to make public sewer available to the Thornhill project. In parentheses Public Service Commission Case Number 03-1543-PSD-PC. It has been suggested to me that the developer may propose an agreement with the District whereby the developer would construct the Thornhill collection and treatment system at its expense and then transfer the system to Jefferson County Public Service District at no cost to the District. The purpose of this letter is to advise the District that any such agreement must be approved by the West Virginia Public Service Commission as an alternate mainline extension agreement section 150 CSR 5-5.5.H.7 and sewer form number seven. And this is a --- as I said a Fax and it was from Tom Michael to me and to Pat Rissler. BY ATTORNEY MICHAEL: Q. And at the meeting we're talking about after you read that, what was the next action that was taken by the Board? A. They approved the four memorandums. Q. Related to Thornhill or Old Standard? A. Old Standard. Q. Did they do anything with respect to Thornhill at that meeting? A. The subject came up. It was tabled until June 7th. ATTORNEY MICHAEL: Your Honor, if I can approach the witness --- A. Okay. ATTORNEY MICHAEL: --- and hand her a copy of the Board records? BY ATTORNEY MICHAEL: Q. At that meeting didn't the Board --- Counsel prepare identical agreements for Thornhill --- A. Yes. Q. --- that had just been approved by Old Standard? A. Right. Q. That was right after you read your objection? A. Exactly. Q. Nonetheless the minutes reflect that your objection had nothing to do with the discussion; did it? A. That's correct. Because it had nothing to do with the actions under consideration by the Board. ATTORNEY MICHAEL: No further questions, Your Honor. JUDGE GEORGE: Cross Examination? ATTORNEY KELSH: No. ATTORNEY ROBERTSON: None by Staff. JUDGE GEORGE: Mr. McDonald? RECROSS EXAMINATION BY ATTORNEY MCDONALD: Q. Ms. Sheeley, are you a voting member of the Jefferson County Public Service District? A. No. Q. Are you a voting member of the Jefferson County Public Service District? A. No. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: No questions. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: No questions. JUDGE GEORGE: Mr. Robertson? ATTORNEY ROBERTSON: No questions, Your Honor. JUDGE GEORGE: You may step aside. Thank you very much. ATTORNEY MICHAEL: That was the rest of the questions, Your Honor. JUDGE GEORGE: Mr. Robertson, you may call your first witness. ATTORNEY ROBERTSON: At this time the Staff would like to call Jim Weimer. --------------------------------------------------------- JAMES WEIMER, HAVING BEEN FIRST DULY SWORN, TESTIFIED AS FOLLOWS: --------------------------------------------------------- DIRECT EXAMINATION BY ATTORNEY ROBERTSON: Q. Could you please state your full name for the record and also your position at the Public Service Commission? A. My name is James C. Weimer. I am an engineer in the engineering division of the Public Service Commission, 201 Brooks Street Charleston, West Virginia. Q. And you are a licensed professional engineer in the State of West Virginia? A. Yes, I am. Q. And you also do complaint investigations; is that correct? A. Yes, I do. Q. And at this particular time --- copies of the Staff's recommendation dated December 9th filed with the executive secretary's office on December 9th? ATTORNEY ROBERTSON: The Court Reporter has already identified it as Staff Exhibit Number One. (Staff Exhibit Number One marked for identification.) JUDGE GEORGE: Okay. It's been marked as Staff Exhibit Number One. BY ATTORNEY ROBERTSON: Q. Mr. Weimer, do you also have a copy in front of you? A. Yes, I do. Q. After reviewing the complaint of Ms. Sheeley ---of what you did in your investigation of this complaint case? A. Well, the first thing we do is review the file of the information that's filed with the complaint to determine what all of the issues are. The second thing we do is then we conduct a field investigation to see what specifically has happened in the field with respect to the information filed. And then once that has been done we make an evaluation of the information provided and what we find in the field and make a determination of what recommendations Staff would provide based on the Public Service Commission's law and regulations and the statutory requirements. Q. And basically looking at her complaint that you and your investigation, looking at the issues at hand, looking at whether the District and/or the developers would have to file a certificate? A. Well, based on the information provided in the filing and based on what I was able to determine was happening in the field, it was apparent that this particular project was of the size and scope that would have required typically a Certificate of Convenience and Necessity from the Public Service Commission prior to any construction activity. Q. Right. Then also the Staff through its investigation did send the District and both Thornhill and Sheridan data request Interrogatories, which, at least, Mr. McDonald said has entered in all of the interrogatories or the responses from both developers; is that correct? A. Yes. And that --- the information that the Staff requested was determined --- the validity of the information or the allegations made in the filing by the Complainant. Q. Then also you did receive responses from the District --- appropriate responses also from the District and because we did do a combined data request; is that correct? A. Yes, we did. We had responses from both parties. Q. In looking at this from an engineering perspective that --- with your recommendation of a technical recommendation in this case that you're looking at the developers and/or the District filed certificate? A. Well, again, the size and scope of the project would indicate that some entity must file a certificate in order to be in compliance with Public Service Commission regulations and the statute does not specify any particular party but gives a variety of parties who could follow --- should follow any time you're constructing a new plant. Q. In looking at the size of both of these plants you had other --- you reviewed other certificate filings in your experience with the Commission? A. Yes, we have. In fact, we have entire PSDs with plants of some of the sizes calling Health Department permits because the entire size of their Public Service District operation so --- and of course, we've got the number of units that were spelled out on the Health Department permits. It certainly would legitimize any need for a certificate filing because of the size and the scope of the project. Q. I presented Mr. Jonkers the Health Department --- the two Health Department permits to construct that were filed by Old Standard and also the one filed by Thornhill. Have you had an opportunity to review those? A. Yes, I did. Q. And without those two --- the Health Department looked at those to serve, I believe --- one was 178 residents and the other one was 179? A. Yes, that's correct. Q. Did that cause you any alarm of not having a certificate filed? A. Yes again, that supported the Staff conclusion that the size and the scope of this project was such that a certificate must be filed. That's far in excess of the need to certificate any entity becoming a utility, number 25 is something that the Public Service Commission utilizes. And also whenever you see something of that magnitude, the cost is also --- all of the additional contracts with the Public Service District which were referenced in the filing which also would have required Commission approval. Q. All right. In getting back to looking at the certificate. First of all, this was a unified Staff recommendation meeting legal engineering and financial? A. Yes, there's no --- generally in many cases there will be some differing opinions about how a case is to be handled. But in this particular case it does, in fact, majority are unified finding that the scope of this project is such that a certificate filing must be done. Q. In looking at the Staff's overall recommendation do you believe that the Staff has a preference as to whether or not the developers or the District filed a certificate before construction of the plant? A. Again, Staff only looks at Public Service Commission regulations and statutory requirements --- the statutory requirements to find who should file. And in this case we have no preference, just someone must file a certificate. Q. Right. And you are familiar with the certificate statute of having who should file --- the party, the entity should file for a certificate before constructing a plant? A. The party building the plant. Q. Looking at the other agreements that have been entered into by Mrs. Sheeley, the four exhibits for Sheridan Corporation, and also the four exhibits for the Thornhill development, looking at that that there also was a unified position from the Staff as to those particular agreements? A. Yes. Any agreement that has the potential to have a large financial impact on the District, all new agreements as to purchase agreements, lease agreements are all typically filed for approval of in a PC case --- petition case at the Public Service Commission. After reviewing those agreements it was --- Staff notified the Commission that those agreements all qualified as those which should have been filed for approval by the Public Service Commission. Q. So looking at the situation --- I know the memo speaks for itself, but what is the Staff looking for in this proceeding complaint case? A. Well, the Staff is looking for a result where a certificate will be filed. And as far as what other actions are taken, I think it would be appropriate possibly to have at least the construction part evaluated prior to proceeding any further so if there are any financial impacts which possibly could be negative for the District, at least Staff has an opportunity to review them. Q. Can you just be a little more specific? You said about construction. Are you talking about Sheridan or is that for Thornhill? A. Well, whoever is doing the construction of the plant because it's eventually going to be a District asset. Apparently based on the agreements, there's been no evidence that it's improperly designed or an inappropriate plan. At this level --- or at least at this point prior to the Staff recommendation --- Staff review but typically no construction occurs until a certificate's been granted. And in this case it's probably appropriate to have the same situation exist with construction of the waste center halted pending a review. Q. So basically that Staff wants to look at these products. A. Staff reviews --- any major project which is going to affect utility and utility customers for the Public Service Commission must be reviewed by the Staff to make sure that it's not going to be a financial burden or is going to violate any of the regulations of the other agencies or it's not been subject to at least public input as to how to proceed. Q. The other thing with this particular technology, the membrane of the bioreactor if I remember correctly. The MBR plant. Do you know if other utilities or developers filed a certificate project using this technology at the Commission? A. I am unaware of any. It's a --- as I think it has been presented, it's a newer technology. There are many newer technologies because of the increasing requirements to clean up the discharge from these wastewater treatment plants. Staff would be in the same agreement as many others reviewing literature, visiting other plants, discussing plant performance with people with actual experience. But we have not, to my knowledge, had any of the plants file for a membrane reactor. Q. And as to looking at the technology of a plant, I'm going to put it in your court as the engineer in this particular case. That's something too that --- from an engineering viewpoint that the Staff wants to review in a hearing concept? A. Yes. The technical Staff and engineering Staff typically reviews the design of the plants and the approvability of the plant is usually done as far as a biological removal and processes in the plant and discharge environments is done by other agencies. However, Staff often does do review because even with the other agencies looking at all these things that are missed and Staff discusses with the other agencies how they did arrive at their conclusions about the approvability of the plant and the discharge limitations. Generally once it goes through the process we find very little problem with those issues that have been reviewed by their agencies but they do review them and therefore we always take the opportunity to review any new technology and even existing technologies. Q. And so the Staff feels that what the developers and/or the District's filing a certificate for any construction in these plants it is the appropriate time so Staff can have a look into the technology of these plants? A. That was the purpose of the Public Service Commission and the Statutory requirements so that's the reason it was written. So that there is a review process that those types of issues can be evaluated prior to construction. Q. And also let's say that the Judge actually orders a certificate to be filed by the developers or the District then also you would --- the Staff would also want any other types of agreements that would be related to the plant? A. Yes. Anything that --- again, we review --- it's been this --- the charge of Staff to review all agreements regarding the impact, utility operation in any significant way. In this case there's O & M agreements, asset purchase agreements, large scale assets, lease agreements, which could potentially have an impact positive or negative on the operations of the utility and, therefore, it would be a requirement to have that reviewed and approved by the Public Service Commission. Q. Would you agree with me that of all the water and the sewer utilities that the Commission regulates that under the statutes and under the Commission regulations that the Public Service District is probably the most regulated water and sewer utility in the state? A. Yes, you're absolutely right. Q. In fact, there are circumstances and provisions that would apply to the PSC that wouldn't apply to private utilities which are used ---? A. That's correct. Particularly when it comes to rate setting opportunities. Q. It's not that all the evident sewer water utilities under the rate system --- it's just that of all those utilities the ones that are under the statute are the most --- Public Service District? A. Yes, because by and large they --- first of all, there are multitudes for Public Service Districts ---. Secondly, Public Service Districts come in a whole variety of sizes and management capabilities and often they are very small operations and require more oversight than some of the larger better managed PSDs. Q. I believe I just have one or two other questions, Mr. Weimer. In the previous part called the provo agreements we, the District and Sheridan and the District and Thornhill in the two cases known as 03-1543 and 03-1544. Were you the engineer assigned to review those cases? A. No, I was not. Q. Do you know who was assigned to review those cases? A. Yes. That was Taylor Balwin (phonetic) of the engineering division. Q. And have you had an opportunity to review the Staff recommendation in those two particular cases? A. Yes, I reviewed the Staff recommendations. And what the Staff agreed to? Q. We have reached the same conclusion in this complaint case as we did in those two proceedings? A. Yes. Again, basically the Staff recommendation in the provo agreement was a result that there was a plant being constructed, number one. And number two it was extremely large financial project they believe because of that certificate filing to get a complete review to make sure that didn't negatively impact the operations of the utility. Q. At this particular time based upon your investigation of the complaint and also looking at the other information in this complaint case, your review, do you have anything else for the Staff, here today? A. Well, the only thing, you know, that I would like to have, certainly I have seen the need for sewer services in this county as very troubling to see the situation exists up here where it's the only developing area in the state basically as far as population increase and not to say that's all --- necessarily always good, but it is a part of the state that's growing and whenever you have a growing area in the state, you have the opportunity for economic development if everything is done properly. And I certainly understand the developers have somewhat of a problem here and that it would probably be in everyone's best interest to try and expedite the solution. Q. Thank you, Mr. Weimer. JUDGE GEORGE: Mr. Weimer, would you agree with me that in the time you --- the Commission discovers utilities in this state that are operating without a convenience --- Certificates of Convenience and Necessity without --- on their own? A. Yes, we have cases like that. I do know --- whenever that question came up earlier the Health Department generally sends a cover letter out to be considered as package plans because I've been --- I've seen some of those letters that alerts the utility or the developer or whoever it happens to be the --- when they get a customer count of 25 or greater, they need a certificate but it doesn't say --- unfortunately it doesn't say they need a certificate for construction. So it's sort of a --- an agency --- inner agency problem in that regard. JUDGE GEORGE: They are illegally operating utilities. Often the history has been that they've been created by developers who simply look at the certificates --- customers --- maybe they --- but frequently they are generated to the developers. A. Yes. In fact, we just --- I'm trying to recite a case I just done recently where a developer was unaware of the regulatory requirements in this state and they put in a --- what was called one of these alternative systems and produced an extremely high quality affluent as well as managed --- they were simply unaware of the fact they had to file for a certificate until they were challenged in which case they immediately did. JUDGE GEORGE: Well, developers usually --- operating utilities ---? A. That's the typical case. It's generally been put in and almost manually turned over to homeowners to operate in which case homeowners associated on typically --- if no one specifically is responsible, then no one could be held responsible and it sort of becomes a problem for the environmental side of the DEP. JUDGE GEORGE: We've been talking about these meetings with a restricted area and --- start pumping water from the citizens' well source or something like that and it is slowly developing into a utility. We find most ---? A. Yeah. That was very prevalent in the past. I'm not sure how prevalent it is currently. But it was extremely prevalent in the past, many years ago. JUDGE GEORGE: And what does Commission Staff or the Commission do when they find one of these illegally operating utilities? A. Well, we inform them that they have to certificate and do a review and go over all of the violations that the system is operating under and require that they correct them. JUDGE GEORGE: And have they found such utilities even at this time as far as --- I mean, you may not know? A. I have no personal knowledge in this county, but I have many in the southern part of the state. JUDGE GEORGE: Mr. Kelsh was talking at least today on potential operating committees, what would Staff typically do when they find such information? A. Well, whenever Staff typically finds information, we contact the utility and inform them that they must file a certificate. JUDGE GEORGE: Mr. Kelsh? CROSS EXAMINATION BY ATTORNEY KELSH: Q. Good evening, Mr. Weimer. A. How are you, Mr. Kelsh? Q. Is it Staff's view that a Certificate of Convenience and Necessity is required whenever anyone constructs a sewer plant? A. I believe the statute says plant or ---. Q. Okay. We've had a number of situations that were discussed in earlier testimony today, you were present when Mr. Kable testified on behalf of the District? A. Yes, I was. Q. And he identified the Briar Patch subdivision as having some sort of package treatment plant. Do you recall that testimony? A. Yes. Q. And he indicated there were about eight homes in that development? A. Yes, I do. Q. Do you believe that package plan requires a certificate? A. Under the statute any plant requires a certificate. Q. All right. The Quality Inn was identified as having its own plant to treat its waste. Do you believe the Quality Inn should get a certificate for that plant? A. If it is, in fact, a sewage treatment plant serving --- if it is serving other than a single customer, like a single home, then I think --- the history will lead to --- there is a narration here to a single home treatment plant, then the answer is no. If it doesn't have more than one customer, I believe we're probably not involved. Q. All right. JUDGE GEORGE: But certain systems, over 25 customers would require a certificate? A. Well, any --- I think that any time you're building a plant to serve more than one customer, you have --- to serve --- you need a certificate. BY ATTORNEY KELSH: Q. And in a Staff memo you maintain that the agreement which the District has entered into require the approval of the Commission under West Virginia Code section 24-2-12? A. I believe that was the Staff position, that's correct. Q. Section 24-2-12 has seven distinct subsections. Do you know which of those subsections you believe require the District to obtain Commission's approval? A. I would like --- I would probably have to read it. ATTORNEY KELSH: If I may present --- approach the witness and present him with a copy? BY ATTORNEY KELSH: Q. This is West Virginia Code section 24-2-12. I've circled the seven subsections. If you would --- we've got four agreements and perhaps if you take the one agreement --- needs to be approved under one subsection and another agreement needs to be approved under another. If that's the case, please so indicate. A. Well, we have one that talks about leasing which is subsection C. Q. So you believe the lease agreement needs to be approved under subsection C? A. I believe I'd say that would qualify. JUDGE GEORGE: Why do we need subsection ---? A. That's subject to the provisions of this staff memo except --- other than the street --- you assign, transfer, resale or otherwise dispose of its franchises, licenses, permits, plans --- or any part thereof, but they shall not be construed to prevent the sale, lease and selling from a transfer items other than tangible personal property which is not necessarily useful nor will it become necessarily useful in the future in the performance of its duties to the public. BY ATTORNEY KELSH: Q. Do you believe that all of the agreements are required to be approved by the Commission under Subsection C? A. Particularly the leasing. Certainly necessary to the corporation. Q. The real estate purchase agreement? A. The real estate purchase agreement I think requires approval because of the financial --- possible financial impact of the utility. Q. Okay. But under what subsection of that statute is required? A. No public utility subject to the provisions of this chapter are set forth in this chapter may purchase, acquire, take or receive any stocks, stock certificates, bonds, notes, other entities of any other public utility. Q. Okay. And what subsection is that? A. I believe it is subsection M but I can't see the top. Q. And then there's ---? A. Subsection E it is. Q. Subsection E. Okay. It has the O & M agreement? A. Okay. And that would be subsection F. No public utility is subject to the provision of this chapter except --- any of these direct interims with any contract, arrangement or management of construction engineering supplied the financial services with the burden of any other service by --- with any other corporation, person or entity. Q. Okay. And then the asset purchase agreement? A. I think that's been qualified on one of the earlier subsections which I read. Q. Can you identify that subsection? A. This is the purchase agreement? Q. Yes. A. No public utility is subject to the municipal chapter subdivisions other than --- may purchase, acquire, take or receive any stocks, stock certificates, bonds, notes or other evidence of any other public utility. Q. Okay. And that's subsection E? A. That was that subsection E. Q. Okay. Thank you. You state that this agreement should be reviewed and approved by the Commission in part because it did have a large financial impact on the District? A. Correct. Anytime you see asset purchase, lease, O & M agreements is certainly entered --- our experience is that it generally has the financial significant financial impact. Q. Do you believe the purchase of this property for $1 could have a large adverse impact upon the District? A. Well, I wouldn't know that until I reviewed the entire agreement and the entire certificate filing to see what all it entailed. Q. But then you didn't answer my question. Do you believe that a purchase of property for $1 could have a large adverse effect on the District? A. If the property were inappropriate for the District, is improperly designed and needs significant maintenance issues, yes, it could. Oftentimes I recommend utilities not purchase property because of that very reason. Q. Okay. There's been some discussion about the O & M agreement previously. And the O & M agreement provides that the District will be paid in full for the cost of its services provided to Sheridan. Do you believe that agreement could have a large adverse effect on the District? A. On this case certainly not. If it's paid in full, it can't be a problem. It depends on if there are any other issues associated with that agreement that could impact that. And that also requires a --- that's one of the reasons that's so important to do. Q. The asset purchase agreement provides that --- I don't --- provides the Public Service District will obtain a Certificate of Convenience and Necessity before closing on that asset purchase agreement. Prior to that time the District has very limited --- its customers are not at risk. Is that fair to say? A. Well, certainly until the District takes ownership and any liabilities account for ownership, the customers aren't impacted. But there are certificates granting other than that and we're talking about a certificate to operate utilities and purchase a certificate for constructing --- there's a significant difference. ATTORNEY KELSH: All right. Thank you. That's all the questions I have. JUDGE GEORGE: Mr. McDonald? ATTORNEY MCDONALD: No questions, Your Honor. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: Just one short question. CROSS EXAMINATION BY ATTORNEY HAMMER: Q. Mr. Weimer, under the O & M agreements for LL --- for Thornhill and Old Standard Exhibit Three and Exhibit Nine, am I correct that the District was obligated because of the mandatory language in those agreements to take responsibility for those facilities? A. Yes. It was the Staff --- a unified petition and it was under the statute that they should have been filed before the Public Service Commission approval. ATTORNEY HAMMER: No further questions. JUDGE GEORGE: Mr. Michael? CROSS EXAMINATION BY ATTORNEY MICHAEL: Q. Mr. Weimer, at 24-2-11 as you paraphrased it and I'll --- it's saying, it says no person shall begin construction of any plant furnishing to the public any services. So under the agreements that we have Old Standard, LLC began the construction of a wastewater treatment plant to provide services to homeowners and Sheridan, LLC. Do you think that fits under the requirement for a certificate case? A. Yes. And when you said so there ---. Q. And in fact, the procedure is before you begin construction? A. That's generally the key. That's generally the --- unless it's already in the ground as --- the developer I think it's the --- you don't got to do anything about it. Q. This morning --- 24-2-12, you were asked to look at it. Subsection A there says no public utility may enter into --- again, I'm paraphrasing. May enter into any contract with any other utility while operating any plant. That would apply if, in fact, in this case, in fact, to Old Standard, LLC is considered a utility; correct? A. It definitely illustrates interpretations. Q. Does Staff take the position on whether or not at any point in this process Old Standard becomes a utility? A. Well, that --- again, that administrative department says if they are servicing customers, they would become a utility. If they dispose of the asset prior to becoming --- prior to reaching the point ---. Q. Let's think about this in terms --- at the point in time where wastewater treatment plant is in operation, it's on a piece of ground run by the Jefferson County PSD, the wastewater treatment facility itself is owned by Old Standard under a lease agreement with PSD. The PSD is operating the plant under an O & M agreement with Old Standard. Old Standard is paying Jefferson County to do that. Old Standard is collecting sewer bills from the Homeowners Association which in turn is assessing dues going to the individual members. That's a situation we're going to have. Now, in that situation who is the utility? A. Well, again, until there are 25 customers, there are technically ---. Q. Assume we have reached 25 customers and we have ---? A. If we have reached 25 customers and there has been an asset transfer, then the developer would have to file to become a utility. ATTORNEY MICHAEL: No other questions, Your Honor. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: I have some questions, Your Honor. CROSS EXAMINATION BY MR. FAULKNER: Q. Mr. Weimer, about how many complaints do you investigate in a normal year? And we're coming to the end of '04 ballpark? A. Just complaints? Q. Well, or investigations? A. Sixty (60), 70 a year --- complaints in a year, plus certificate cases, agreements. Q. So quite a few? A. Yes. Q. And then you said that this is one of those cases where legal, engineering and financial all agree. How often does that happen? A. Well, pretty much I'd say a majority of the time. Most cases are clear. There are differences because as with any statute or regulation, there are some of those which have wide grace flaws and commitment. And they are open to different Staff interpretations depending upon the particular Staff background. However, there are also tendered by prior Public Service Commission precedents which oftentimes is what determines what the Staff position will be. Q. So for how many years have you been doing this kind of work? A. I've been with the Commission about five years. Q. About five years. So you've pretty much seen it all inside the spectrum of when complaints or other issues come forward, you've encountered maybe minor issues and then major issues? A. I wish I could say I had a lot of minor issues, unfortunately I'm plagued with some of the major ones. Q. Okay. Just to put this in context if we said one was minor, trivial infractions and ten was a mind numbing disregard for the law, where does this fit on the one to ten scale? A. This is in the upper radius. I think in Staff's interpretation. MR. FAULKNER: Okay. That's all. JUDGE GEORGE: Very well Redirect? ATTORNEY ROBERTSON: Just a couple of questions, Your Honor. REDIRECT EXAMINATION BY ATTORNEY ROBERTSON: Q. Mr. Weimer, looking at what the developers --- that they were --- it was Staff's viewpoint and recommendation that no one was going to file a certificate before the plant was built? A. That --- I mean, that was what was intended or ---? Q. No, I said, looking at the Staff recommendation in this particular complaint case the developers were looking, at not filing a certificate for that treatment plant. That was a ---? ATTORNEY KELSH: That already seems to be an issue. Go ahead. This doesn't seem to be Redirect. I object. We covered this on the record. JUDGE GEORGE: Can you repeat the question? BY ATTORNEY ROBERTSON: Q. Looking at this particular complaint case the developers have looked at building a treatment plant and not filing a certificate, that's the heart of the complaint? A. Exactly. Q. So Staff also looked at under 24-2-12 these particular agreements, all of the agreements listed in the Staff memorandum with Thornhill and also Sheridan. Looking at also that the developers were not filing a certificate? A. Yeah, we saw those --- the entire process as somewhat of a skirting of the Public Service Commission requirements because they are --- those are things that we typically see filed by all utilities and we typically see filed in certificate cases whenever plants are built. Q. So because of the complaint situation and looking at these particular agreements, that's the reason that Staff also looked at requiring the District to have Commission approval of these agreements? A. Yes, they --- as we've just discussed, we as the Staff, unified position that by statute they needed to submit for Public Service Commission approval. Q. Now, one other question. If the developers and the --- the District filed for a certificate, then these numerous agreements may or may not be applicable if a certificate is filed in these specific agreements? A. Well, again, that would be a function of how the filing is made I mean, between the developer and --- it appears based on what has already happened that they were going to have to comply because first of all, the construction has already started, has already purchased material and has engineering in the way so it appears that that problem is going to have to be fixed by the developer in which case the agreements are going to be a necessary filing by the District as a separate case to a certificate. Q. Well, in your opinion of filing a certificate then there could also be agreements filed within the filing of a certificate proceeding at the Commission? A. Yes, but they both have to be parties. I think the District would have to file the agreement as well as the developer. Q. Right. But ---. A. And a joint filing for the agreements specifically. Q. But that could be filed under one case number at the Commission? A. Well, I presume the secretary could arrange that. Q. Thank you, Mr. Weimer. JUDGE GEORGE: Staff filed a doctrine of consent with the actions and the District and the developers demonstrated multiple intent to violate the code. Is that still your admission? A. I think that was a representation by the division. I don't believe that was in any technical Staff memo. I was thinking legal division position based on information provided in the Staff memorandum. JUDGE GEORGE: Very well. Anything further, Mr. Kelsh? ATTORNEY KELSH: I have no further questions. JUDGE GEORGE: Any Cross Examination, Mr. McDonald? ATTORNEY MCDONALD: No, Your Honor. JUDGE GEORGE: Mr. Hammer? ATTORNEY HAMMER: No, Your Honor. JUDGE GEORGE: Mr. Michaels? ATTORNEY MICHAELS: No, Your Honor. JUDGE GEORGE: Mr. Faulkner? MR. FAULKNER: No, Your Honor. JUDGE GEORGE: You may step aside. You may call your next witness. ATTORNEY ROBERTSON: Your Honor, at this particular time Staff would actually move into the record the Staff memorandum dated --- or filed by the executive secretary on December 9th, 2004. We would enter it into the record and Staff rests. JUDGE GEORGE: Any objections to the admission into evidence of Staff Exhibit One? ATTORNEY MCDONALD: No objection. JUDGE GEORGE: It's admitted into evidence. Do you have additional witnesses? ATTORNEY ROBERTSON: No, Your Honor. JUDGE GEORGE: Okay. Unfortunately you're on a tight clock. My decision due date is February the 1st. We should be getting transcripts on the 28th of December. I need initial briefs on January the 4th and briefs on January the 11th. The only way I can extend that briefing schedule is if somebody moves and obtains from the Commission an extension of my due date. Anything else we need to do today? As a policy of practice the other day --- before the Commission these are dates that documents have to be in house and we have no mailbox here. Anything --- and given this tight schedule, I would request that if it's possible all the parties e-mail or Fax their briefs to the other parties, their initial briefs. MR. FAULKNER: Your Honor, is it mandatory that an Intervenor file a brief or may Intervenors simply join in one? JUDGE GEORGE: No, it is not. It is not. You have no obligation to file a brief. In my view as long as you came to the hearing and sat here all day, that keeps your intervenor status that you pre-filed. Any other questions? Anything else? If not, hearing is adjourned. Thank you very much. * * * * * * * * HEARING CONCLUDED AT 8:14 P.M.