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 partic