ML12305A093
| ML12305A093 | |
| Person / Time | |
|---|---|
| Site: | Indian Point  |
| Issue date: | 10/22/2012 |
| From: | Atomic Safety and Licensing Board Panel |
| To: | |
| SECY RAS | |
| References | |
| RAS 23677, 50-247-LR, 50-286-LR, ASLBP 07-858-07-03-LR-BD01 | |
| Download: ML12305A093 (335) | |
Text
Page 2388 1 UNITED STATES OF AMERICA 2 NUCLEAR REGULATORY COMMISSION 3 + + + + +
4 ATOMIC SAFETY AND LICENSING BOARD PANEL 5 + + + + +
6 HEARING 7 --------------------------------x Docket Nos.
8 In the Matter of: : 50-247-LR and 9 ENTERGY NUCLEAR OPERATIONS, INC.: 50-286-LR 10 (Indian Point Generating Units 2:
11 and 3) : ASLBP No.
12 --------------------------------x 07-858-03-LR-BD01 13 Monday, October 22, 2012 14 15 DoubleTree by Hilton Hotel Tarrytown 16 Westchester Ballroom 17 455 South Broadway 18 Tarrytown, New York 19 20 BEFORE:
21 LAWRENCE G. McDADE, Chair 22 MICHAEL F. KENNEDY, Administrative Judge 23 RICHARD E. WARDWELL, Administrative Judge 24 25 Neal R. Gross & Co., Inc.
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Page 2389 1 APPEARANCES:
2 On Behalf of Entergy Nuclear Operations, Inc.:
3 KATHRYN M. SUTTON, ESQ.
4 PAUL M. BESSETTE, ESQ.
5 MARTIN J. O'NEILL, ESQ.
6 MARTHA B. STOLLEY, ESQ.
7 RONALD J. TENPAS, ESQ.
8 of: Morgan, Lewis & Bockius LLP 9 1111 Pennsylvania Avenue, N.W.
10 Washington, D.C. 20004 11 (202) 739-5738 (Sutton) 12 (202) 739-5796 (Bessette) 13 (713) 890-5710 (O'Neill) 14 (212) 309-6858 (Stolley) 15 (202) 739-5435 (Tenpas) 16 ksutton@morganlewis.com 17 pbessette@morganlewis.com 18 martin.o'neill@morganlewis.com 19 mstolley@morganlewis.com 20 rtenpas@morganlewis.com 21 and 22 23 24 25 Neal R. Gross & Co., Inc.
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Page 2390 1 WILLIAM GLEW, ESQ.
2 Assistant General Counsel 3 Entergy Nuclear Operations, Inc.
4 440 Hamilton Avenue 5 White Plains, New York 6 (914) 272-3360 7 wglew@entergy.com 8
9 On Behalf of the Nuclear Regulatory 10 Commission:
11 SHERWIN E. TURK, ESQ.
12 BRIAN HARRIS, ESQ.
13 Office of the General Counsel 14 Mail Stop - O-15 D21 15 U.S. Nuclear Regulatory Commission 16 Washington, D.C. 20555-0001 17 (301) 415-1533 (Turk) 18 (301) 415-1392 (Harris) 19 sherwin.turk@nrc.gov 20 brian.harris@nrc.gov 21 22 23 24 25 Neal R. Gross & Co., Inc.
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Page 2391 1 On Behalf of the State of New York:
2 JOHN J. SIPOS, ESQ.
3 Assistant Attorneys General 4 Office of the Attorney General of the 5 State of New York 6 The Capitol 7 State Street 8 Albany, New York 12224 9 (518) 402-2251 10 john.sipos@ag.ny.gov 11 and 12 KATHRYN LIBERATORE, ESQ.
13 LAURA E. HESLIN, ESQ.
14 Assistant Attorneys General 15 Office of the Attorney General of the 16 State of New York 17 120 Broadway, 26th Floor 18 New York, New York 10271 19 (212) 416-8482 (Liberatore) 20 (212) 416-6091 (Heslin) 21 kathyrn.liberatore@ag.ny.gov 22 laura.heslin@ag.ny.gov 23 24 25 Neal R. Gross & Co., Inc.
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Page 2392 1 On Behalf of Riverkeeper, Inc.:
2 PHILLIP MUSEGAAS, ESQ.
3 DEBORAH BRANCATO, ESQ.
4 Riverkeeper, Inc.
5 20 Secor Road 6 Ossining, New York 10562 7 (800) 21-RIVER 8 phillip@riverkeeper.org 9 dbrancato@riverkeeper.org 10 11 On Behalf of Hudson River Sloop 12 Clearwater, Inc.:
13 MANNA JO GREENE, Environmental Director 14 KARLA RAIMUNDI 15 RICHARD WEBSTER 16 Hudson River Sloop Clearwater, Inc.
17 724 Wolcott Avenue 18 Beacon, New York 12508 19 (845) 265-8080 20 mannajo@clearwater.org 21 karla@clearwater.org 22 23 24 25 Neal R. Gross & Co., Inc.
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Page 2393 1 TABLE OF CONTENTS 2 Exhibits: Mark Recd 3 ENT000589 2518 2519 4 ENT000590 2711 2711 5 Board 4 and 5 2549 6 New York State 446 2674 7 WITNESSES 8 Robert M. Aleksick Raphael Kuyler 9 Nelson Azevedo Ronald J. Tenpas 10 Dr. Nathan Bixler Jonathan M. Rund 11 Donald P. Cleary Dr. Stephen Sheppard 12 Alan Cox Dr. Tina Ghosh 13 Dr. Allen Hiser Dr. George Tolley 14 Donald Harrison C. William Reamer 15 Dr. Joram Hopenfeld 16 Jeffrey Horowitz 17 Joseph Jones 18 Dr. Francois J. Lemay 19 Ian D. Mew 20 Dr. Kevin O'Kula 21 Lori Potts 22 Jerry Riggs 23 Kathryn Sutton 24 Grant Teagarden 25 Matthew Yoder Neal R. Gross & Co., Inc.
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Page 2394 1 P R O C E E D I N G S 2 9:01 a.m.
3 JUDGE McDADE: Okay. We are on the 4 record. I want to go through some administrative 5 matters that came up over the weekend. The first had 6 to do with the availability of witnesses for 7 Clearwater-Contention EC3. There were witness 8 availability issues that were raised by Ms. Greene.
9 We received an email from her over the weekend.
10 Based on that email, we had agreed to 11 schedule EC3 to begin tomorrow at 2:00 p.m. Does that 12 meet the needs of Clearwater, Ms. Greene?
13 MS. GREENE: Your Honor, I mentioned that 14 we had not been able to reach Tony Papa, Anthony Papa.
15 We did get an email from him. He's coming later today 16 to observe. But as of now he says he is not available 17 tomorrow. I'm hoping we can prevail upon him, but 18 other than that we have confirmed with all of our 19 witnesses.
20 And I believe with Dolores Guardado who 21 will be arriving at 4:30 p.m. and because she only 22 speaks Spanish, Karla Raimundi has been in 23 communication with her. And we should double-check 24 with Ms. Raimundi.
25 But as far as I know the only outstanding Neal R. Gross & Co., Inc.
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Page 2395 1 is Anthony Papa. And I'm hoping -- We had encouraged 2 our witnesses to come for hearing observation so they 3 could see how the process works. And he is coming 4 today. He's coming this afternoon. And we will try 5 to do everything we can to get him to be present 6 tomorrow.
7 JUDGE McDADE: Did he explain what the 8 conflict was on Tuesday afternoon?
9 MS. GREENE: No, it was simply an email 10 and did not return phone calls.
11 JUDGE McDADE: And we will arrange and 12 have an interpreter here for Ms. -- Can you do the 13 pronouncement again?
14 MS. GREENE: Guardado.
15 JUDGE McDADE: Guardado. Thank you.
16 Okay. So that's the first thing. We will be starting 17 late tomorrow at 2:00 p.m. and then continue. Plan on 18 continuing with Clearwater EC3 until we finish on 19 Tuesday to accommodate the witnesses.
20 The next has to do with --
21 MR. WEBSTER: Judge, this is Richard 22 Webster for Clearwater. Can I ask a quick question?
23 Is the Board's intention to complete Clearwater EC3 on 24 Tuesday?
25 JUDGE McDADE: Yes.
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Page 2396 1 MR. WEBSTER: Thank you.
2 JUDGE McDADE: And if necessary we will go 3 later than our normal, since we're starting later, we 4 will go later than our normal schedule if necessary in 5 order to complete it.
6 MR. WEBSTER: Thank you very much.
7 JUDGE McDADE: With regard to New York 37, 8 do you have any further update with regard to the 9 availability of Mr. Bradford?
10 MR. SIPOS: Yes, we do, Your Honor. John 11 Sipos for the State of New York. Your Honors, the 12 State and I have been in touch with Mr. Bradford 13 throughout the weekend. And I spoke to him within the 14 last hour.
15 He is still in a great deal of pain. In 16 his words, it's "plenty painful." And he is still 17 either on the flat of his back or on his left side.
18 Those are the only positions he can be in without 19 pain.
20 It is extremely difficult for him to sit 21 up for more than a minute or two or to walk without a 22 walker for more than a few seconds. And it does 23 appear that while there has been some improvement 24 neither he or we believe he's in a condition to be 25 travel ready for tomorrow to come down for a hearing Neal R. Gross & Co., Inc.
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Page 2397 1 here on Wednesday.
2 JUDGE McDADE: Where is he physically 3 located right now?
4 MR. SIPOS: He is located near Manchester, 5 Vermont, up the hill in the Village of Peru.
6 JUDGE McDADE: We're talking about in any 7 event a four or five hour automobile ride.
8 MR. SIPOS: Yes, approximately. Yes. And 9 I don't even know that he can get far beyond his own 10 bedroom right now.
11 JUDGE McDADE: Well, let me explain a 12 little bit of my thoughts on this. First of all, if 13 Mr. Bradford is going to testify, it's really 14 necessary that he be in a condition to testify 15 meaningfully. And if he's either in a great deal of 16 pain or on a great deal of pain medication, it seems 17 like his ability to testify meaningfully would be 18 significantly compromised.
19 So given what you've described having him 20 get in a car with that condition for several hours and 21 then be in a position where he would have to sit in a 22 chair here, it seems extremely unlikely that the 23 option of having Mr. Bradford here to testify in 24 person on Wednesday is viable.
25 In my view, that leaves three basic Neal R. Gross & Co., Inc.
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Page 2398 1 options. Option No. 1 is to have him testify by 2 telephone. No. 2 is to proceed without him and just 3 simply forego his testimony. Or No. 3 would be to 4 move New York-37 to track 2.
5 It is not possible to hear New York-37 in 6 December. There are other witness availability issues 7 that we have been made aware of months ago that 8 preclude us from hearing it in December. So if we 9 don't hear it this week, then it has to go onto track 10 2.
11 What I would like the parties to do is (1) 12 to contemplate those options and I realize that the 13 first issue is for New York to suggest what it views 14 the priorities of those options are. It's sort of 15 like doing your own SAMA analysis on this. And then 16 (2) to also get input from the other parties as well 17 because this also impacts them if any of those options 18 are exercised.
19 So rather than have you express those 20 views right now, let me ask all of the parties to 21 think about it and after the luncheon break today, we 22 will come back and we will be able to explore the 23 possibilities a little bit further.
24 MR. SIPOS: Your Honor, may I just inquire 25 of Your Honors about a potential fourth possibility Neal R. Gross & Co., Inc.
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Page 2399 1 recognizing that there are multiple moving parts to 2 this contention amongst the parties. Would one option 3 be to continue with Contention 37 on Wednesday with 4 the witnesses who would be available and take up Mr.
5 Bradford on December 10th for whatever period of time 6 was necessary? I'm certainly hopeful for him and for 7 the contention that he would be better by then.
8 JUDGE McDADE: I don't know and we can 9 have that as a fourth possibility on the table for the 10 other parties to contemplate. One of the issues with 11 that is given the issues on witness availability on 12 the other parties, they may not have responsive 13 witnesses available who would be able to express their 14 views in contradiction of Mr. Bradford's. So they 15 could wind up being at a significant disadvantage if 16 he were to testify and then they were not to provide 17 testimony presenting their positions.
18 But it is something to contemplate. And 19 when we come back after lunch we can ask the other 20 parties what their view is of that. I certainly would 21 not be predisposed to starting 37 on Wednesday and 22 then continuing it until track 2, dividing it by 23 several months on the taking of the testimony. It 24 seems to me not to be the best option.
25 And I think we would be better served just Neal R. Gross & Co., Inc.
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Page 2400 1 simply if that were the option of hearing Mr. Bradford 2 on track 2 of hearing the whole contention together on 3 track 2 rather than to have it bifurcated by so many 4 months. The dates for track 2 are still dependent on 5 the publication of various documents. We can't even 6 given a definite date for track 2.
7 MR. SIPOS: Thank you, Your Honor.
8 JUDGE WARDWELL: Point of clarification.
9 This is Judge Wardwell. When you said the 10th, do 10 you mean any time during the week of the 10th? Or is 11 there something magical about the 10th itself?
12 MR. SIPOS: Yes, there is something 13 magical about the date of the 10th. Mr. Bradford is 14 scheduled to speak at a conference I believe in Hawaii 15 on Tuesday, Wednesday and Thursday of that week. So 16 that's why I was suggesting the 10th, Your Honor.
17 JUDGE McDADE: Okay. You're not 18 suggesting having the hearing there instead of 19 Tarrytown.
20 MR. SIPOS: Your Honor, we would be open 21 to any reasonable accommodation.
22 JUDGE WARDWELL: At the State's expense, 23 of course.
24 MR. SIPOS: We could discuss that, Your 25 Honor.
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Page 2401 1 JUDGE McDADE: The next thing, we received 2 a letter, a copy of a letter, dated October 21st that 3 discusses various matters. It appears that the 4 parties have received a cc on it. And it basically 5 indicates that the State is ready to proceed on 16 and 6 17, but does raise one issue with regard to discovery.
7 The State requests that Entergy be directed to 8 disclose any additional relevant and nondisclosed 9 material.
10 Document 900422 as identified on Entergy's 11 log reveals the existence of at least one related 12 document. And this is listed as Sheppard-sqrt.xls, an 13 Excel spreadsheet that Dr. Tolley apparently created.
14 I realize Entergy received this just 15 yesterday afternoon or evening just as we did.
16 MR. SIPOS: Yesterday evening, Your Honor.
17 JUDGE McDADE: Have you been able to 18 identify whether or not such a document exists?
19 MR. BESSETTE: Your Honor, I would like to 20 have Ron Tenpas, our colleagues, address that issue.
21 MR. TENPAS: Thank you. Your Honor, Ron 22 Tenpas for Entergy. We were not consulted about the 23 letter before we received it. We believe that 24 document or its equivalent perhaps on another by a 25 somewhat different name was disclosed in the early Neal R. Gross & Co., Inc.
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Page 2402 1 April time frame. It represents a data collection 2 that analyses were run on 3 Nevertheless, we believe we have also 4 found it again and we are prepared to provide it even 5 this morning in electronic format a second time if 6 that would be useful.
7 JUDGE McDADE: Please do so and then we 8 will decide as we proceed whether or not it's 9 necessary to have any delay whether New York reviews 10 it or not. Thank you.
11 Are there any other administrative matters 12 that need to be taken up before we get started with 13 the taking of testimony this morning?
14 MR. HARRIS: Your Honor, this is Brian 15 Harris for the staff. As we discussed before the 16 break last week, Mr. Harrison is not available now.
17 But we're still prepared to go forward with New York-18 16.
19 JUDGE McDADE: Okay. Thank you.
20 MS. SUTTON: Kathryn Sutton for the 21 Applicant, Your Honor. Also just by way of reminder, 22 Dr. O'Kula must leave by 1:00 p.m. today and he's an 23 expert on this New York-16 panel.
24 JUDGE McDADE: Thank you, Ms. Sutton.
25 We have some old faces and we have some Neal R. Gross & Co., Inc.
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Page 2403 1 new faces here. Before we get started, a couple of 2 preliminaries. First of all, if you don't understand 3 a question, don't be embarrassed to say so. Don't try 4 to answer a question if you don't understand what it 5 is because it's unlikely that the answer will be 6 responsive. And it may just confuse us as well as 7 you.
8 Secondly, if for any reason during the 9 course of taking of testimony, you feel it is 10 necessary to take a break, don't just sit there in 11 silence and suffer. Either try to get our attention 12 and bring it to our attention. Or alternatively if 13 for some reason we are not particularly observant, try 14 to get the attention of your counsel who won't be the 15 least bit shy about speaking up.
16 For those witnesses who haven't been here 17 before, the procedure today is basically one of us 18 asking you questions. We are going to direct our 19 questions to you. You are going to direct your 20 answers to us.
21 You're not going to be directing your 22 answers to the other witnesses even though you may 23 agree or disagree with the other witnesses. It's not 24 going to be a debate back and forth between you. It's 25 going to be a dialogue between you and us.
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Page 2404 1 And we, of course, will have an 2 opportunity to go back and ask witnesses who have a 3 different point of view to comment on the testimony 4 that they've heard. And we'll probably then give you 5 an opportunity to respond as well.
6 In all probability or in all possibility 7 after the Board has finished asking questions, there 8 will be an opportunity perhaps for counsel to ask 9 questions as well. But for right now it's just going 10 to be a dialogue between you and us.
11 Okay. Before we get started, some of you 12 were sworn last week. But we're starting all over 13 again. So could you please raise your right hand. Do 14 you swear that the evidence you will give in this 15 hearing will be the truth, the whole truth and nothing 16 but the truth so help you God?
17 (Chorus of I dos.)
18 JUDGE McDADE: Thank you. Okay. We're 19 starting on New York Contention-16. And it's been our 20 practice in this hearing to give a little bit of 21 summary of the contention as least the Board 22 understand it.
23 This is a contention relating to the SAMA 24 analysis that the Environmental Impact Statement 25 requires that a SAMA analysis be done; that the Neal R. Gross & Co., Inc.
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Page 2405 1 population within the vicinity of the facility at the 2 Indian Point facility is an input into that SAMA; that 3 if the Environmental Impact Statement significantly 4 understated the projected population in the vicinity 5 of Indian Point during the proposed period of extended 6 operations that could potentially have an impact on 7 the SAMA; and it is alleged by New York through their 8 expert the population is understated because it fails 9 to account for two things, primarily the census under 10 count and the consideration of consumer population.
11 The allegation is the SAMA analysis is fraud because 12 by underestimating the population it underestimates 13 the cost of the severe accident.
14 What we need to understand and what we 15 need to decide is first of all whether or not the 16 population is understated and, if so, by how much.
17 And finally if it is understated, does it make any 18 difference with regard to the SAMA analysis that were 19 conducted or the variance material of consequence.
20 That said, let's get started. Dr.
21 Sheppard.
22 DR. SHEPPARD: Yes, sir.
23 JUDGE McDADE: Good morning, Doctor.
24 DR. SHEPPARD: Good morning, Your Honor.
25 JUDGE McDADE: Your degrees are in Neal R. Gross & Co., Inc.
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Page 2406 1 economics, your areas of study, land use, urban 2 economics and environmental economics. You've worked 3 extensively in population modeling.
4 Your purpose in testifying here as I 5 understand it is primarily to develop an accurate 6 population model. Is that correct?
7 DR. SHEPPARD: That's correct.
8 JUDGE McDADE: Okay. And am I correct 9 that your hypothesis is not that you have any 10 expertise with regard to the conducting of SAMA 11 analysis, but rather if population is a critical input 12 parameter in a SAMA analysis, then if the population 13 is incorrect, that the SAMA analysis would necessarily 14 be flawed.
15 DR. SHEPPARD: Yes, Your Honor.
16 JUDGE McDADE: Okay. And you've concluded 17 the population is understated.
18 DR. SHEPPARD: That is my conclusion.
19 JUDGE McDADE: Okay. Let's get started, 20 first of all, with the census undercount. Can you 21 describe just very briefly why you believe the 22 permanent population of the area is underestimated?
23 DR. SHEPPARD: Yes, very briefly, Your 24 Honor. The phenomenon of census undercount has been 25 widely studied by demographers and by the Census Neal R. Gross & Co., Inc.
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Page 2407 1 Bureau itself. It's generally accepted by 2 demographers and by economists and other social 3 scientists that there are good reasons why census 4 undercount occurs, particularly amongst minority 5 populations who may for one reason or another fear 6 adverse consequences if they are counted as part of 7 the census population and therefore endeavor to not be 8 counted.
9 There have been studies of the magnitude 10 of undercount that range in magnitude. And I have in 11 my analysis taken a middle of the road. I wouldn't 12 call it a census estimate. I would call it an average 13 of the range of estimates. I've applied that strictly 14 to the minority population that's within the 50 mile 15 zone surrounding the location of the Indian Point 16 Energy Center.
17 Applying that leads me to estimate an 18 amount that would be undercounted. And it's 19 consistent with --
20 JUDGE McDADE: Do you agree that the 2000 21 Census is an appropriate starting point for our 22 analysis?
23 DR. SHEPPARD: It was the appropriate 24 starting point for when the analysis was undertaken.
25 JUDGE McDADE: You can't submit it.
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Page 2408 1 DR. SHEPPARD: Can't submit it, yes.
2 JUDGE McDADE: Okay. And I hope I don't 3 mispronounce this. Dr. Tall? Let me just ask from 4 the Entergy or staff standpoints. Do you agree that 5 the 2000 population is an appropriate starting point?
6 MR. TEAGARDEN: Grant Teagarden for the 7 Applicant. Yes, Your Honor.
8 MR. JONES: Joe Jones for the NRC. Yes, 9 Your Honor.
10 JUDGE McDADE: Now once we get started 11 with that, in your initial analysis, Dr. Sheppard, you 12 indicated that the population undercount was sort of 13 a generalized phenomenon. In the rebuttal testimony, 14 you indicated and went into more detail with regard to 15 the undercount specifying the differences between 16 urban populations, minority populations and the 17 population of -- I believe the characterization was 18 non-Hispanic Whites. Correct?
19 DR. SHEPPARD: Yes, Your Honor.
20 JUDGE McDADE: Okay. Now in Entergy 21 000016, the A.C.E. Revision II, they indicated that 22 most recently the Census Bureau has indicated that 23 generally there is not an undercount but an overcount.
24 Does that document and that analysis impact your 25 analysis? If so, how? And, if not, why not?
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Page 2409 1 DR. SHEPPARD: That document, Your Honor, 2 is something that I considered. The A.C.E. process is 3 an internal essentially research process within the 4 Census Bureau in which they continuously endeavor to 5 evaluate the accuracy of the census, to explore 6 different methodologies for evaluating the magnitude 7 of undercount, if any, or any source of inaccuracy.
8 And in addition to that document there is published 9 research by demographers.
10 I have considered that document. But I am 11 comfortable with the estimate of undercount I have.
12 That document doesn't supercede previous research or 13 supplant previous research. It does provide 14 interesting information.
15 Most social scientists however believe 16 that there is undercount of minority populations and 17 that is the basis of my undercount adjustment.
18 JUDGE McDADE: Okay. To Entergy first and 19 then to the NRC staff, that document indicates that 20 while there is a general overcount that the undercount 21 among blacks and Hispanics I believe is approximately 22 five percent and that within the 50 mile radius of 23 Indian Point there's about a 42 percent minority 24 population.
25 Doesn't that support Dr. Sheppard's Neal R. Gross & Co., Inc.
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Page 2410 1 analysis that there is a significant material 2 undercount in the population within the area 3 surrounding Indian Point?
4 MR. RIGGS: Your Honor, this is Jerry 5 Riggs for the Applicant. We come to the A.C.E. report 6 and we look at the table at the values that pertain to 7 it. And we evaluate it with --
8 JUDGE McDADE: This is Entergy 000016. Do 9 you want to call the document up? Is there something 10 specific you want to put us to?
11 MR. RIGGS: Sure, Your Honor. Entergy 12 000016, let's look at Table 1 in the introduction on 13 page xii. This is the table right there.
14 Okay. In this document, you see a 15 breakdown that shows the 0.49 percent overcount for 16 the total population. In the A.C.E. II column, what 17 we see here is that minority population is broken down 18 and it shows that there is nothing in there that 19 supports a three percent population undercount for 20 minorities.
21 JUDGE McDADE: Okay. Dr. Sheppard, where 22 do you come to the conclusion that there's a 23 significant undercount for blacks and Hispanics?
24 DR. SHEPPARD: Your Honor, this particular 25 report, A.C.E. Revision II, explores one possible Neal R. Gross & Co., Inc.
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Page 2411 1 methodology. The basic methodologies for estimating 2 undercount are to return to the site and do survey 3 sampling to endeavor with greater effort to identify 4 all the population or to employ demographic analysis 5 in which one compares births, deaths, in and out 6 migration within small subareas to try to identify the 7 magnitude of the undercount.
8 These different methodologies lead to 9 different conclusions about the magnitude. This 10 particular report employs a methodology which tends to 11 result in somewhat smaller estimates of the 12 undercount.
13 This report does verify that there is an 14 undercount of minority population. And as you noted 15 in your previous question, the minority population 16 within 50 miles from Indian Point is nearly double the 17 national average. So it's particularly important in 18 this context to take a count of the phenomenon.
19 Other studies that have employed other 20 methodologies estimate higher levels of undercount for 21 minority populations. And that's why I included a 22 midrange estimate of three percent.
23 JUDGE McDADE: Based on your experience 24 with population projection, what is the basis for 25 undercount among minorities and in urban areas?
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Page 2412 1 DR. SHEPPARD: The basis for undercount is 2 that these populations may have a higher fraction of 3 persons who are in some legal dispute or who may have 4 outstanding warrants or who may be immigrants to the 5 country or recent migrants and they simply would be 6 nervous about being counted. And so they undertake 7 even though the Census Bureau endeavors to assure 8 people that no adverse consequences will happen as a 9 result of being counted.
10 They endeavor to avoid being counted.
11 They do not return the forms. When forms aren't 12 returned, the Census Bureau sends enumerators out to 13 the addresses to try to figure out if people are 14 living there and how many. And they simply do 15 everything they can to avoid being counted.
16 JUDGE McDADE: Are you aware of any 17 specific analysis relating to undocumented aliens?
18 DR. SHEPPARD: There has been some 19 discussion of that. There have been a variety of 20 press accounts of that. Some of that is hypothesis 21 that hasn't been carefully tested.
22 JUDGE McDADE: Does Entergy contest the 23 hypothesis that the minority population within the 50 24 mile radius is approximately 40 percent?
25 MR. RIGGS: No, Your Honor. Well, when I Neal R. Gross & Co., Inc.
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Page 2413 1 looked at the data, Dr. Sheppard's values were on par 2 but slightly inflated.
3 JUDGE McDADE: Okay. But basically that's 4 what the minority population would be.
5 MR. RIGGS: I would say so, yes.
6 JUDGE McDADE: And certainly in the New 7 York City area, it's conceitedly highly urban.
8 MR. RIGGS: The New York City area is 9 highly urban in the southern area of the IPEC region.
10 JUDGE McDADE: Okay. Dr. Sheppard, one of 11 the things that Entergy and the staff point out is 12 that from that A.C.E. report, Entergy 000016, a set of 13 211 places that have a population of 100,000 or more, 14 that 78 percent of them fell between one percent over 15 and one percent under in the population estimate.
16 Does this impact your analysis that urban areas are 17 underreported?
18 DR. SHEPPARD: The underreporting or 19 undercount phenomenon really depends upon the type of 20 population, the specific neighborhood and the ethnic 21 composition of the neighborhood. And as I said, 22 different methodologies do lead to different levels of 23 estimates of undercount.
24 I think it's important to be aware of the 25 range of estimates in choosing an appropriate Neal R. Gross & Co., Inc.
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Page 2414 1 adjustment to make for undercount as well as to be 2 aware of the level of urban population and minority 3 population.
4 In short, I think it's important to be 5 aware of that. But the fact that some methodologies 6 applied to the locations lead to different estimates 7 doesn't alter my conclusion that undercount is a real 8 phenomenon and that a principle of conservatism 9 applied in attaining population estimates for the 10 Indian Point region would warrant the application of 11 an adjustment.
12 JUDGE McDADE: Okay. You anticipate that 13 the level of undercount in say mid Massachusetts would 14 be different than the undercount in Brooklyn.
15 DR. SHEPPARD: Yes, sir. In large part 16 not just because of the difference in urban structure 17 and population density. But most importantly because 18 of the difference ethnic composition of those two 19 communities.
20 JUDGE McDADE: You submitted New York 21 000213. In that at page 22, you had a discussion that 22 there were 280,000 addresses added in New York City 23 out of the four million that were added nationwide.
24 Can you explain to us the significance of that data in 25 your analysis?
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Page 2415 1 DR. SHEPPARD: I'm sorry, Your Honor. Can 2 you tell me again the exhibit number and let me draw 3 my attention to it? Or perhaps we could call it up on 4 the screen.
5 JUDGE McDADE: Yes, I believe it was New 6 York Exhibit 000213 at page 22.
7 DR. SHEPPARD: Yes. So, Your Honor, this 8 exhibit, New York State 000213, is the final report of 9 the U.S. Census Monitoring Board. So this is an 10 internal process within the Census to evaluate the 11 accuracy of the census and the material on page 22 --
12 I'm just trying to find -- Great.
13 JUDGE McDADE: The paragraph starting "It 14 is tempting to believe..." Mr. Wilkie, could you 15 highlight that?
16 DR. SHEPPARD: Okay. Yes, I have that.
17 The improvement is due to the local update of census 18 addresses. The Census Bureau maintains that a 19 database of all addresses in the United States and 20 they endeavor to update that and adjust that over 21 time.
22 JUDGE McDADE: Okay.
23 DR. SHEPPARD: And New York City 24 contributed -- the sentence as it says there, yes.
25 New addressed were added for New York City.
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Page 2416 1 JUDGE McDADE: Okay. What is the 2 significance of that? Is that fact that you had 3 280,000 addresses for New York City an indicator that 4 had been undercount prior to that? Or how exactly is 5 this data significant to what we're discussing here 6 today?
7 DR. SHEPPARD: I see. I think that 8 observation is significant in that I'm not sure it's 9 of direct relevance for the undercount because even if 10 the addresses are not included, the Census Bureau 11 tries to reach out to every structure. They try to 12 reach all elements of the population.
13 But they miss some. If there are new 14 addressed added, it is indicative of the fact that 15 they're trying to update their addresses. Those will 16 be new addresses to which census survey forms are 17 mailed.
18 JUDGE McDADE: You indicated that 19 according to your estimate you anticipated a three 20 percent undercount for minorities which would then 21 equal a 1.18 percent total for the general population 22 leading to an undercount of 231,000 plus people. Can 23 you just walk us through very quickly how you came up, 24 how you derived the three percent undercount for 25 minorities?
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Page 2417 1 DR. SHEPPARD: Sure. Your Honor, there 2 are several reports that have estimated -- There are 3 some reports that have been in the published 4 literature and in internal Census Bureau documents 5 that have attempted to simply estimate an overall 6 undercount for the census without looking at specific 7 minority neighborhoods or minority populations.
8 But a large part of the -- Because it's 9 been understood that the undercount phenomenon applied 10 differently in minority neighborhoods, much of the 11 research has focused on estimating the different 12 levels of undercount amongst different minority 13 populations.
14 I reviewed the literature both in internal 15 Census Bureau documents and in the published economics 16 and demographic literature, established a range of 17 estimated undercounts and averaged that range rounding 18 to the nearest percent of the average of estimated 19 undercounts which came to three percent. The sources 20 that I reviewed are cited in my report.
21 JUDGE McDADE: From the staff, what is 22 wrong with that analysis in your view? Mr. Jones?
23 MR. JONES: Yes, Your Honor. What is 24 wrong with the analysis is that we are trying to add 25 what I would describe as an artificial confidence to Neal R. Gross & Co., Inc.
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Page 2418 1 the precision of this data. We are down to a three 2 percent undercount that results in 1.1 percent 3 composite undercount. And there are fluctuations in 4 the population on a daily basis such that when we 5 start talking about values as low as one percent and 6 I think today we'll talk about fractions of one that 7 was sent in of considerable amount that we're just 8 adding an artificial level of confidence to the data 9 that we're looking at.
10 JUDGE McDADE: We're going to be getting 11 into the significance of this data later this morning.
12 But my question at this point is do you conceive that 13 Dr. Sheppard's analysis that there is in all 14 probability an undercount of the permanent population 15 of approximately 1.18 percent is valid.
16 MR. JONES: I agree that approximately one 17 percent number is valid.
18 JUDGE McDADE: Okay. Does Entergy agree 19 with that as well?
20 MR. RIGGS: Your Honor, this is Jerry 21 Riggs for the Applicant. And absolutely not, sir.
22 JUDGE McDADE: Okay. Why not?
23 MR. RIGGS: Okay. If we go to this very 24 same document and we turn to page six to look at the 25 Bureau's A.C.E.'s results.
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Page 2419 1 JUDGE McDADE: Okay. And by the same 2 document, you're talking about New York 000213.
3 MR. RIGGS: That's correct, sir.
4 JUDGE McDADE: Okay. And we're going 5 where on it?
6 MR. RIGGS: There's a -- Where it says 7 "Bureau announces A.C.E. results" about the middle of 8 the page. From here we can read the reports of 9 Congress relied on the A.C.E. I report, essentially 10 the March 1, 2001 version of the A.C.E. report. Okay.
11 JUDGE McDADE: And just so we can find 12 this later, this is on page 11 of 179. Please 13 continue.
14 MR. RIGGS: Okay. Then if we turn back to 15 the A.C.E. II report that's Entergy Exhibit 000016.
16 Turn to the next page. That's the wrong spot 17 actually. Let's see. I'm looking for page 1 of the 18 introduction. Okay. The first paragraph. And third 19 sentence.
20 The sentence reads "The March 2001 A.C.E.
21 estimates of the 2000 coverage which is the reference 22 to the report used by the Report to Congress estimates 23 2000 coverage were determined to be unacceptable 24 because the A.C.E. failed to measure a significant 25 number of erroneous census enumerations and thus Neal R. Gross & Co., Inc.
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Page 2420 1 overstated the net undercount." From that, we know 2 that we can't rely on the A.C.E. I report based on the 3 Census Bureau's own analysis.
4 All right. In the A.C.E. II report in the 5 introduction, we learn about two distinction types of 6 error. One of them is undercount and one of them is 7 overcount. Undercount is a standard occurrence in 8 census. That's when you omit people for whatever 9 reason.
10 The Census Bureau has historically tried 11 to mitigate that effort by providing estimates to 12 counter the undercount effect. And that's how we get 13 the overcount.
14 Based on that, we know we have to rely on 15 A.C.E. II results. So if we go back to the table and 16 we calculate. We use percentages of minorities and we 17 weight them accordingly.
18 JUDGE McDADE: Okay. And when we say go 19 back to the table you're talking about Table 1.
20 MR. RIGGS: That's correct, Your Honor.
21 JUDGE McDADE: And Table 1 on Entergy 22 Exhibit 000016, correct?
23 MR. RIGGS: Correct.
24 JUDGE McDADE: Okay.
25 MR. RIGGS: Now if we take the weighted Neal R. Gross & Co., Inc.
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Page 2421 1 average of those values with specifically the minority 2 percentages in the IPEC region, we still can derive an 3 overcount for the total population.
4 JUDGE KENNEDY: I'm sorry. This is Judge 5 Kennedy. You're weighting these percentages by?
6 MR. RIGGS: By the percentage of 7 minorities in the region. The percentage of those 8 race categories in the region.
9 JUDGE KENNEDY: In the 50 mile region.
10 MR. RIGGS: That's correct, Your Honor.
11 You actually use Dr. Sheppard's values that he quoted 12 and you still come up with an overcount.
13 JUDGE KENNEDY: Okay. Can you explain?
14 You said "weighted." How are they weighted?
15 MR. RIGGS: Well, if you look on Table 1 16 and you look at the American Indians on reservation, 17 it shows an overcount of 0.8 percent. In the IPEC 18 region, there's no Indian reservations. So the zero 19 percent of that population in the region. You 20 multiply that by its percentage which is zero and it 21 gets extracted.
22 The non-Hispanic White if we correlate 23 that with the nonminority population which is 100 24 minus the 44 percent in Dr. Sheppard's estimates. Was 25 it 43 or 42? Anyway, if we take that percentage and Neal R. Gross & Co., Inc.
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Page 2422 1 multiply it by the overcount there and we sum all 2 those averages, we still end up with an overcount.
3 JUDGE McDADE: Dr. Sheppard, I realize or 4 at least I believed you testified that this report was 5 just one of the factors that you considered. But just 6 focusing on this particular report, can you address 7 the comments that were just made?
8 DR. SHEPPARD: I believe I can, Your 9 Honor. First off, obviously for minority groups that 10 are not present in the area, the concern about the 11 under/over count would not be relevant. This table 12 does in fact show that for the largest minority groups 13 that are within the 50 mile area surrounding Indian 14 Point that there is estimated undercount. And this 15 estimated undercount is obtained even using a 16 methodology that in general tends to produce extremely 17 conservative estimates of the magnitude of the 18 undercount.
19 I'm applying this undercount only to 20 minority populations. So this would be the kind of 21 datapoint I would consider. And I would look at this 22 and say, "Well, this suggests that at a minimum there 23 is 1.8 percent undercount for blacks and 0.7 percent 24 undercount for Hispanics." And continuing in that 25 manner and averaging and applying it only to the Neal R. Gross & Co., Inc.
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Page 2423 1 minority population, you do come up with an 2 undercount.
3 The point is not to -- Mr. Riggs when he 4 refers to the net undercount, that's subtracting away 5 from the undercount of the minority populations for a 6 hypothetical overcount of predominantly white 7 population. And there is controversy amongst 8 demographers, economists and sociologists about 9 whether such an overcount could possibly be true.
10 In the case of an undercount of minority 11 populations, there's a well-established and quite 12 easily understandable incentive at the individual 13 level, mistaken though it may be, the incentive to try 14 to avoid being counted. It's not clear what 15 incentive, if any, someone has to endeavor to be 16 overcounted. So many demographers feel that these 17 estimates of overcount are probably artifacts of the 18 estimation methodology.
19 I think it's safer to focus on the 20 minority populations where we believe the phenomenon 21 applies, to use middle of the road estimates of the 22 magnitude of the undercount and to estimate an 23 adjustment to factor from that.
24 JUDGE McDADE: Okay. Thank you.
25 DR. SHEPPARD: Yes.
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Page 2424 1 JUDGE McDADE: Let me ask. The 2 Environmental Impact Statement assumes that the 3 populations are evenly distributed between that 4 portion of a particular county that is within the 50 5 mile radius and those portions that are outside of it.
6 Is that -- let me go first to the staff and then to 7 Entergy -- a reasonable estimate?
8 In other words, you look, for example, at 9 Suffolk County, Long Island. Wouldn't you anticipate 10 that the extreme western portion of Suffolk County 11 that is within the 50 mile radius would have a 12 significantly higher population density then the far 13 eastern portions of Suffolk County? The same being 14 true for say New Haven, Connecticut region. The 15 Litchfield, Connecticut region.
16 Let me ask first of all to the staff. Is 17 that assumption of even distribution of populations a 18 valid one? And, if not, wouldn't that lead to a 19 significant undercount in the population just in 20 Suffolk County alone?
21 MR. JONES: Your Honor, I didn't separate 22 the detail to that level. So I can't answer that 23 question.
24 JUDGE McDADE: Okay. Entergy.
25 MR. RIGGS: Yes, Your Honor. This is Neal R. Gross & Co., Inc.
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Page 2425 1 Jerry Riggs for the Applicant. In this, I'd like to 2 turn to pages 25 and 26 of Entergy Exhibit --
3 JUDGE WARDWELL: Before we go, this is 4 Judge Wardwell. Just to fix a point that Dr. Sheppard 5 said, Mr. Riggs, I want to verify on Table 1 here that 6 we're looking at that that's how you did arrive at 7 your net overcount is by subtracting off -- just 8 summing that column if you would under the first part 9 of Race-Hispanic Origin Domain.
10 MR. RIGGS: Yes. I used an average based 11 on the contribution, a weighted average, of each in 12 the region.
13 JUDGE WARDWELL: So the non-Hispanic White 14 would compensate for some of the non-Hispanic Black in 15 that fashion. Is that correct?
16 MR. RIGGS: Your Honor, that's correct.
17 JUDGE WARDWELL: Thank you.
18 DR. BIXLER: Your Honor, this is Nathan 19 Bixler. I'd like to make a point that I think is 20 important to this discussion. When the population is 21 evaluated using SECPOP which I think was the starting 22 point for the calculations of the population here, the 23 population data come in at the census block level.
24 They don't come in at the county level.
25 So the calculation determines if a census Neal R. Gross & Co., Inc.
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Page 2426 1 block is within a grid element. And if it is, it 2 assigns that population to the grid element. So the 3 resolution of the input data that comes into the 4 population data that goes into the MACCS2 calculation 5 is at much higher resolution than a county level kind 6 of information.
7 JUDGE McDADE: So it's your testimony that 8 the EIS does not assume population as evenly 9 distributed within the counties.
10 DR. BIXLER: That's correct. It should 11 not. I'm confident that it does not.
12 JUDGE McDADE: Dr. Sheppard, do you care 13 to respond?
14 DR. SHEPPARD: I wonder if you could give 15 me a moment, Your Honor, because I don't believe that 16 that accords with my memory of the document that 17 reports on how the population estimates were obtained.
18 But I just wonder if you could give me a moment to 19 just consult my references here.
20 MR. TEAGARDEN: Your Honor, Grant 21 Teagarden for the Applicant. If I may augment Mr.
22 Riggs' statements in regards to Table 1.
23 JUDGE McDADE: Why don't you hold on for 24 a second because I'm sure Dr. Sheppard isn't going to 25 be able to find his reference and listen to you at the Neal R. Gross & Co., Inc.
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Page 2427 1 same time. Just hold for a second.
2 DR. SHEPPARD: One of the difficulties of 3 these complicated matters, Your Honor.
4 MS. LIBERATORE: Your Honor, Kathryn 5 Liberatore for the State of New York. Maybe it would 6 just be helpful to clarify what Entergy did in terms 7 of the counties versus what staff and/or Sandia did in 8 the FSEIS. I believe there may be a difference. But 9 that may help clarify this discussion.
10 JUDGE McDADE: Okay. Thank you. But 11 let's wait and let Dr. Sheppard respond if he can.
12 DR. SHEPPARD: Your Honor, I'm looking for 13 the part. But in the original report I believe it was 14 this. I wonder if New York State counsel can assist 15 me in identifying the report that presents the 16 original population estimates that were inputs for the 17 SAMA analysis.
18 MS. LIBERATORE: Kathryn Liberatore for 19 the State.
20 JUDGE McDADE: 000209.
21 MS. LIBERATORE: I believe that may be New 22 York State 000211, the Enercon site specific MACCS2 23 input data for Indian Point Entergy Center at page 2-24 1.
25 DR. SHEPPARD: Yes, this is the report.
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Page 2428 1 Perhaps we can just scroll up and just review the text 2 because I believe there was something. County level, 3 right. For the population projections, county level 4 population were obtained. So the projections and 5 population estimates appear not to have been done at 6 the block or block group level. But I believe they 7 made use of county level data.
8 It may well be -- and I'm not an expert on 9 the operation of the MACCS2 code -- the MACCS2 code 10 has provisions for taking input of block or block 11 group level data.
12 But I believe the actual estimates of 13 population and this would be particularly relevant for 14 example in the case that you cited, Your Honor, where 15 only a part of a county is included within the 50 mile 16 zone from Indian Point. Essentially if 35 percent of 17 the land area of the county is included, the 18 population estimates took 35 percent of that county's 19 population as opposed to taking the actual block or 20 block groups that lie within.
21 JUDGE McDADE: Okay. From Entergy's 22 standpoint, again focusing for the moment on Exhibit 23 000211, did Entergy in its SAMA analysis presume the 24 population within counties to be evenly distributed or 25 did it break it down further than that?
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Page 2429 1 MR. RIGGS: Your Honor, this is Jerry 2 Riggs for the Applicant. When we do the population 3 input, we deal with three distinct types of population 4 data input. One of them is Census 2000 in the block 5 level. The next is population projection information 6 on the county level from the states. And then finally 7 visitor information from the state's tourism 8 departments on the state level. Sometimes they're 9 broken down a little better than that, but those are 10 the resolutions.
11 For the Census 2000, it's provided in 12 block data. And then we have to convert it to the 13 sector geography. And what that means is that we have 14 to take the blocks and if they're bisected by sector, 15 we have to add area weighting function to get that 16 county or that block information into the sectors.
17 Then we sum up the sectors and finally produce a 18 sector population value for 2000 data.
19 JUDGE McDADE: Okay. The language here, 20 Section 2.1 going down five lines, it said, 21 "Population estimates for Connecticut were provided by 22 municipalities and converted to county to maintain 23 consistency." Doesn't that imply that for all of the 24 states other than Connecticut the data came in by 25 county?
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Page 2430 1 MR. RIGGS: What that is talking about is 2 the population projection information, not the base 3 2000 population from the census. If you scroll down 4 a bit and look at the table, what you see there is the 5 county population projection information.
6 Its function is to project population in 7 time and you see that the time variable on top goes 8 from 2000 to 2035. Typically, the states provide at 9 the county level. It's a different dataset than the 10 Census 2000 data.
11 JUDGE McDADE: Okay. So we're basically 12 starting from two different starting points here.
13 MR. RIGGS: The problem is we have to use 14 2000 data. Then we also have to combine that with 15 projection information to get the appropriate inputs 16 for the SAMA model. So what we have to do is find a 17 common year which they all have 2000 and we have to 18 convert the geographies from whatever they are to 19 sector geographies.
20 In the case of census, we're converting 21 from small, tiny block areas into sectors by summing 22 them up and then taking their partials and summing 23 those up. And then we're also using the projection 24 information in county form and area weighting them 25 into the sectors as well. So we're going down in Neal R. Gross & Co., Inc.
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Page 2431 1 geography from the projection information and up in 2 geography from the census block information.
3 JUDGE McDADE: Basically, after this long 4 discussion, your testimony is consistent with Dr.
5 Bixler than rather than using an assumed population 6 that's evenly distributed within counties. You didn't 7 just look at the area in the county and the 8 population. You narrowed it down more than that to 9 sectors.
10 MR. RIGGS: That's correct. We're trying 11 to create a high resolution dataset as high as we can 12 go.
13 JUDGE McDADE: Okay. While we're 14 basically in the same area, we're talking about in 15 your projections you could use either a linear 16 progression or a polynomial regression. Can you 17 explain what a polynomial regression is and why you 18 used it for New York, Westchester and Rockland 19 Counties?
20 MR. RIGGS: Yes, Your Honor. What we're 21 trying to do is we're trying to get a best fit, a best 22 mathematical fit, for the data that the states have 23 presented. And if you look at those particular 24 counties, Rockland and Westchester peak at 2010 25 whereas New York peaks at 2020.
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Page 2432 1 And in their datasets they show a decrease 2 of population after those years. And in order to 3 obtain the best possible estimate that corresponds 4 directly with what the state is saying, we used a 5 second order of polynomial regression to fit the 6 points to align that we can then extend out to 2035.
7 JUDGE McDADE: Can you define that term 8 for me, polynomial regression?
9 MR. RIGGS: It's a mathematical method 10 used to produce a line equation based on a set of data 11 points.
12 JUDGE McDADE: That didn't help me a whole 13 lot.
14 MR. RIGGS: Okay.
15 JUDGE McDADE: Is it more than just simply 16 saying that look for those three counties it's 17 anticipated that while the population would increase 18 for a period of time it would then start to decrease?
19 So if in order to look at the population in 2035, you 20 would have to look at it going up and then coming back 21 down again.
22 MR. RIGGS: I'm not sure I follow that.
23 So what we see in the data is we see a definite peak 24 in the population according to what the state has 25 provided to try to make a smooth fit of line on top of Neal R. Gross & Co., Inc.
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Page 2433 1 those datapoints using math.
2 And because the state -- Excuse me.
3 Because the states don't provide information out to 4 the date we needed, we needed to fit that line to 5 those datapoints and extend it out. And that's what 6 we did mathematically with the second order polynomial 7 regression.
8 JUDGE McDADE: But based on the 9 presumption that the population would be decreasing as 10 we approach 2035 in those three counties.
11 MR. RIGGS: In those three counties, yes.
12 But overall in the 50 mile region the population is 13 showing an increase.
14 JUDGE McDADE: No, I understand.
15 MR. RIGGS: Okay.
16 JUDGE McDADE: But there were only three 17 counties that you used the polynomial regression and 18 I'm trying to figure out what the difference is 19 between a polynomial regression and just any other 20 kind of regression.
21 MR. RIGGS: Okay. Well, in the other 22 counties, we've got a straight line. Essentially it's 23 a straight line or linear regression equation that we 24 use because the data fit that.
25 JUDGE McDADE: There it's a progression.
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Page 2434 1 Here it's a regression.
2 MR. RIGGS: I see what you're saying. The 3 regression is to fit the closeness of the line to the 4 point, not necessarily a decrease or an increase.
5 Right. It's the fitment of the line that we're 6 talking about when we're talking about regression 7 analysis.
8 JUDGE McDADE: The what of the line?
9 MR. RIGGS: The fitment, how close the 10 line falls to the datapoint.
11 MS. POTTS: Your Honor, this is Lori Potts 12 for the Applicant. I guess I could help a little bit.
13 For these three counties, the data provided by the 14 State does show a peak and then shows that the 15 population will decrease slightly after the peak.
16 The regression analysis that Mr. Riggs is 17 talking about is a curve fit rather than a linear fit.
18 So it does follow the data that was provided by the 19 states. Since we only have 2030 data and we wanted to 20 use 2035 data, the 2035 is slightly lower than 2030 21 for those three counties.
22 JUDGE McDADE: Okay. Thank you.
23 JUDGE WARDWELL: And is it true -- this is 24 Judge Wardwell -- that it would be a less of a 25 reduction with a polynomial than if you just took the Neal R. Gross & Co., Inc.
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Page 2435 1 reduction that you did see between the last few years 2 and projected that at a linear rate of decrease from 3 the peak point?
4 MR. RIGGS: Your Honor, this is Jerry 5 Riggs for the Applicant. The problem with using a 6 linear regression model for these particular counties 7 is that it wouldn't fit the data.
8 JUDGE WARDWELL: It would fit the data.
9 It wouldn't fit it as well. Is that better way to 10 word it?
11 MR. RIGGS: Yes, I agree. That's good.
12 JUDGE WARDWELL: It can always fit data I 13 mean.
14 MR. RIGGS: Right. It doesn't provide the 15 best model for -- Okay.
16 JUDGE WARDWELL: But the heart of my 17 question I just wanted to point out if I understand it 18 correctly and that's why I asked the question is that 19 the way the polynomial model that you have now 20 projected a slight decrease through the target year of 21 2035. If you had taken a linear fit from the peak to 22 the reduction that occurred in the last year of actual 23 measurements and projected that downward at a linear 24 rate, that value would have been a lot lower, wouldn't 25 it have, than that you have done with the polynomial Neal R. Gross & Co., Inc.
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Page 2436 1 fit?
2 MR. RIGGS: I don't know.
3 JUDGE WARDWELL: Okay. That's a fair 4 answer. I don't know is an answer.
5 JUDGE McDADE: One that I gave a lot in 6 school. And I was always right. Dr. Sheppard, do you 7 take issue with the use of the polynomial regression 8 for New York, Rockland and Westchester Counties?
9 DR. SHEPPARD: I do, Your Honor.
10 JUDGE McDADE: Why?
11 DR. SHEPPARD: Because I believe that it's 12 inconsistent with what I understand to be the guiding 13 principles of how population estimates and projections 14 are supposed to be undertaken for input to the SAMA 15 process. In particular, as I understand it from 16 review of Nuclear Regulatory Commission guidelines on 17 how to prepare these population estimates and how to 18 undertake SAMA analysis, the principle of conservatism 19 in developing these population projections suggest 20 that if population is declining in a particular region 21 that an intermediate level population or perhaps the 22 peak population during the proposed relicense period 23 should be used.
24 After all, if an accident were to occur, 25 God forbid, there's no guarantee that it will happen Neal R. Gross & Co., Inc.
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Page 2437 1 in the last year of licensing. So it would be better 2 off and more consistent with the principle of 3 conservatism to not bother with the polynomial 4 regression or any kind of statistical analysis for 5 this particular process in terms of projection. Just 6 to simply use a peak level population that would occur 7 during the relicense period.
8 JUDGE McDADE: Okay. But putting aside 9 NRC guidance on SAMAs for a moment and just focusing 10 on it as someone who projects population, if what 11 you're trying to do is project the population of those 12 counties in 2035, is this a viable analysis?
13 DR. SHEPPARD: It's a way to do it.
14 That's not the way I would have chosen. I would have 15 estimated the growth rates between the years and 16 extrapolated the growth rates.
17 Indeed, in Sandia's review of the 18 population estimates, they speak of undertaking 19 exactly that type of analysis, projecting the growth 20 rates from the individual state level population 21 estimates out to 2035. And that results in a somewhat 22 higher total population increase within the 50 mile 23 area than the one used by the Applicant. I think that 24 would be a better way of having approached it.
25 JUDGE WARDWELL: And have you qualified Neal R. Gross & Co., Inc.
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Page 2438 1 that somewhat higher into a --
2 DR. SHEPPARD: I'm sorry. I have to 3 confess. I didn't do the quantification, but 4 according to Sandia's discussion of it their 5 quantification using that methodology resulted in 6 about 3.5 percent increase in the population within 7 the area as of 2035.
8 MR. JONES: Your Honor, this is Joe Jones 9 for NRC. Two things here. Yes, we did a comparative 10 analysis when we looked at the population data because 11 we were reviewing the information to determine whether 12 Entergy's numbers are reasonable. We're not trying to 13 precisely duplicate but just to determine whether they 14 are reasonable.
15 With regard to use of the State data to 16 augment the population projections, that is fully 17 consistent with NUREG/CR-7002 which is entitled 18 "Development of Evacuation Time Estimates for Nuclear 19 Power Plants." And that suggests that licensees use 20 state and local data when projecting and determining 21 populations.
22 JUDGE WARDWELL: Who is the principal 23 author of that NUREG?
24 MR. JONES: That would be myself, Your 25 Honor.
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Page 2439 1 JUDGE WARDWELL: Just checking.
2 JUDGE KENNEDY: This is Judge Kennedy. Is 3 that an equivalent appropriate reference for a SAMA 4 analysis then? Are the evacuation time population 5 estimates translatable to a SAMA analysis?
6 MR. JONES: No, they're not, Your Honor.
7 And there is good reason for this. First of all, it 8 is intended, the evacuation time estimate is used by 9 response organizations to support decisions with 10 regard to potential evacuation of an emergency 11 planning zone which is only the 10 miles around the 12 nuclear power plant.
13 JUDGE KENNEDY: So it wouldn't be 14 appropriate for the 50 mile region that we're 15 discussing here today.
16 MR. JONES: It is not a direct reference 17 for the 50 mile region, no.
18 JUDGE KENNEDY: I guess through this 19 discussion I've not lost the path and I'd like to go 20 back to Entergy to understand the population 21 projection. I'm understanding starting at the 2000 22 census data and then using state projection data to 23 get to a final number for 2035.
24 Was a percentage of increase in population 25 added to the 2000 census? Or was the actual projected Neal R. Gross & Co., Inc.
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Page 2440 1 value the final number that was put into the SAMA 2 analysis? And, Mr. Riggs, if you're the appropriate 3 person that would be just fine.
4 MR. RIGGS: Your Honor, this is Jerry 5 Riggs for the Applicant. The answer to that is the 6 final number is based on the 2035 projected 7 information. The resolution of the data comes from 8 the 2000 census. Does that help?
9 JUDGE KENNEDY: I guess if you explain to 10 us what resolution means.
11 MR. RIGGS: It's the spatial resolution 12 where we try to make sure that the appropriate 13 distribution of population is in each sector 14 appropriately. Because there's an assumption in 15 county level information that the population is 16 distributed evenly, it doesn't provide enough 17 resolution. Well, it doesn't provide as much 18 resolution as the block data does from the Census 19 2000.
20 JUDGE KENNEDY: I guess now that's where 21 I think I was going with this. I'm trying to 22 understand. You have a projection to 2035 that is 23 based more on county-wide. It appears to be based on 24 county-wide information. And you're trying to 25 translate that back to data that's based in the 2000 Neal R. Gross & Co., Inc.
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Page 2441 1 census that's at some sort of block or grid level.
2 And could you try me one more time in explaining how 3 that -- I think what I'm asking is how do we get 4 population back to the grid element that's appropriate 5 for 2035.
6 MR. RIGGS: Okay. If you notice these 7 datasets start out with 2000 value for the county.
8 That's a common date between the county and the 2000 9 census. Right. The values will match up if you sum 10 up all the blocks. In a county, they'll match that 11 number which means that we can then create an index of 12 2035 data relative to the 2000 data for each county.
13 And what we do with that is -- I'm trying 14 to collect my thoughts here.
15 JUDGE KENNEDY: Take your time please.
16 MR. RIGGS: When we create an input for 17 MACCS program, we have to convert geographies into the 18 sector grid. So what we have between the datasets is 19 we have a common year which is 2000 and then we have 20 to go into the sectors with that common year.
21 So what we do is with the 2000 data we 22 convert block data into the sectors using area 23 weighting and summation to create a base 2000 value 24 for the sector. Then we use the population projection 25 information in terms of the year 2000. In other Neal R. Gross & Co., Inc.
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Page 2442 1 words, we're taking the 2035 and then we create an 2 index with it. We put it in terms of 2000 which means 3 that the 2035 value is like 1.5 times the 2000 value.
4 Then we convert that and put that county 5 level information into the sector grid and weight it 6 accordingly. If we have 100 percent of the county in 7 a sector, then that sector adopts that county's growth 8 rate, you know, the growth index, the value that we 9 put out, say, 1.5. And then we multiply the 2000 10 value by that index to get the 2035 value for that 11 sector.
12 JUDGE KENNEDY: So you in some way come up 13 with an incremental population growth from 2000 to 14 2035 and the distribute that at the block level or 15 grid level.
16 MR. RIGGS: Yes.
17 JUDGE KENNEDY: Let me think about it a 18 minute.
19 MR. RIGGS: Okay.
20 JUDGE KENNEDY: I think I understand what 21 you did. And I don't know. Dr. Sheppard, have you 22 heard this discussion from Mr. Riggs? It seemed like 23 you were raising a challenge to that earlier and maybe 24 we could circle back to that.
25 DR. SHEPPARD: My concern is in Neal R. Gross & Co., Inc.
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Page 2443 1 understanding the role of what Mr. Riggs calls areal 2 disaggregation or proportion to the area. My 3 understanding of how the population forecast -- Since 4 it is the population forecasts ultimately that enter 5 as inputs as I understand it from the testimony that's 6 just been given that enter as inputs into the SAMA 7 analysis and using the MACCS2 model.
8 It's important to understand where those 9 population forecasts come from. And as I understand 10 it from reading the report and from what Mr. Riggs has 11 testified, that they basically are building population 12 forecasts at the county level using state data. And 13 then they're disaggregating that population down to 14 the individual radial grid structure that's mandated 15 for use in the MACCS2 code based on the area of each 16 grid element.
17 So it does come down to assuming that 18 population is distributed evenly over the county 19 counterfactual though that may be as I understand it.
20 Perhaps someone else can clarify.
21 JUDGE KENNEDY: That's not the way I just 22 understood it.
23 DR. SHEPPARD: Perhaps we have a different 24 -- We're still at a loss for a clear understanding.
25 JUDGE KENNEDY: Mr. Riggs, would you care Neal R. Gross & Co., Inc.
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Page 2444 1 to respond to that? I believe I understood what you 2 explained. And I think it's in conflict with what Dr.
3 Sheppard's challenge to it is.
4 If there's a better person to explain it, 5 but I believe I understood what you said, Mr. Riggs.
6 And I understand how the projection is arrived at. I 7 don't want to just leave Dr. Sheppard's challenge 8 lying there.
9 MR. RIGGS: Okay.
10 JUDGE KENNEDY: I sense an answer there 11 somewhere.
12 MR. RIGGS: The resolution comes from the 13 2000 block data. And whenever you sum up the 14 population over a sector grid, then you're creating a 15 specific number based in 2000 for that particular 16 sector. Okay. So that's where the resolution for the 17 final dataset comes from.
18 The block data is so small that for a 19 larger area it does not assume that there's an even 20 distribution of population for the county. So 21 whenever you -- Sorry. Go ahead.
22 JUDGE KENNEDY: I was going to say on the 23 off -- In the case where the grid represents a large 24 fraction of the county, I think I get it. If the grid 25 represents a small fraction of the county, I guess Neal R. Gross & Co., Inc.
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Page 2445 1 we're projecting -- It sounds like there's a 2 projection of the average for the county into that 3 sector or grid element. And so the average of the 4 county-wide --
5 We're back to East Suffolk County, West 6 Suffolk County and how you project that growth pattern 7 into the grid. That's where I see to be the 8 difficulty. And I don't know how. Maybe you could 9 help us understand how real that is in this scenario 10 here. I mean, are there cases where county-wide data 11 based on a large county that isn't fully encompassed 12 in the 50 mile region is actually a real issue here?
13 MR. RIGGS: Okay. I think the best way to 14 look at it is that the population distribution comes 15 from the 2000 census data. The projection rate or the 16 projection itself comes from the county data. So the 17 population resolution is based on the four small 18 elements that are summed up; whereas the projection 19 information, not the population, but the projection 20 component of those population tables is what's assumed 21 to be evenly distributed over the county.
22 JUDGE KENNEDY: Let me try one more time.
23 Are there instances where relatively large counties 24 only constitute a small fraction of -- Or if the grid 25 is not representative of a large area of the county, Neal R. Gross & Co., Inc.
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Page 2446 1 then it seems like this projection starts getting a 2 little off the mark. Using the average for the county 3 and what I'm really looking for is if we were to go 4 around the grid, how real that projection issue is 5 within the Indian Point 50 mile grid elements here?
6 MR. RIGGS: Okay.
7 JUDGE KENNEDY: If there's 16 times around 8 and this occurs all around the grid or if there's on 9 the order of one or two of these is our real issue.
10 MR. RIGGS: Okay.
11 JUDGE KENNEDY: That's another way for me 12 to for me to understand it. I understand how you're 13 doing the projection. Now what I'm really trying to 14 understand is whether using this average is a real 15 factor in your projection estimate down at the block 16 level. And I think is where Judge McDade started us 17 a bit ago and I think we're back to that issue.
18 MR. RIGGS: Okay. Whenever you're dealing 19 with county level information regardless of what it is 20 and you're going into the sector grid, there are cases 21 where there are contributions of several counties in 22 some of the sector grids. The way to fix that is to 23 essentially provide a weight for the counties in that 24 sector. Say, the county occupies one-third of a 25 portion of a sector. Then you take that county's Neal R. Gross & Co., Inc.
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Page 2447 1 value and multiple it by that percentage.
2 And then in the final outcome of that you 3 sum all those contributions for the counties in that 4 sector to give you final value to multiply the 2000 5 values by.
6 JUDGE KENNEDY: Let's try it a different 7 way and maybe --
8 MR. TEAGARDEN: Your Honor, Grant 9 Teagarden for the Applicant. If I could.
10 JUDGE KENNEDY: I was either going to try 11 another person or try Mr. Jones who reviewed this for 12 reasonableness and maybe if he could provide some 13 information on the significance of this using an 14 average across the grid.
15 If you have something to offer, Mr.
16 Teagarden, we can start there.
17 MR. TEAGARDEN: Yes, Your Honor. What 18 we're seeking to do is maintain the highest resolution 19 of the data throughout the projection methodology. We 20 can start with the year 2000 census data which has a 21 high resolution at what's being termed a block level.
22 When we look for growth data, the growth 23 data is only reported at the county level. We don't 24 have a means of growth projection rates at the block 25 level. So in that regards we're starting with the Neal R. Gross & Co., Inc.
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Page 2448 1 highest resolution data at the year 2000. And then 2 we're applying the growth ratio at the best resolution 3 that we have which is at the county level.
4 That assume uniform growth throughout the 5 county. But it's being applied to where -- As I 6 understand the question being raised about 7 disportionate or uneven population distributions 8 within a county for those portions within the 50 mile 9 analysis region where there is a higher population 10 distribution, that growth rate is being applied to 11 that higher population. That growth rate is being 12 applied to that higher amount. And for the lower 13 population density areas, perhaps outside 50 mile 14 region, the same growth rate would be coming.
15 One could make a case that as urban sprawl 16 grows with time the greater growth rates actually 17 occur in the less populated areas. And the areas that 18 are already more densely developed would have a slower 19 growth rate. And with that hypothesis then Entergy's 20 approach of a uniform growth across the county would 21 be somewhat potentially conservative.
22 JUDGE WARDWELL: You used the term 23 "uniform growth" twice in that little response then.
24 You meant uniform growth rate.
25 MR. TEAGARDEN: Uniform growth rate. Yes, Neal R. Gross & Co., Inc.
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Page 2449 1 Your Honor.
2 JUDGE WARDWELL: Thank you.
3 MR. TEAGARDEN: If that helps explains.
4 Entergy seeks to use the best resolution that we have 5 and when it comes to growth rate we have that at the 6 county level.
7 JUDGE WARDWELL: Dr. Sheppard, is there 8 anything they could do besides that? As I sit here, 9 it sounds like it's a reasonable approach.
10 DR. SHEPPARD: Mr. Teagarden's comments 11 were quite helpful. But they underscore a slightly 12 alternative version of exactly my concern. Although 13 the growth rates themselves weren't the central focus 14 of my evaluation and proposed revisions of the 15 population estimates.
16 But it's clear that as urban growth 17 proceeds just as Mr. Teagarden has said and testified 18 that growth does not proceed uniformly over a county 19 or any area. It happens in concentrated areas on the 20 urban periphery or elsewhere. A good deal of the area 21 within the Indian Point 50 mile radius zone would be 22 in peripheral areas of Westchester County or elsewhere 23 that would experience some of this urban growth, urban 24 sprawl.
25 Ideally, I think population estimates be Neal R. Gross & Co., Inc.
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Page 2450 1 undertaken which would take into account the different 2 rates of growth that occur throughout the county 3 rather than assume a constant rate of growth.
4 JUDGE McDADE: Dr. Sheppard, the 2010 5 census gave a figure for population that was 6 approximately 2.0 percent lower than the population 7 was projected by Entergy in its environmental report 8 and by the staff in its Environmental Impact 9 Statement.
10 Doesn't this suggest a conservatism in the 11 calculation of the rate of growth which basically 12 would offset your concerns regarding census overcount?
13 In other words, if there was a two percent overcount 14 on the rate of increase, that would amount to about 15 400,000 permanent residents. Doesn't that offset your 16 concern with the census undercount or overcount?
17 DR. SHEPPARD: Your Honor, I think it 18 would be premature to come to that conclusion. I 19 think that there might be some validity to that if the 20 idea was to obtain population estimates for 2010.
21 What we're trying to do here is a more 22 difficult problem of obtaining population estimates 23 for 2035. And for that you really need I think the 24 2010 data had they been available when the proposal 25 and the application was put forward. It would be Neal R. Gross & Co., Inc.
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Page 2451 1 reasonable to consider. But then the State growth 2 estimates also need to be considered.
3 So you really can't -- Since those growth 4 rates and the estimates of growth undertaken at the 5 state level are done by comparing a general pattern of 6 development and population growth, you really would 7 have to go back and redo the population growth 8 forecast from the get-go using the new 2010 data 9 rather than take population growth estimates that were 10 based on older data and just try to drop in the 2010 11 estimate. So I wouldn't -- I think it would be 12 premature to come to that conclusion given that what 13 we're really interested in is 2035 population.
14 JUDGE McDADE: I guess the point I was 15 getting at is this. Starting with the 2000 census 16 which is the only one, the most recent one they had 17 when they did their projections, the fact that the 18 growth rates that were utilized wound up overstating 19 the population as of the first benchmark, the 2010 20 census. Is it reasonable to conclude that this overly 21 optimistic growth rate would continue throughout the 22 period of extended operation out through 2035 so that 23 you would -- again there would be this conservatism 24 that in fact the population in 2035 would be slightly 25 less than the population projected by Entergy?
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Page 2452 1 DR. SHEPPARD: Right.
2 JUDGE McDADE: Why could you not carry 3 this out in a linear fashion?
4 DR. SHEPPARD: The reason you can't is 5 because preparing the population forecast involves 6 more than simple linear extrapolation of growth 7 trends. It involves analysis of the age and 8 demographic structure, the fertility behavior of the 9 population. So when population forecasts of this sort 10 are made they have to consider anticipated births, 11 deaths, so on and so forth.
12 If the actual growth of -- If this change 13 in population from 2000 to 2010 may be below the 14 initial 2010 forecast, but if the concentration of 15 younger persons or persons from demographic groups 16 that exhibit higher fertility rates, if that portion 17 of the population was greater, then it could be that 18 subsequent population growth will compensate and 19 overshoot.
20 So you have to consider it. You can't 21 just simply drop in a benchmark and compare that and 22 extrapolate the trend because that's not the way that 23 the individual county forecasts will be done. Those 24 will be done by taking into consideration a pattern of 25 births, deaths and net migration at the county level.
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Page 2453 1 And those births and deaths in particular, the natural 2 increase will depend upon the age structure and 3 demographic structure of the population.
4 JUDGE McDADE: But that's what the 5 counties did originally and the algorithm that they 6 used appeared to overstate population growth. Why 7 would we assume that it would change or why could not 8 we assume that it would remain relatively constant?
9 DR. SHEPPARD: Because in addition to the 10 2010 census providing us with information about the 11 total, the 2010 census may be providing us with 12 information about the age structure or ethnicity of 13 the populations within the counties. And those 14 populations might have higher growth rates, higher 15 rates and natural increase in the future.
16 So what I'm saying is not that the 2010 17 census data are irrelevant. It's that we can't safely 18 conclude just from comparison of the 2010 census with 19 the 2010 forecast that the 2035 forecast will be 20 constantly overshooting the actual population total as 21 well.
22 Really if you wanted to make sure of the 23 2010 census data, the proper approach, I understand 24 that time doesn't always permit that. But the proper 25 approach would be to redo the county level forecasts Neal R. Gross & Co., Inc.
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Page 2454 1 taking full advantage of the 2010 census data.
2 JUDGE McDADE: Am I correct then that your 3 testimony is that the hypotheses that I postured I'm 4 just reading too much into the 2010 data? It just 5 really isn't prudent to make that leap.
6 DR. SHEPPARD: That is my belief. Yes, 7 Your Honor.
8 JUDGE McDADE: Okay. Entergy, what's your 9 view?
10 MR. RIGGS: Your Honor, the nuclear 11 industry does a lot of gut checks and for me the 2010 12 census information or census count actually produced 13 similar results to our projections. Then the gut 14 checks work. It's fine.
15 MS. POTTS: Your Honor, this is Lori Potts 16 for the Applicant. I would just like to add one more 17 thing while you're thinking about this. We did in our 18 population estimate use projections to the year 2035 19 which is in itself conservative because we're doing 20 the time averaged analysis over the entire 20 year 21 period of extended operation. And our guidance would 22 have allowed us to use any year in the second half of 23 the period of extended operation, for instance, 2025, 24 as our population projection.
25 By virtue of using 2035, we have added Neal R. Gross & Co., Inc.
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Page 2455 1 considerable conservatism to the analysis that would 2 account for any minor variations in the projected 3 numbers.
4 JUDGE McDADE: Okay. Thank you. Dr.
5 Bixler, Mr. Jones, do you have anything on this 6 further?
7 MR. JONES: Joe Jones with staff. The 8 2010 data definitely provides a level of confidence in 9 the population values that we're using. I would go 10 back to what Dr. Sheppard mentioned earlier. A linear 11 projection of data is one approach. And so I don't 12 know that I would rule this out as an approach to 13 project the 2035 data. It certainly shows an 14 aggregate increase over a six year period and gives us 15 a lot of confidence in the data that we're using.
16 DR. BIXLER: This is Nathan Bixler for the 17 staff. I just want to add my viewpoint on this. If 18 I had done the analysis that Entergy was doing, I 19 would have done it exactly the same way that they did.
20 They had the 2000 census data available at 21 the block level as a starting point. I would have 22 used that. And then I would have used the Oconee 23 growth rate projections and used that.
24 In most cases, one of the grid elements in 25 the MACCS2 analysis would be entirely within Oconee.
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Page 2456 1 You would just use the Oconee growth rate for that 2 particular grid element. In the cases where you have 3 a grid element that overlaps a couple of counties you 4 would use a weighted average of the growth rates for 5 those two counties to estimate the growth rate for 6 that grid element. And then I would put that 7 altogether. And I think it is correct to say that 8 extrapolating all the way out to 2035 leads to 9 significant conservatism in the final answer.
10 JUDGE KENNEDY: Dr. Bixler, this is Judge 11 Kennedy. And I hate to go back to this theme, but 12 what if the grid elements they were all in a 13 particular county, but they only were in one percent 14 of the areal mass of that county? Do you have a view 15 towards using this average based on the other -- I 16 mean there is 99 percent of the land area of the 17 county that you're representing by an average, but 18 only one percent of it is totally -- Well, the grid 19 element is totally in that county, but only represents 20 one percent of all that.
21 Do you have any view towards this average 22 concept we were talking about before?
23 DR. BIXLER: Yes. I believe that that's 24 the best you can do. If you have a grid element 25 that's only one percent of a county but you're Neal R. Gross & Co., Inc.
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Page 2457 1 assuming that the county growth rate applies to every 2 census block within that county which is that's the 3 best you can do, then you assume that the census 4 blocks that fall within that grid element even though 5 they're one percent of the county grow at the same 6 rate as the county. I think that's what you end up 7 having to do.
8 JUDGE KENNEDY: I mean I guess as Dr.
9 Sheppard pointed out you could inform those averages 10 possibly by maybe some land use information within 11 that county. If it was totally rural, it may be a 12 good candidate for high growth in close to the Indian 13 Point 50 mile region.
14 I don't know if that's a refinement that 15 would be worth the effort here. I mean I think it's 16 really hard to judge from my perspective. But at 17 least Dr. Sheppard pointed out there are possibly 18 other ways to inform that average.
19 And the extremes in my mind are easier to 20 deal with. If just a tiny portion of the county is in 21 the grid versus all of the county is represented by 22 grid elements, I have different concerns. And I think 23 my concern really is on the one where only a small 24 area mass of the county is being represented in the 25 grid element.
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Page 2458 1 DR. BIXLER: I think I would be reluctant 2 to go just beyond using the county projections because 3 doing that would be kind of inventing your own 4 strategy or way of doing this analysis. And I think 5 you would get into areas where it would be hard to 6 defend what you've done. But just by simply using the 7 Oconee growth rate projections, that's a 8 straightforward thing to do and it's easier to defend 9 and to explain.
10 JUDGE KENNEDY: Would it be fair to say 11 that the county projection at least at the county 12 level is informed by land use patterns? And somehow 13 they came up with the growth projection. And I guess 14 I'm assuming and maybe looking for a confirmation that 15 typical land use patterns for that county would inform 16 the county's growth rate again at the county level.
17 Would that be your view?
18 DR. BIXLER: Yes, I believe that would be 19 correct.
20 MR. RIGGS: Your Honor, this is Jerry 21 Riggs for the Applicant. Concerning land use patterns 22 or something like that would fall out in the 23 resolution of the census block data as well. Because 24 if you had an area of such maybe it's a river or 25 something that's full of water. The population there Neal R. Gross & Co., Inc.
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Page 2459 1 would be zero from the block data.
2 JUDGE KENNEDY: Thank you.
3 MR. TEAGARDEN: Your Honor, Grant 4 Teagarden for the Applicant. If I can also augment in 5 regards to your question about a county where you have 6 just a small portion within the 50 mile analysis 7 region, the small portion will have a minimal to 8 negligible impact upon the 50 mile analysis region 9 because it is small in comparison to the over 7,000 10 square miles of the analysis region.
11 And for the SAMA analysis where we're 12 examining atmospheric dispersion of postulated 13 releases, those land portions near the end of the 50 14 mile region would have a very small, a much smaller, 15 probability than other regions within the analysis 16 region of being impacted by those releases.
17 That being said, where there may be 18 questions about the degree of uncertainty when this is 19 applied to these counties that are bordering the 20 analysis region and just slightly encroached, that 21 because of their small land area they essentially have 22 no impact upon the results of the SAMA analysis.
23 JUDGE KENNEDY: Thank you, Mr. Teagarden.
24 JUDGE WARDWELL: This kind of brings up 25 back to a question I had earlier and I held off. But Neal R. Gross & Co., Inc.
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Page 2460 1 maybe now is a good time to do this, Mr. Teagarden.
2 Is it the practice with SAMA analysis to use the peak 3 population or do you use the best estimate for that 4 population at some time frame, in this case 2035 that 5 we're shooting for?
6 MR. TEAGARDEN: It is our practice, the 7 practice that I'm familiar with, for individuals to 8 pursue a best estimate approach. That being said, 9 most analyses that I'm familiar with have used an end 10 date that reflects the last year of the license 11 renewal period. And that incorporates a fair amount 12 of conservatism as Ms. Potts mentioned.
13 The Entergy analysis could have used the 14 date such as 2025 and instead they choose to use a 15 date of 2035. And that adds in something above a half 16 a million people due to the growth that occurs in the 17 50 mile region over that last ten year period.
18 In general, we seek for the SAMA analysis 19 to pursue a best estimate approach. The approach for 20 population projected that Entergy utilized was 21 conservative and it is an approach that many, if not 22 most, applicants take.
23 JUDGE WARDWELL: If during the projections 24 it's indicated that the population is declining during 25 the period of extended operation, is there any Neal R. Gross & Co., Inc.
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Page 2461 1 conscientious intention to go back and just us the 2 peak population that was either projected or actually 3 measured for that value in your analysis rather than 4 the lower value that might be erroneously projected?
5 MR. TEAGARDEN: Your Honor, if that trend 6 was a significant trend within the 50 mile analysis 7 region such that the total population for the 50 mile 8 analysis region say for the final year was less than 9 the total for an earlier year, I believe that many 10 applicants would choose to use the earlier year.
11 In this case, we have only three counties 12 that have a slight peak prior to the final year. The 13 delta associated with that peak is of the order of 14 60,000 individuals which is a very small amount in the 15 total population.
16 JUDGE WARDWELL: Ms. Potts, I saw you 17 nodding your head. Does that mean you agree with Mr.
18 Teagarden's assessment?
19 MS. POTTS: Yes, I do.
20 JUDGE WARDWELL: And, staff, do you have 21 any comments on that?
22 MR. JONES: Yes, we've reviewed the 23 documentation that shows that -- this is Joe Jones 24 with the staff -- the delta is only on the order of 25 about 60,000 people.
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Page 2462 1 JUDGE WARDWELL: And it's your experience 2 in reviewing these that an applicant often will go 3 back and use the peak value rather than any decline 4 that may be observed?
5 DR. GHOSH: I can answer that. This is 6 Tina Ghosh from NRC staff. I just want to point out 7 that I think as Mr. Teagarten mentioned the point is 8 not to do a purposefully conservative analysis, but to 9 purposefully pick the peak population during any 10 period during the relicensing period.
11 The goal is to do a best estimate 12 analysis. But it's true that many applicants choose 13 a conservative estimate even though what is actually 14 expected or required is really just a best estimate of 15 the population.
16 And the reason for that is we don't know 17 when in the 20 year period an actual accident may 18 occur. And the point is to look at the average or 19 best estimate effects should an accident occur which 20 could occur at any time period in that 20 year period.
21 Again, often applicants do choose a 22 conservative estimate. But there is no requirement or 23 expectation to do so.
24 JUDGE WARDWELL: Thank you, Dr. Ghosh. I 25 think that was helpful.
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Page 2463 1 Dr. Sheppard, do you have any comments on 2 what you've just heard?
3 DR. SHEPPARD: I can't speak for what the 4 regulations require. I understood Mr. Teagarden and 5 others to essentially point out that the change in 6 population estimates associated with using or not 7 using the peak year is I take to be about 65,000. I 8 agree with that number. And I also understood others 9 to say the typical practice had been to use end of 10 license period population forecasts as inputs to the 11 SAMA analysis or where peaks occurred during the 12 license period to substitute those peaks.
13 JUDGE WARDWELL: Thank you.
14 JUDGE McDADE: Okay. We're going to start 15 getting into a little bit different subjects starting 16 to talk about commuters. That may take longer than 17 the census. So it might be appropriate for us to take 18 a little bit of a break at this point in time before 19 we do.
20 It's now a 10:45 a.m. I would propose 21 that we take a break until 11:00 a.m. Is that going 22 to be enough time? Anybody request a longer break 23 than that?
24 (No verbal response.)
25 Apparently not. We'll stand in recess Neal R. Gross & Co., Inc.
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Page 2464 1 then until 11:00 a.m. Off the record.
2 (Whereupon, a short recess was taken.)
3 JUDGE McDADE: And this question will go 4 both to the Staff and to Entergy, perhaps Entergy 5 first. The Environmental Report and the Environmental 6 Impact Statement do consider transients, tourists, 7 shoppers, business travelers. How are they 8 calculated?
9 MR. RIGGS: Your Honor, this is Jerry 10 Riggs for the Applicant. What we do is we get the 11 information from the state tourism bureaus and it's 12 usually in state form and then we area weight those 13 values into the counties to create an index. Then we 14 convert that into the sector grid, using spatial area 15 weight.
16 MR. JONES: This is Joe Jones with Staff.
17 I agree with the way that the description of 18 developing that data is presented. It's important to 19 understand the difference in these three type of 20 population you mentioned, tourists, shoppers, and 21 business travelers because shoppers are included as 22 transients, but they are in the SAMA area for day 23 trips, not necessarily overnight trips. Whereas, 24 tourists and business travelers would be accounted for 25 overnight. And all of them in the Entergy analysis Neal R. Gross & Co., Inc.
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Page 2465 1 were considered overnight.
2 In this context, MACCS doesn't know how to 3 treat a tourist any different than a general member of 4 the public. So MACCS, the consequence code, treats a 5 business traveler or a tourist or a shopper as though 6 they live in the area, they have a home in the area 7 and as though they're going to incur a dose over a 50-8 year committed period.
9 JUDGE WARDWELL: And what's the definition 10 of a business traveler?
11 MR. JONES: The way it's used in the SAMA 12 analysis is that it's someone that comes in to the 13 SAMA area for an overnight stay or longer.
14 JUDGE McDADE: Mr. Jones, you indicated 15 they're treated as a permanent resident. Do they 16 impact such things as the calculations per diem for 17 displaced people, the decontamination costs, 18 relocation expenses, loss of use of property? Are 19 they calculated for those purposes the same as a 20 permanent resident of the area?
21 MR. JONES: That is absolutely correct, 22 Your Honor. And that is why it is challenging to 23 consider commuters in total as they enter the area.
24 Well, that's commuters. The business travelers as 25 well.
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Page 2466 1 JUDGE McDADE: Okay, but it would be your 2 view that the inclusion of these transients, tourists, 3 shoppers, business travelers would tend to over 4 estimate the clean-up costs?
5 MR. JONES: Yes, and let me explain with 6 just two quick examples. Dr. Bixler and myself came 7 here from Albuquerque and most of the NRC Staff came 8 from Washington, D.C. and areas around there. We are 9 in the SAMA area and the code models us as though we 10 are residents here. Our homes are not here, but it 11 models as though we are residents here. For the folks 12 supporting the State of New York and other folks in 13 the room that have traveled here and are staying in 14 this hotel or other hotels, they are considered 15 business travelers.
16 So the MACCS code assumes, as a business 17 traveler, that they have a home here and they will 18 incur a 50-year committed dose year along with the 19 relocation costs. But it also includes them as 20 members of the census data in their actual resident, 21 and it accounts for all of the same information. So 22 it is a conservative.
23 JUDGE McDADE: Traveling here from 24 Albuquerque, you didn't anticipate the hearing would 25 last long enough to purchase?
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Page 2467 1 (Laughter.)
2 MR. JONES: That is correct, Your Honor.
3 JUDGE McDADE: Okay. Why would commuters 4 be treated differently? I mean conceivably a commuter 5 would get more of a dose than a tourist or a shopper 6 or a business traveler. The commuter would have an 7 incentive during both the early and the extended 8 period of cleanup to be back in the city, back in the 9 area on a daily basis where it would be unlikely that 10 after an accident, one would expect tourism and 11 business travel to fall off significantly. So why 12 exclude commuters -- well, first of all, do you accept 13 my premise that a commuter would probably get more of 14 a dose than a business traveler or a tourist or a 15 shopper?
16 MR. JONES: I do accept that premise. The 17 reason -- it's not that I'm saying commuters should 18 not be included. The consequence model doesn't know 19 how to distinguish a commuter from a member of the 20 public. So if we recognize that there are about one 21 million commuters, well, they're only in the SAMA area 22 if they work five days a week, on the order of 20 23 percent of a year. Well, 20 percent of one million 24 commuters, if you just did a straight calculation is 25 200,000 or 1 percent of the total population and you Neal R. Gross & Co., Inc.
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Page 2468 1 really wouldn't want to calculate decontamination of 2 their home because by definition for the SAMA analysis 3 they're commuting into it. So you would have to 4 reduce those costs as well.
5 In effect, the commuters, the million commuters that 6 we are discussing would have less than a one percent 7 effect on the SAMA analysis.
8 JUDGE McDADE: Wouldn't it be relatively 9 easy to calculate the dose costs for commuters without 10 calculating the other costs that are in the MACCS code 11 such as decontamination costs, loss of use of 12 property, etcetera?
13 MR. JONES: I'd like to defer to Dr.
14 Bixler.
15 DR. BIXLER: It's not possible to do 16 within the code. You could do it, I guess, by post-17 processing the results. You could, for example, take 18 the population dose and scale it up to account for 19 more people receiving that dose than what you had in 20 the population file and then not scale up the off-site 21 economic costs. That would be one possible way of 22 doing that.
23 But if you're just simply running the 24 code, it has one population database by grid element 25 and there's not a separate accounting for commuters or Neal R. Gross & Co., Inc.
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Page 2469 1 other types of transients.
2 JUDGE McDADE: Okay, but this is the 3 MACCS2 code. Wouldn't the MACCS3 code be able to take 4 that into consideration?
5 DR. BIXLER: The MACCS3 code doesn't 6 exist, but I suppose in the future it could have, 7 could consider that.
8 JUDGE McDADE: Okay, but in figuring out 9 the costs of a severe accident, wouldn't that be 10 appropriate to take into consideration the dose 11 through some mechanism, the dose that consumers would 12 receive -- commuters, not consumers?
13 DR. BIXLER: That would make a lot of 14 sense to me if you went to -- it does make sense to 15 include the commuters, business commuters in the dose 16 part of the calculation, but it also makes sense to 17 exclude them from the economic cost part of the 18 calculation.
19 MS. POTTS: Your Honor, this is Lori Potts 20 for the Applicant.
21 JUDGE McDADE: Yes.
22 MS. POTTS: It also makes sense in that 23 context if we're just looking at the population dose 24 to people who are here temporarily to exclude some of 25 that dose to people who leave the area.
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Page 2470 1 JUDGE McDADE: Let me ask Dr. Sheppard and 2 let me posit a few scenarios and ask you how these are 3 treated differently in your analysis. One of the 4 areas within the 50-mile radius is Suffolk County.
5 You have commuters within Suffolk from outside the 50 6 mile who commute within the 50 mile.
7 You have commuters within Suffolk from 8 inside the 50 miles to outside the 50 miles, but still 9 in Suffolk. And you have commuters within Suffolk 10 from inside the 50 miles to outside the 50 miles also 11 outside of Suffolk.
12 How would these be treated in your 13 analysis? Would they be treated differently? How 14 would they be captured? Let's do them one at a time.
15 If you're within Suffolk, and you commute 16 from within Suffolk from outside the 50 miles to 17 within site the 50 miles, does your analysis capture 18 them?
19 DR. SHEPPARD: My analysis suggests 20 including any person adding to the population 21 estimate. Any person who resides outside of the 50-22 mile zone therefore would not be counted in the census 23 data that is the foundation of the current population 24 estimates, but works within a 50-mile zone.
25 In order to obtain a count of how many Neal R. Gross & Co., Inc.
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Page 2471 1 such persons there are, we have to consider the 2 scenarios that you exactly have identified because the 3 data we have available to us are data from the census 4 that give the county work-flow patterns. These work 5 flow pattern data are used for a variety of purposes 6 within the census, in particular, for determining the 7 definition of the metropolitan area which is for the 8 most part based upon work-flow patterns.
9 So for a person who lives in Suffolk and 10 works in Suffolk, but lives outside of the 50 mile 11 from IPEC zone and if they reside outside that area 12 and work within the area, I think that they should be 13 included.
14 JUDGE McDADE: In your calculation, where 15 you came up with the 996,000, they're not, are they?
16 DR. SHEPPARD: Perhaps we should -- let me 17 turn to the table that you're pointing to so that I 18 address clearly your question. You're looking at a 19 table from my report? Or you're considering -- just 20 considering the scenarios? For example, the 21 discussion that I provide in the report, this is New 22 York State 000209 on page 6 is this what you're asking 23 about, you'd like me to discuss how I've come up with 24 these totals?
25 JUDGE McDADE: Yes. I mean the first Neal R. Gross & Co., Inc.
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Page 2472 1 question is am I interpreting it correctly that that 2 group, the first group commute from within Suffolk 3 from outside to inside the 50 miles stay within 4 Suffolk, they're not captured in your analysis?
5 DR. SHEPPARD: I am endeavoring to capture 6 them, so if you -- if I might refer to the discussion 7 in my report on page 6, suppose we have an observation 8 of a -- what you're talking about is the distinction 9 would fall under Category 2. For every county that is 10 partially within the 50-mile boundary, so Suffolk 11 County would be an example of that.
12 If P is the percent of land area that's in 13 the county that's located within 50 miles of IPEC, 14 then take that percent of the commuter flows that come 15 into that county from counties that are totally 16 outside, so if there's someone commuting from a county 17 in Connecticut say to Suffolk County, this is based 18 upon the idea of a uniform distribution of work 19 places. So the census data don't provide us with 20 information about where in the county the people work.
21 They do provide us with information about the location 22 of work. They provide us with just flows from county 23 to county.
24 JUDGE McDADE: But the data doesn't supply 25 information about flows within the county. If the Neal R. Gross & Co., Inc.
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Page 2473 1 person is commuting, but stays within the same county, 2 we don't have data?
3 DR. SHEPPARD: I'm sorry, I misunderstood 4 your question. That's right. I don't have data on 5 that.
6 JUDGE McDADE: Okay, now the second 7 question is a similar hypothetical for people who 8 start out within the 50-mile radius, stay within 9 Suffolk County, but move beyond the 50 mile, the data 10 that's available doesn't capture them either?
11 DR. SHEPPARD: Permit me to identify them, 12 that's correct.
13 JUDGE McDADE: Now the third scenario 14 which is not only for Suffolk County, but for all 15 areas, you're starting in Suffolk County, you're 16 within 50 miles and you move outside of Suffolk County 17 and outside the 50 miles. Does your calculation 18 subtract for those individuals?
19 DR. SHEPPARD: The calculations that I've 20 included in my proposed revisions to the population 21 does not subtract for those individuals because they 22 reside within the 50-mile radius area around Indian 23 Point, they will be during some fraction of the day 24 within that area and hence need to be or should be 25 considered as part of the population in analysis -- in Neal R. Gross & Co., Inc.
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Page 2474 1 the SAMA analysis.
2 JUDGE WARDWELL: But don't those 3 individuals -- excuse me, aren't those individuals 4 placed at their residence rather than at some other 5 location where they may not be in the SAMA analysis?
6 DR. SHEPPARD: So they are counted -- if 7 they reside within the 50-mile zone, they would be 8 counted as part of the residential population.
9 JUDGE McDADE: They're counted as 10 permanent residents. What I'm getting at is one of 11 the discussions is that a cost to commuters is the 12 cost of the dose. And here, we would expect that the 13 increased dose for incoming commuters would be equal 14 to approximately the decreased dose for outgoing 15 commuters. So shouldn't there be an effective 16 leveling so that all we're talking about is the 17 increased number of people in the city during the day 18 when we're talking about commuters?
19 DR. SHEPPARD: I see. So the reason I 20 haven't pursued that approach in providing my analysis 21 is several-fold. First, there can and will be 22 circumstances under which both groups, the people 23 commuting out of the 50-mile zone and the people 24 commuting in will both be present within. So under 25 the idea of wanting to consider peak population, there Neal R. Gross & Co., Inc.
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Page 2475 1 is certainly the possibility that they will both be 2 within there depending upon the timing of the 3 commuting flows.
4 Second, when I read the guideline -- so in 5 trying to work out what population adjustments I 6 should suggest when the State of New York asks me what 7 I would suggest, I consulted the regulation documents 8 and information on how to prepare a SAMA analysis 9 since I hadn't made use of the MACCS2 code myself.
10 And the guidance provided there says that 11 the population estimate should include census data and 12 extrapolations of census data and then to those 13 figures should be added the transient population.
14 Then if I look in a variety of other locations, but in 15 particular, a recent document that was authored by Mr.
16 Jones, there is a very clear statement of what the 17 transient population should include. The transient 18 population should include shoppers and tourists and 19 should include people who live outside the zone, but 20 work within the zone. So it doesn't say include the 21 net difference. It suggests that the definition of 22 transient population for the purpose of this analysis 23 should be the people who live outside the 50-mile 24 zone, but work within the 50-mile zone.
25 So if I take what I understand to be the Neal R. Gross & Co., Inc.
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Page 2476 1 suggested definition of transient population, and 2 implement that using the best data available, that 3 leads me to the estimate I've provided.
4 JUDGE WARDWELL: You stated that -- you 5 said that you based this using some guidance for the 6 MACCS2 code and then a document that Mr. Jones 7 authored. Do you have a cite for both of those?
8 DR. SHEPPARD: Yes, I do. So first off, 9 New York State 000287. I don't know what PDF page it 10 is, but the number at the bottom of the page is page 11 13. It's discussing population distribution. This is 12 -- the title page is severe accident mitigation 13 alternatives analysis guidance document.
14 MS. LIBERATORE: Your Honor, Kathryn 15 Liberatore for the State. That's PDF page 22 of 79.
16 DR. SHEPPARD: And it says in Section 17 3.4.1 "transient population included in the site 18 emergency plan should be added to the census data." So 19 it's clear that transient populations are worthy of 20 consideration for this analysis.
21 And then one seeks a more precise 22 definition of what should constitute the transient 23 population? And if I look at -- I consulted two 24 different documents, Entergy document 000014, which 25 has on page 3-2 a very nice, clear definition of what Neal R. Gross & Co., Inc.
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Page 2477 1 this analysis would consider to be transient 2 population. Transients are people who reside outside 3 of the zone or enter the area for a specific purpose.
4 That's shopping and recreation. And then to that is 5 to be added employees, people who reside outside and 6 commute to business within the planning zone on a 7 daily basis.
8 So the population groups that appear to be 9 mandated to be considered to my understanding were the 10 permanent residents, the tourists-type transients, and 11 then the daily commuter flows who come in. No 12 suggestion is made that we should net out the people 13 who flow out. That seems consistent to me with the 14 principle of conservatism in the population estimate 15 because there are times when both the out-commuters 16 and the in-commuters are on the road, en route, as you 17 suggested in your previous question, Your Honor.
18 Those individuals could, in some circumstances be 19 subjected to a higher dose exposure than those who 20 have a residence or shelter protecting them.
21 So it seemed to me, it all seemed 22 consistent to me to proceed that way in forming the 23 best possible estimate of the population to be 24 included within the 50-mile zone.
25 JUDGE McDADE: Does your calculation take Neal R. Gross & Co., Inc.
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Page 2478 1 into consideration super commuters?
2 DR. SHEPPARD: My calculation -- the 3 calculations I've presented they include anybody who 4 responded to the census survey and said yes, I'm 5 commuting. On the census day I was in New York City 6 or in any of the counties within the -- that intersect 7 the 50-mile zone around Indian Point. So it does 8 include a very small number of people who appear to 9 have commuted from a very long distance.
10 In rebuttal testimony, an issue or concern 11 was raised about this small number of people who 12 appeared to be commuting from Boston or Chicago or 13 other long distances within the United States. I 14 don't feel it's wise to exclude those. They're not a 15 large part of the number in any event, so they could 16 be excluded. But there is a studied and understood 17 phenomenon that contemporary labor markets do involve 18 small numbers of people who commute astonishing large 19 distances.
20 JUDGE McDADE: But wouldn't they already 21 be captured as business travelers? And I think the 22 information that was put forward by the Staff and the 23 Applicant is that in this area there were about 24 59,000, a significant number. But how do we avoid 25 -- and under your calculation, how do we avoid Neal R. Gross & Co., Inc.
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Page 2479 1 counting them as business travelers already counted 2 and as commuters as well?
3 DR. SHEPPARD: It's difficult to be 4 absolutely certain because of the lack of precise 5 information from the state tourist agencies about how 6 they collect their data. And I know that practices 7 differ between the states. I've worked myself in 8 other research in quite detail, in a lot of detail 9 with Massachusetts, Connecticut, and New York tourism 10 data and I know that those three states all use 11 different methodologies.
12 So can I be absolutely certain that none 13 are double counted? No. But it seems to me 14 reasonable that some business travelers -- if business 15 travelers are estimated by overnight stays, then many 16 of those will be included in the tourist numbers. But 17 not all super commuters involved overnight stays. A 18 person can -- if a person on a census day who resides 19 in Chicago traveled to New York, they can take a 20 morning flight, they can be in Chicago or be in New 21 York. They can have a series of meetings. They can 22 confer with colleagues and they can return home that 23 same day.
24 JUDGE McDADE: And this is to the Staff, 25 whoever, Mr. Jones or Dr. Bixler, there was an Neal R. Gross & Co., Inc.
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Page 2480 1 estimate that 25 percent of Dr. Sheppard's commuters 2 are already included in the transient population. Can 3 you explain where that 25 percent figure came from?
4 MR. JONES: This is Joe Jones with Staff.
5 Yes, I can. It was understood and documented that 6 business travelers are included in the commuter 7 estimate. But there was no quantification provided 8 for that.
9 Now I was aware and fully confident that 10 it was not 100 percent of the commuters were business 11 travelers and I was very confident that half the 12 commuters were not business travelers in this part of 13 the country. So I selected an estimate of 25 percent.
14 Now recognizing that this is a small 15 contribution to the SAMA analysis because if they're 16 treated appropriately, they should not be considered 17 to include decontamination costs per person or full 18 dose commitments or relocation costs. So the 25 19 percent of one million people is on the order of 20 250,000.
21 Now the super commuters document that we 22 just discussed, identified about 59,000, 60,000 people 23 commuting to Manhattan. So there's kind of a delta 24 there; 59,000 is 6 percent, so we could say that 6 25 percent are business travelers using that document as Neal R. Gross & Co., Inc.
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Page 2481 1 a basis. Or my estimate of 25 percent, it was an 2 assumption for a simple illustration. So the delta 3 there is 19 percent. Because we're certainly not 4 arguing that my estimate was high -- was low. It's 5 evidently being considered as a high estimate.
6 So we're looking at something on the order 7 of 19 or 20 percent difference which in the context of 8 commuters is, as I just explained, 20 percent of 9 commuters, one million people would be 200,000 who 10 should not receive a full cost allocation in the SAMA 11 area. And therefore, they represent less than 1 12 percent contribution to the SAMA analysis.
13 JUDGE McDADE: Okay, why do you think 14 business travelers are captured in Dr. Sheppard's 15 commuter group?
16 MR. JONES: The testimony explains that 17 business travelers are included and with tourists.
18 JUDGE McDADE: But they're included with 19 tourists. I'm talking about with commuters. Why do 20 you think the business travelers would be captured in 21 the commuter group? The business travelers -- well, 22 let me just leave it there. Why do you think that?
23 MR. JONES: Could you repeat the question, 24 Your Honor?
25 JUDGE McDADE: Okay, it seemed like the Neal R. Gross & Co., Inc.
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Page 2482 1 answer that you gave assumed that super commuters and 2 business travelers were accounted for within the 3 commuter group that Dr. Sheppard referred, his 900,000 4 something. Can you point me to what it is that 5 informs that belief?
6 Actually, hold that for a second. Dr.
7 Sheppard, I just chased down something that isn't 8 being chased. Do you believe that business travelers 9 and tourists would be included in that 900,000 10 commuter group?
11 DR. SHEPPARD: No, I don't, certainly not 12 tourists.
13 JUDGE McDADE: What about business 14 travelers?
15 DR. SHEPPARD: Business travelers, I don't 16 believe that they are included.
17 JUDGE McDADE: They would have to self-18 identify as commuters.
19 DR. SHEPPARD: A business traveler would 20 have to self-identify as commuter. That point what 21 you just said is exactly correct, because these county 22 to county work-flow numbers are obtained by individual 23 responses to census surveys. And so they're asking 24 are you commuting to such a such location and they say 25 if you work outside the county in which you reside, Neal R. Gross & Co., Inc.
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Page 2483 1 what county do you work in? So it's answering that 2 basic question.
3 So in order to believe that the commuter 4 numbers that I'm using or that I'm providing and using 5 to supplement the population estimate, in order to 6 believe that that includes a large number of business 7 travelers, we would have to believe that a person who 8 was attending a business conference within the 50-mile 9 zone or was staying overnight as a sales 10 representative or whatever, a typical business 11 traveler, that they would have to say yes, I work 12 outside the county that I reside in and that county is 13 one of the counties within the 50-mile zone.
14 One can conjecture about that, I'm not 15 aware of any research that identifies specifically 16 that weight. The choice I made in my analysis was to 17 say I think it's most plausible that if a person says 18 I was commuting, they are commuting. They understand 19 commuting in the ordinary sense of the word as regular 20 travel for purposes of work, not simply occasional 21 business travel that would involve an overnight stay.
22 I agree that that latter group will --
23 most of them will be picked up by the state tourist 24 boards.
25 JUDGE McDADE: Mr. Jones, wouldn't you and Neal R. Gross & Co., Inc.
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Page 2484 1 I be considered business travelers into the 50-mile 2 area, but not commuters?
3 MR. JONES: That is correct.
4 JUDGE McDADE: Wouldn't most business 5 travelers be in that, if not vast majority of business 6 travelers be in that same category?
7 MR. JONES: I would agree with that, yes.
8 JUDGE McDADE: So should they be deducted 9 somehow from Dr. Sheppard's commuter calculation?
10 MR. JONES: No, they should not. They are 11 -- I was attempting to say that they are included with 12 the transients that was a population of about 300,000 13 plus that was defined as including the business 14 travelers, tourists, and shoppers. And they're a 15 portion of that.
16 JUDGE McDADE: Is in any way a commuter's 17 loss of income captured in the SAMA analysis as a cost 18 of the severe accident?
19 MR. JONES: I'd like to defer that to Dr.
20 Bixler.
21 DR. BIXLER: They would not normally be 22 included as far as a loss of income since they reside 23 outside of the 50-mile zone, they wouldn't be 24 included. In fact, maybe a portion of them would have 25 some loss of income, although it could be that the Neal R. Gross & Co., Inc.
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Page 2485 1 income continues, but they now work outside of the 50-2 mile zone or something to that effect. So it's not 3 clear to me what fraction of the commuters who would 4 normally commute into the 50-mile zone would actually 5 lose employment as a result of an accident.
6 MR. TEAGARDEN: Your Honor, Grant 7 Teagarden for the Applicant. If I could augment Dr.
8 Bixler's response, because for individuals who are 9 commuting out of the region for their workplace, they 10 would be -- MACCS would be counting them as having 11 their disruption associated with their job when in 12 actuality their job occurs outside the 50-mile region.
13 So MACCS would be accruing costs for those 14 individuals, the outflow, which does not reflect their 15 situation. So another example of how the inflow and 16 the outflow need to be considered together just 17 because MACCS does not distinguish individuals by 18 their role within the 50-mile region.
19 JUDGE McDADE: But in the circumstances we 20 have here, wouldn't it be reasonable to assume that 21 the inflow of commuters into the 50-mile area far 22 exceeds the outflow of commuters out of the 50-mile 23 area?
24 MR. TEAGARDEN: Your Honor, Entergy has 25 examined that question and found that it does not Neal R. Gross & Co., Inc.
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Page 2486 1 exceed it to the degree that you might anticipate.
2 Ms. Potts, would you --
3 MS. POTTS: Yes, Lori Potts for the 4 Applicant. In our testimony, there's Table 4 on page 5 47, that's Entergy 000003 if you want to go there.
6 MS. STOLLEY: Your Honor, Martha Stolley 7 for the Applicant. That's Entergy Exhibit 000016.
8 MS. POTTS: I'm sorry. I was actually 9 going to our testimony.
10 JUDGE McDADE: I'm sorry, is this your 11 direct testimony. You said Entergy 000003.
12 JUDGE WARDWELL: Page 47, you said?
13 MS. POTTS: Page 47. What this table 14 reflects is the analysis that we did using the county 15 to county worker flow data that Dr. Sheppard used and 16 accounting for where each person goes to work in or 17 out, coming into the region or leaving the region.
18 And you can see in the total there in the center that 19 there's only -- there is a net influx of commuters, 20 but only about 110,000.
21 You can see for some counties there are 22 actually more people who leave that county to go to 23 work than enter that county. The negative numbers are 24 the ones where there are more people leaving.
25 JUDGE McDADE: Okay, but on the more Neal R. Gross & Co., Inc.
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Page 2487 1 people leaving, according to this chart, the way you 2 just described it, it would mean that a quarter of a 3 million more people commute out of Kings County and 4 out of the 50-mile area each day than commute in. I 5 mean is that realistic that there would be -- I mean 6 you start off with a population of less than 2.5 7 million for the county. It seems like out of that 8 population a significant number of people wouldn't be 9 employed at all because they're under 18. They're 10 over 70. They work inside the home. They're 11 students. They're unemployed. And then you would 12 have a significant percentage of the people in Kings 13 County who would live and work in Kings County and you 14 would have a significant percentage of the people in 15 Kings County who would commute into New York County or 16 into the Bronx.
17 I mean I guess I'm saying at first glance, 18 it appears to me that quarter of a million number 19 appears unrealistic. Am I misreading it?
20 MS. POTTS: No, Your Honor, but that's 21 what the census data shows from the people that said 22 they were -- live in Kings County, New York and work 23 elsewhere.
24 JUDGE WARDWELL: Let me ask this, if those 25 Kings County people for sake of argument let's assume Neal R. Gross & Co., Inc.
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Page 2488 1 all 250,000 work in downtown New York City. Would 2 those numbers be reflected in the 1.355 million value 3 of New York, New York?
4 MS. POTTS: Yes, they would.
5 MR. RIGGS: Your Honor, this is Jerry 6 Riggs for the Applicant. In this data set, you can 7 see this is high resolution data set. Those numbers 8 are from people -- net numbers of coming into and 9 leaving the county and the 50-mile region.
10 JUDGE WARDWELL: And the 50-mile region?
11 MR. RIGGS: Yes, sir. So you get a net 12 total in and out of the 50-mile region of 110,663, 13 people coming into the region.
14 MR. BESSETTE: Your Honor, this is Paul 15 Bessette. I would refer you to the source of the data 16 as identified by Ms. Potts. The source of the data is 17 the rebuttal commuter analysis. It's the same data 18 that Dr. Sheppard relied on. And the title of the 19 columns are commuters into the 50-mile region.
20 JUDGE McDADE: I understand, Mr. Bessette.
21 All I was getting at is just in taking a quick look at 22 those numbers and just at first glance and perhaps 23 since I'm not testifying and I don't have the 24 knowledge to testify in any event, in a county like 25 Queens County or Kings County, and Kings County is Neal R. Gross & Co., Inc.
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Page 2489 1 Brooklyn, correct? Okay. What percentage of the 2 total population would you expect to be employed?
3 Wouldn't it be about 40 percent of the people? Does 4 anyone have any knowledge in that area of what 5 percentage you would expect to be employed totally?
6 Again, like in Queens, you have 460,000 7 net commuters out of 2.6 million population. Does 8 anyone have any knowledge in that regard, sort of a 9 general estimate as to what percentage of an urban 10 population like Brooklyn or Queens would be employed, 11 taking out people who are retired, people who are 12 below working age, people who are students, people who 13 don't work outside the home, people who are 14 unemployed?
15 MR. RIGGS: Your Honor, this is Jerry 16 Riggs for the Applicant. We do use that data, but we 17 don't have it in front of us.
18 MR. JONES: Your Honor, this is Joe Jones 19 for the NRC. In development of the evacuation time 20 estimates that we do when we look at school data, for 21 instance, we find that just under 30 percent of the 22 public tends to be school-age children.
23 JUDGE McDADE: Okay, let me move on to 24 something else to the Staff. The NEI 05-01 --
25 MS. LIBERATORE: Your Honor, Kathryn Neal R. Gross & Co., Inc.
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Page 2490 1 Liberatore for the State. Just a point of 2 clarification for the record. Kings County is 3 Brooklyn. I think there was just a verbal nod, so I 4 just wanted to make sure that that was clear on the 5 record.
6 JUDGE McDADE: We would hate to make a 7 finding of fact that moved Brooklyn.
8 (Laughter.)
9 I guess that's a way it can trump its 10 neighbor as well. Anyway, never mind. NEI 05-01, New 11 York Exhibit 000285, it recommends that transient 12 population included in site emergency plans be added 13 to the census for the SAMA.
14 Commuters are included for emergency 15 plans. Why aren't they included for the SAMA?
16 MR. JONES: This is Joe Jones for the NRC.
17 There's a good reason for that, Your Honor. In 18 developing an evacuation time estimate, we need to 19 understand how many vehicles may be on the road at any 20 given time over the course of many different 21 scenarios. And if we could look at Entergy Exhibit 22 000014, page 6-5, this might help describe this.
23 While that is being brought up, the reason 24 we need to look at this is we need to account for the 25 number of vehicles on the road in the event that an Neal R. Gross & Co., Inc.
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Page 2491 1 evacuation is ordered. So we do a time roadway 2 capacity population estimate that identifies and as 3 this table comes up, that identifies the evacuation 4 time estimate for any of a given number of scenarios.
5 And this is the Indian Point evacuation time estimate.
6 And you can see on the lefthand side, there were 14 7 different scenarios.
8 Now for instance, Scenario 5 is a summer 9 midweek or weekend evening. We would have a different 10 number of commuters for that scenario. If you go 11 directly to the next page, we include commuters in the 12 employees column here. You can see there are only 13 three scenarios there, 6, 7, and 8, where 100 percent 14 of commuters are used. For Scenario 12 and Scenario 15 5, there are only 10 percent of the commuters included 16 in the analysis.
17 So we take the information and apply it in 18 a scenario-specific approach so that we can identify 19 under any of the given conditions for the scenarios 20 what the evacuation time might be. That provides 21 offsite response agencies the information at a level 22 that is useful to them. If we just blindly included 23 commuters in every scenario, an evening evacuation 24 time estimate would not be realistic. And it would 25 misinform the individuals that would be needing to Neal R. Gross & Co., Inc.
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Page 2492 1 make an evacuation decision.
2 JUDGE McDADE: Okay, but is my 3 recollection of NEI 05-01, that's 287 at 13, correct 4 that it recommends that transient populations included 5 in the site emergency plan be added to the census for 6 the SAMA? Are you saying you disagree with that 7 insofar as it includes commuters?
8 MR. JONES: Well, it definitely says and 9 I have it here in front of me that the population 10 included in the site emergency plan and this data in 11 the evacuation time estimate is the population 12 included in the site emergency plan. It's a very 13 small subset of the SAMA area, since this only goes to 14 10 miles.
15 JUDGE McDADE: Okay, and the exhibits 16 000405, 000406, and 000407 and 000407 we talked about 17 before the NUREG/CR-7002 which you authored, that 18 talks about the NUREG for emergency planning does lump 19 commuters with tourists and business travelers, but 20 your testimony is that while in your opinion it is 21 appropriate for the emergency plan, it's not 22 appropriate for the SAMA analysis?
23 MR. JONES: That is correct, Your Honor.
24 I just realized that the entire 7002 was not an 25 exhibit, just up through about page 12. Otherwise, I Neal R. Gross & Co., Inc.
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Page 2493 1 would point to the reference in that document where we 2 provide the descriptions of commuters in greater 3 detail. And it defines that or it explains that 4 commuters should be identified as appropriate for the 5 given scenario.
6 JUDGE McDADE: Okay, you reduced Dr.
7 Sheppard's estimate on commuters because they're not 8 present 24/7. Not knowing when an accident might 9 occur, one could estimate that 100 percent of 10 commuters or close thereto would be available or in 11 the area say at noon, almost none at 2 o'clock in the 12 morning. What number, if any, do you think should be 13 used in this regard?
14 MR. JONES: Again, I reduced that number 15 because commuters should not be assigned the full 16 allocation of costs associated with a permanent 17 resident. In my opinion, the cost with regard to 18 commuters, if we agree there are on the order of a 19 million commuters and they are in the area on the 20 order of 20 percent of the time, we have 200,000 21 commuters which is 1 percent of about 20 million 22 people in the SAMA area. And if we discount the fact 23 -- if we discount the decontamination costs and 24 relocation costs associated with those individuals and 25 just accounted for dose, even if we accounted for dose Neal R. Gross & Co., Inc.
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Page 2494 1 of them coming back every day and working in the area, 2 it would be less than one percent of the SAMA 3 analysis.
4 JUDGE McDADE: I believe --
5 JUDGE WARDWELL: Just a point of 6 clarification before you leave that? Now are these 7 only the commuters that are outside the 50-mile area 8 coming in or are these all commuters or --
9 MR. JONES: When I use the number of about 10 a million, that does not account for any commuters 11 leaving the SAMA area and returning back. This is just 12 commuters coming into and working.
13 JUDGE WARDWELL: It doesn't include any 14 commuters within the 50-mile zone?
15 MR. JONES: Correct.
16 JUDGE WARDWELL: And Entergy, is that what 17 you used in your SAMA analysis, what Mr. Jones just 18 described? Is that what you -- oh, no. You just did 19 that for sensitivity.
20 MR. JONES: Correct.
21 JUDGE WARDWELL: You did not use any 22 commuters, is that correct, Entergy?
23 MR. TEAGARDEN: Your Honor, we did not 24 incorporate commuters specifically. However, we 25 incorporated transients throughout the whole 50-mile Neal R. Gross & Co., Inc.
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Page 2495 1 region.
2 One point of clarification, it's been 3 mentioned, but may not have been highlighted is that 4 the NEI guidance specifies including transients that 5 are included in the site emergency plan. The site 6 emergency plan goes to a distance of ten miles.
7 What Entergy uses were transients for the 8 full 50-mile region from available state data. And 9 the number of individuals they included is a factor of 10 two higher than what would have been included had they 11 simply approached the commuters for the ten-mile 12 region with other transients from the emergency plan.
13 So Entergy had collected available data 14 for the whole 50-mile region and elected to use that 15 data, recognizing that it was conservative in regards 16 to transients.
17 MR. JONES: And Your Honor, if I could 18 just clarify one other item with regard to this NUREG-19 7002. As I had mentioned earlier when asked by Judge 20 Kennedy whether this was guidance for SAMA analysis, 21 I specifically identified that it is not.
22 JUDGE WARDWELL: Back to Entergy. Can you 23 state the rationale for why business travelers are 24 considered different than commuters in your opinion?
25 And I don't care who elects to answer that question.
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Page 2496 1 MR. TEAGARDEN: Your Honor, the business 2 traveler data was collected with a view towards hotel 3 occupancy and things of that nature. So it was part 4 of the data set.
5 JUDGE WARDWELL: I wasn't asking how it 6 was collected. I was asking why if you include 7 business travelers wouldn't the same rationale pretty 8 much hold for commuters or at least some fraction 9 thereof of those commuters from a philosophical 10 standpoint? And I'm speaking now of commuters outside 11 the 50-mile -- whenever I use the phrase commuters, 12 I'm only referring to those outside the 50-mile zone.
13 MS. POTTS: Could you rephrase that 14 question? This is Lori Potts for Applicant.
15 JUDGE WARDWELL: Probably not.
16 MS. POTTS: I'm not sure what you're 17 asking.
18 JUDGE WARDWELL: I'm asking if business 19 travelers are incorporated into a SAMA analysis which 20 you have done, correct?
21 MS. POTTS: Yes.
22 JUDGE WARDWELL: Then why isn't it 23 rational to also include commuters outside the 50-mile 24 zone at least in some fraction of the time that 25 they're here?
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Page 2497 1 MS. POTTS: Well, again, as we have stated 2 before, the SAMA analysis accounts for each person 3 that you add as a permanent resident. So it accounts 4 for all those economic costs for every person that you 5 add. By including the tourists and business travelers 6 from the state tourism data, we included some 349,000 7 people and assigned a residence to them within the 8 region.
9 If we had included the commuters that are 10 listed in the evacuation time estimate study, as 11 recommended, we would have only included about -- we 12 would have only added about 160,000 people to the 13 analysis. So what we have done is conservative.
14 The SAMA analysis doesn't know who is a 15 commuter and who is a business traveler and who is a 16 permanent resident if they're all permanent residents.
17 JUDGE McDADE: You lost me there for a 18 moment. Can you just repeat that analysis right at 19 the end? I thought I heard that you included a few 20 hundred thousand people in the -- as transients, but 21 that if you included commuters you'd be talking about 22 100,000. Wouldn't you be talking about 1.2 million as 23 opposed to 300,000?
24 MS. POTTS: Sir, what I meant was if we 25 had included the transients and employees that are in Neal R. Gross & Co., Inc.
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Page 2498 1 the evacuation time estimate study as recommended in 2 the guidance, that would only be about 160,000 people, 3 the 10-mile number of people.
4 JUDGE McDADE: Okay, so what you're saying 5 is and correct me if I'm wrong here because this is 6 what I'm hearing, so I want to make sure it's the same 7 thing that you're saying, is you have built 8 conservatism in because the guidance only requires you 9 to consider the immediate 10-mile zone around the 10 facility. Instead, you considered the 50-mile zone 11 around the facility for transients and therefore one, 12 you have almost three times as many transients; and 13 two, those transients are, if anything, over 14 represented because all of the costs of a permanent 15 resident are attributed to them, whereas they actually 16 only are responsible for a significantly smaller 17 percentage of that overall cost.
18 MS. POTTS: That's correct.
19 JUDGE McDADE: I want to make sure what 20 I'm hearing is what you're saying, there's no 21 disconnect there.
22 MS. POTTS: Correct.
23 JUDGE WARDWELL: And now what I'm asking 24 is not how much conservatism have you built in, but 25 the way I would deduce the answer to my question --
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Page 2499 1 JUDGE McDADE: I was rephrasing her 2 answer, not your question.
3 (Laughter.)
4 JUDGE WARDWELL: If I was to deduce your 5 statement as a response to my question, I would word 6 it this way, that -- I don't know how I'd -- I had it, 7 but I lost it. I apologize. I'll just ask my 8 question again to someone else.
9 Mr. Teagarden, does NEI define transient?
10 MR. TEAGARDEN: NEI-0501 does not 11 specifically define transient.
12 JUDGE WARDWELL: In Entergy's analysis, 13 you have used business travelers and tourists as 14 transients.
15 MR. TEAGARDEN: That's correct.
16 JUDGE WARDWELL: With that same rationale 17 that you use those two as transients, why have you not 18 used commuters in some fashion? Because the same 19 types of conservatism exists with those. You have 20 some concern. The same problems with -- you have the 21 same problems associated with the facts that yes, 22 you're assigning costs to those business travelers and 23 tourists as residents. Well, fine. Why aren't you 24 applying that same rationale to commuters or vice 25 versa? Why don't you draw the line at only business Neal R. Gross & Co., Inc.
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Page 2500 1 travelers and not the tourists and commuters? Why did 2 you draw the line when you drew the line?
3 MR. TEAGARDEN: That data was developed 4 for multiple purposes, the 50-mile data for the 5 tourist segments, I'm sorry for the transient 6 segments, tourists and business travelers. So that 7 was a readily available set of data that bounded by a 8 factor of two or more the data that could have been 9 used had a stricter or application of the NEI-0501 10 guidance used.
11 Entergy could have added additional 12 conservatism by adding commuters into the 50-mile 13 region, understanding that MACCS misrepresents their 14 contribution. But at some point, as it's been 15 discussed, SAMA analysis is intended to be a best 16 estimate analysis. Entergy has included several 17 conservatisms going to the Year 2035 which even 18 exceeds the life-extension date for Indian Point Plant 19 2 by including the transients for the full 50-mile 20 region. And that was judged to be more than 21 sufficient level of conservatism to be included in the 22 analysis.
23 JUDGE WARDWELL: And is there any 24 indication that that was a true judgment of a 25 conscientious decision mechanism when first developing Neal R. Gross & Co., Inc.
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Page 2501 1 this, that you actually did look at the commuters and 2 say no, we're not, or was this just an oversight or 3 something that hasn't been done before until it was 4 brought to your attention?
5 MS. POTTS: Lori Potts for the Applicant.
6 I don't believe that that rationale is written down, 7 but that certainly is what was in our mind.
8 JUDGE WARDWELL: Thank you.
9 JUDGE McDADE: Dr. Sheppard, does your 10 analysis take into consideration at all where within 11 the 50-mile zone commuters are going?
12 DR. SHEPPARD: It does at the county 13 level. So the data that I have available from the 14 Census Bureau provides information on which county is 15 the destination of their commuter journey. But below 16 that, I have no information. So I don't take separate 17 account at a sub-county level.
18 JUDGE McDADE: Would it be accurate that 19 the vast majority of the commuters are going to the 20 periphery of the 50-mile zone, such as New York 21 County?
22 DR. SHEPPARD: That strikes me as not an 23 unreasonable hypothesis. However, many of them will 24 also pass through other portions of the 50-mile zone.
25 So in an ideal world, if we had unlimited time and Neal R. Gross & Co., Inc.
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Page 2502 1 resources to conduct this analysis, we'd probably want 2 to combine not only the commuter destinations, but 3 also the primary transient route so that we could 4 ascertain what portions of the -- what grids, what 5 portions of the 50-mile zone they pass through. That 6 would be doable. I haven't undertaken such an 7 analysis.
8 JUDGE McDADE: But a very significant 9 percentage of the people commuting into Manhattan from 10 outside the 50-mile zone would be commuting from North 11 Jersey, Long Island, and eastern Connecticut.
12 DR. SHEPPARD: That's correct.
13 JUDGE McDADE: So they wouldn't be going 14 towards the epicenter of the accident.
15 DR. SHEPPARD: That's right.
16 JUDGE McDADE: To the Staff or Entergy, 17 there's a significant percentage of people who commute 18 from this area down to New York City to Manhattan, I 19 would assume. I believe that your testimony indicated 20 that there's about 170,000 commuters from the vicinity 21 of the plant into New York City.
22 Is there any way to calculate the 23 difference in the dose that they would receive by 24 staying in the Peekskill area as opposed to moving 25 down to the New York area, New York City?
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Page 2503 1 MR. JONES: This is Joe Jones with Staff.
2 The MACCS code will not account for that. I would 3 imagine that Dr. Bixler could do a hand calculation of 4 some sort, but it is not accounted for in the 5 analysis. So in that example, those individuals and 6 it is about 170,000, they are modeled as getting a 7 greater dose than they likely would receive.
8 JUDGE McDADE: So there's no change in the 9 SAMA analysis to reflect the fact that during a 10 significant portion of the day, maybe a third of their 11 time is spent away from the site of the accident?
12 MR. JONES: That is correct.
13 JUDGE KENNEDY: This is Judge Kennedy. It 14 makes me wonder and it's maybe even stated, the 15 transient population, how is it distributed within or 16 is it distributed around the 50-mile region? Is there 17 any attempt to place the transient population in 18 different grid elements?
19 MR. RIGGS: Your Honor, this is Jerry 20 Riggs for the Applicant. When we get the data, we 21 -- the data comes in state-wide data, so it's 22 distributed evenly for -- distributed evenly over the 23 entire state. Then we place that information into the 24 sectors.
25 JUDGE KENNEDY: And how is it placed in Neal R. Gross & Co., Inc.
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Page 2504 1 the sectors?
2 MR. RIGGS: Again, by area weighting.
3 JUDGE KENNEDY: Area weighting?
4 JUDGE WARDWELL: I assume that means by 5 square footage?
6 MR. RIGGS: Yes.
7 JUDGE WARDWELL: Or square miles.
8 JUDGE KENNEDY: And the transient 9 population that you're speaking of in this case would 10 be tourists plus business travelers?
11 MR. RIGGS: It's business travelers and 12 visitors. So tourists would be included.
13 JUDGE KENNEDY: Is visitors a new category 14 here? I was pretty good with tourists and business 15 travelers. Are visitors --
16 MR. RIGGS: Let's keep it at that then.
17 It's sufficient.
18 JUDGE KENNEDY: We can stay with that if 19 that's an accurate representation of the transient 20 population. What constitutes -- let's try it 21 differently. Maybe Mr. Riggs, what constitutes 22 transient population?
23 MR. RIGGS: According to the data, it's 24 business travelers and visitors.
25 JUDGE KENNEDY: Are visitors commuters?
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Page 2505 1 MR. RIGGS: No, they are not. They would 2 be people coming in for shopping or entertainment, 3 people visiting hotels that aren't business travelers.
4 There's not a real clear division on any of that in 5 the data.
6 JUDGE KENNEDY: And that's based on 7 statewide data?
8 MR. RIGGS: From the tourism bureaus, yes.
9 JUDGE WARDWELL: And you proportionate it 10 strictly by the area of the various sectors?
11 MR. RIGGS: That's correct. It's by area.
12 JUDGE WARDWELL: So a given square mile in 13 Tarrytown would see the same number of transients as 14 a square area in Manhattan?
15 MR. RIGGS: Well, to make it clear, in our 16 report we've got tourism data. In New York's case, in 17 particular, from the New York MSA and then the State 18 of New York. So we were able to glean out a little 19 bit more resolution out of that data set so I'd have 20 to go into it and review it to find out if Tarrytown 21 is in the New York MSA to answer that question. So 22 the answer to your question is I'm not sure. I'd have 23 to look into it further.
24 JUDGE WARDWELL: So the answer to your 25 previous question is you're not sure that it's Neal R. Gross & Co., Inc.
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Page 2506 1 necessarily done by area. It may have some fine 2 tuning associated with it?
3 MR. RIGGS: There is fine tuning, but 4 regardless, both of these are by area.
5 JUDGE WARDWELL: What is MSA?
6 MR. RIGGS: Metropolitan Statistical Area.
7 It's -- there's different geographies that things are 8 broken down into and it's a large geography that 9 incorporates much of New York City.
10 JUDGE KENNEDY: This is Judge Kennedy, 11 again. I'm changing the subject slightly, but it's 12 been stuck in the back of my head. This may not be 13 the right time to ask it, but in the context of having 14 this discussion about commuters, there was discussion 15 about conservative analyses, best estimate analyses, 16 and that when you net it all out, it may not be 17 important to consider commuters because there's some 18 sort of conservative assessment that at least led to 19 a judgment, including commuters in this calculation 20 may not be appropriate.
21 The question is is there something that 22 you can point us to that could help us understand this 23 judgment that was done on what's conservative, what's 24 best estimate?
25 Is there -- where do we want to be Neal R. Gross & Co., Inc.
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Page 2507 1 looking? I mean what exhibit that's in the evidence 2 here would help us understand this better? I'm sort 3 of getting confused as to what's best estimate, what's 4 conservative, and what takes care of the commuters, if 5 you will, if it does?
6 Anybody? I can restate the question. I'm 7 really trying to understand where this conservatism is 8 that I'm understanding is what's taking care of the 9 commuter population so that it may not be a 10 significant factor. And if I didn't hear it that way, 11 maybe it's this opportunity to restate that position.
12 I think, Ms. Potts, I think that's what I 13 was hearing from what you were saying is that there's 14 conservative numbers. There's some best estimate, but 15 at the end of the day, there's conservatism in here 16 that makes us less concerned about the commuter 17 population.
18 MR. JONES: Your Honor, this is Joe Jones 19 with Staff. And there are a number of areas where 20 conservatism appears and I would start as Ms. Potts 21 said earlier that the populations are projected to the 22 end of the life. There is a conservatism in that we 23 have tracked the data point that shows the 2010 24 population is about 2 percent greater than had been 25 projected. There is a conservatism with regard to Neal R. Gross & Co., Inc.
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Page 2508 1 business travelers and maybe I can clear that up a 2 little bit as to why it may be more appropriate to 3 model them than commuters because we do know that 4 business travelers stay overnight. That's how we 5 define them. Whether or not it's the same business 6 traveler that comes back isn't important. What's 7 important is the assumption is that hotel will be 8 full. So the dose is accrued for a resident being in 9 there or as a resident.
10 Now it's conservative in the sense that 11 we're also accounting for decontamination costs of the 12 business traveler's home and he does not live here, 13 whereas a commuter is only in the area for a small 14 period of the time.
15 And lastly, another conservative item is 16 that when Entergy included the transient data which 17 was described as visitors and business travelers, as 18 Dr. Sheppard pointed out in his testimony, they could 19 have culled out the daily visitors. They could have 20 separated those and maybe said we don't need to count 21 those because they're only in the area a percentage of 22 the time, but they did not. They kept them in that 23 total and included them as though they were residents.
24 So there again, we've got another population subgroup 25 that is treated as residents that do not live within Neal R. Gross & Co., Inc.
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Page 2509 1 the SAMA area.
2 So there are many areas within the 3 analyses where you see this arise.
4 JUDGE KENNEDY: I mean I guess what I'm 5 hearing is that there's a number of places where 6 conservatism has been built into the analysis, but I 7 didn't quite hear an assessment of the contribution 8 that commuters could play to the overall either dose 9 calculation or cost calculation -- offsite economic 10 cost risk calculation. Is there such an estimate that 11 can be pointed to in this proceeding?
12 MR. JONES: It's conservative compared to 13 what -- and I guess that's what I'm struggling with.
14 I understand that you feel something is conservative 15 but I'm trying to get a measure of is there sufficient 16 conservatism that the issue of commuters and 17 estimating the commuters or accounting for them in 18 some fashion has been taken care of.
19 MR. JONES: I can only point to a portion 20 of my testimony where I identified that I believed 21 commuters would represent less than one percent effect 22 on the SAMA analysis. That was based on the fact that 23 if we recognized there may be about one million 24 commuters, not accounting for commuters that leave the 25 SAMA area, and if we account for them coming into the Neal R. Gross & Co., Inc.
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Page 2510 1 SAMA area for about 20 percent of the time, that takes 2 into account weekends, holidays, sick leave, other 3 reasons they may not come in to work.
4 So we have about 20 percent of a million 5 which if you tried to analyze that number as a 6 resident, that would be 200,000 residents which is 7 approximately 1 percent of the 20 million population 8 in the SAMA area. And again, if we tried to count 9 them as residents and included decontamination costs 10 that would still be conservative, even at one percent.
11 JUDGE KENNEDY: That one percent isn't the 12 bottom line of the -- the difference in the bottom 13 line of the SAMA analysis. It's more of the 14 difference in the relative populations. Is that 15 correct, as I just heard you? Or did you rerun the 16 SAMA analysis to see the effect on the bottom line?
17 MR. JONES: No, we did not rerun the SAMA 18 analysis.
19 DR. GHOSH: If I could just add, this is 20 Tina Ghosh from the Staff. The question came up 21 earlier of possibly undercounting the population dose 22 to these commuters who might still be coming into work 23 after an accident. The population dose risk is, I 24 believe, on the order of 50 percent of the total 25 economic risk and the OECR or the Off-Site Economic Neal R. Gross & Co., Inc.
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Page 2511 1 Cost Risk which accounts for things like 2 decontamination, lost income and so is 50 to 55 3 percent for Indian Point 2 and 3.
4 So I think there again we may be 5 undercounting some of the population dose for that 40 6 percent term. But for those transients and others 7 that are assigned to the 100 percent living within 8 that 50-mile region, we're over accounting a lot of 9 that 50 to 55 percent of that cost term, just to put 10 it in perspective in terms of the total effect.
11 MR. TEAGARDEN: Your Honor, Grant 12 Teagarden for the Applicant. If I may just augment 13 one item that Mr. Jones, I don't think specifically 14 articulated, but which we had articulated is that by 15 use of the transients for the full 50 miles, we have 16 more than a factor of 2 above what we would have had 17 we only included transients and commuters within the 18 10 miles. So there is a factor of 2 higher related to 19 the population included within the 50-mile analysis 20 region.
21 JUDGE McDADE: We have been using commuter 22 data based on a typical business day in this area. If 23 there were an accident that resulted in a release of 24 radionuclides at Buchanan, it would be several hours 25 before that plume, assuming the winds were going Neal R. Gross & Co., Inc.
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Page 2512 1 southerly, would reach Manhattan.
2 Is there any data available where we could 3 calculate the number of commuters who would be 4 diminished from average based on that? In other 5 words, either commuters already in the city who would 6 leave Manhattan before the plume would reach there and 7 therefore they would get no dose, or depending on the 8 time of day commuters who were not yet within the 50-9 mile area, but who would remain out of the area 10 because of the reports of the accident.
11 Is there any data anywhere we could look 12 at to be able to estimate that change in the commuter 13 population with any degree of accuracy? Let me ask 14 Dr. Sheppard, is there anything that you can think of?
15 DR. SHEPPARD: Yes, there is, Your Honor.
16 The Census Public Use Microdata would be capable of 17 providing those types of estimates because they 18 include for a subset of recipients of census survey 19 questionnaires information about obviously where they 20 reside, where they are commuting to if they work and 21 commute to work, and it includes duration of the 22 commuting journey and the time that they depart the 23 house. So using those data, one could come up with in 24 my judgment a pretty reasonable estimate to answer the 25 question you're asking.
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Page 2513 1 JUDGE McDADE: Okay, I guess I'm not 2 really sure how that data would supply it. What I'm 3 trying to get at is I'm sitting at home in Newark, New 4 Jersey. I'm getting ready to go to work. I hear that 5 there is an accident at Buchanan, New York at Indian 6 Point and that there is a radionuclide release and 7 that release is heading south. I may find that I 8 don't need to go to work that day.
9 (Laughter.)
10 DR. SHEPPARD: Or don't want to.
11 JUDGE McDADE: And the same thing if I'm 12 already in work, again, depending on the time of day 13 of the accident. If I'm in work, I might decide I 14 want to go home early and get out of town before the 15 show.
16 Is there any data that I could look to on 17 how to calculate, in other words, if I'm assuming 18 there's 900,000 and something tourists there on an 19 average day, is there any way I can calculate with any 20 degree of accuracy, a reasonable estimate of how many 21 fewer tourists there would be in the event there's a 22 public notice of this accident?
23 DR. SHEPPARD: In my experience, for 24 tourists and shoppers, it would be a more difficult 25 question to answer. So the current analysis attempts Neal R. Gross & Co., Inc.
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Page 2514 1 to include tourists and shoppers and would have less 2 direct information about what times shopping journeys 3 commence, how far they go. There's maybe some 4 information about that. But for journeys to work, for 5 the commuting journey, we do have the data that I 6 mentioned previously that could be drawn upon.
7 Obviously, the answer to the question 8 you're asking is a time of day dependent one, right?
9 So the kind of analysis one could imagine undertaking 10 would be to say if the accident and public 11 announcement occurs between the hours of six a.m. and 12 nine a.m., we estimate this, between nine a.m. and 13 noon, and so on and so forth. So one could come up 14 with that. But obviously it would take time and 15 resources.
16 MR. JONES: Your Honor, one thing we did 17 look at was the average wind speed and if you assumed 18 a kind of worst case situation where the reactor had 19 an accident and there was -- there would be notice 20 before it actually released, but from the time the 21 reactor started to release, you're looking at five 22 mile an hour wind speed, about an average of that. So 23 you're looking at six to ten hours to get down into 24 the area around Manhattan. So there's a very small 25 window of opportunity for people not to be informed Neal R. Gross & Co., Inc.
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Page 2515 1 quite honestly. Something would have to happen in the 2 wee hours of the morning and individuals not turn on 3 their television sets, not to be aware of something 4 that is going on. There's considerable time for a 5 plume to travel directly if that happened to be the 6 case.
7 JUDGE McDADE: This is a hypothetical.
8 Assume for the sake of argument that we agreed that 9 consumers should be -- commuters should be counted in 10 some way and that on a typical day, there's about 11 900,000 of them in the 50-mile radius that wouldn't --
12 is there any way we could estimate how many would be 13 there under this circumstance? Is there any kind of 14 accident analysis that is out there that looks at 15 accidents, any kind of accident, whether it be a --
16 not a nuclear accident, but any kind of accident like 17 this where we could estimate the how many fewer 18 commuters it would be?
19 Mr. Jones?
20 MR. JONES: Yes, we've done -- I've been 21 involved with many evacuation studies where we've 22 looked at populations that are evacuated under 23 technological hazards such as chemical spills, 24 hurricanes that -- where you have a few days' notice.
25 And there really is no data that I'm aware of where Neal R. Gross & Co., Inc.
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Page 2516 1 people have either evacuated or not reported to work 2 at distances of 30 to 40 or 50 miles away from the 3 hazard. I have not seen anything of that nature.
4 JUDGE McDADE: Assuming for the sake of 5 argument that we were to accept Dr. Sheppard's 900,000 6 and something commuter figure, and they were 7 calculated in as permanent residents, just adding to 8 the MACCS code, would that make any difference on any 9 of the SAMAs? Would any of the SAMAs that you have 10 evaluated become cost effective under that scenario?
11 Has Entergy looked at that close enough to be able to 12 make that determination?
13 MR. TEAGARDEN: Yes, Your Honor. Grant 14 Teagarden for the Applicant. We have looked at that 15 with two sensitivity studies that we performed where 16 for the first sensitivity study we included the 17 undercount data at 100 percent, the census undercount 18 data that's alleged in this contention. And we 19 included the commuter data with a 50 percent reduction 20 factor, just purely to address the fact that commuters 21 aren't in the region 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day. There's all the 22 additional issues of they don't have property in the 23 region, homes, and such.
24 When we looked at the values, we would 25 increase the population, I believe it was 3.8 percent Neal R. Gross & Co., Inc.
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Page 2517 1 and for the MACCS values when we reran that, we saw 2 that the population dose risk increased 3.1 percent 3 and off-site cost risks increased 3.2 percent. And 4 that's well below the realm that would be needed to 5 impact the next potentially cost beneficial SAMA.
6 So including 100 percent of the 7 undercounts and 50 percent of the commuters in the 50-8 mile region proposed by Dr. Sheppard, and that value 9 is what we basically expected. Because these two 10 metrics from MACCS that are used in the SAMA analysis 11 basically scale with population. It's population dose 12 risk, so how many individuals are being subjected to 13 exposure and attributing accounting for dose. And the 14 cost risk as we've discussed, many of the factors are 15 per capita based factors for economic impacts. So it 16 is reasonable that as you add population, you would 17 see these two metrics increase somewhat linearly with 18 population.
19 We performed a second sensitivity case, 20 not because we agree with any of the proposed changes 21 to the data, but we performed a second sensitivity 22 case where we included 100 percent of the commuters, 23 100 percent of the census undercount and we also even 24 took the three counties that were discussed where they 25 have peak populations that occurred prior to the year Neal R. Gross & Co., Inc.
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Page 2518 1 2035. We took those. We just used their peak values 2 as a surrogate for the year 2035.
3 We found -- I'll out that. We increased 4 the total population -- let's see -- approximately 6.7 5 percent and the population dose risk increased 6 approximately 6.7 percent and the cost risk increased 7 approximately 6.8 percent.
8 And that still falls short of what would 9 be necessary to impact the next cost beneficial --
10 essentially cost beneficial SAMA. So even if it was 11 agreed that the postulated values were appropriate and 12 Entergy does not believe that they are appropriate, 13 but if they were postulated as such that does not 14 impact the conclusions of the SAMA analysis.
15 MS. STOLLEY: Martha Stolley for Entergy.
16 At this time we would like to offer the sensitivity 17 analysis No. 2 into evidence as Entergy No. 000589.
18 (Whereupon, the above-referred to 19 document was marked as Exhibit ENT000589 20 for identification.)
21 JUDGE McDADE: Does New York have an 22 objection?
23 MR. SIPOS: Your Honor, John Sipos for the 24 State of New York. This is one of the documents that 25 was recently produced and disclosed to the state and Neal R. Gross & Co., Inc.
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Page 2519 1 was the subject of the letter that we wrote last 2 night. It was very recently produced, but at this 3 time, the state does not have an objection to the 4 introduction of this exhibit.
5 JUDGE McDADE: We will receive Exhibit 6 000589, subject to a later objection, recognizing the 7 late time when you received it. So if at a later 8 point in time you believe it should be objected to and 9 excluded, you'd have an opportunity to raise the 10 objection at that time.
11 Also, Entergy should replace its current 12 exhibit list, have a new exhibit list which adds 13 000589 to the list.
14 (The document, having been marked 15 previously for identification as Exhibit 16 ENT000589, was received in evidence.)
17 MR. BESSETTE: Yes, Your Honor.
18 JUDGE McDADE: Okay, at this point in time 19 I think the Board is basically satisfied itself that 20 we understand the testimony and the exhibits with 21 regard to New York 000016. Before we break, let me 22 ask first of all, New York, based on the evidence 23 that's been submitted, the questions of the Board, 24 does New York desire to interrogate any of these 25 witnesses?
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Page 2520 1 MR. SIPOS: Yes, Your Honor. John Sipos 2 for the State. The State would request approximately 3 -- the State would request 15 minutes for us to 4 collect our notes and start that process.
5 JUDGE McDADE: Entergy? Or would you like 6 to wait and find out what New York does first before 7 you decide?
8 MR. BESSETTE: Your Honor, if New York is 9 going, we'll go. I think that's kind of a -- our 10 answer. We do have to remind the Board that Dr.
11 O'Kula does have to depart at 1 p.m. today, but I do 12 think the other panel members are available to address 13 any answers.
14 JUDGE McDADE: Okay, and as far as Dr.
15 O'Kula, although he was a very active witness in 16 previous sessions, he seemed to stay under the radar 17 today. So I'm assuming that New York does not have 18 any clarifying questions with regard to Dr. O'Kula?
19 MR. SIPOS: That would be correct, Your 20 Honor.
21 JUDGE McDADE: So if we take a break now 22 until a quarter of 1, Dr. O'Kula can leave? New York 23 has no objection to that?
24 MR. SIPOS: That is correct, Your Honor.
25 JUDGE McDADE: And Entergy certainly has Neal R. Gross & Co., Inc.
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Page 2521 1 none?
2 MR. BESSETTE: No, Your Honor. Thank you 3 for your consideration.
4 JUDGE McDADE: Okay. Does Riverkeeper?
5 MR. MUSEGAAS: No, Your Honor.
6 JUDGE McDADE: Clearwater?
7 MR. WEBSTER: No, Your Honor.
8 JUDGE McDADE: The Staff?
9 MR. HARRIS: No, Your Honor.
10 JUDGE McDADE: Okay, fine. And I take it 11 the Staff would like to reserve the opportunity to 12 interrogate these witnesses until after you've heard 13 what New York and Entergy says?
14 MR. HARRIS: Yes, you're correct, Your 15 Honor.
16 JUDGE McDADE: Okay. Let us try to keep 17 it very brief. This testimony has gone a lot quicker 18 certainly than the other two that we have had and 19 hopefully doesn't need all that much clarification.
20 See if we can, when we come back, keep the round of 21 interrogation to somewhere between all three parties 22 30 to 40 minutes.
23 Mr. Sipos?
24 MR. SIPOS: And Your Honor, just following 25 Mr. Bessette's notation about Dr. O'Kula, as we set Neal R. Gross & Co., Inc.
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Page 2522 1 out in our letter last night, Dr. Sheppard also has 2 commitments. And as we say I'm looking forward to 17 3 and the State is willing to stay -- the State and its 4 attorneys and its expert are willing to stay as late 5 as necessary tonight.
6 JUDGE McDADE: We have the room until 7 Wednesday.
8 (Laughter.)
9 In that regard, we don't have to break it 10 down tonight. So it is certainly our intent to try to 11 finish up 17 this afternoon, if at all possible and if 12 it means going a little bit late, I think it would be 13 the Board's preference as well to go a little bit 14 late.
15 MR. SIPOS: Thank you, Your Honor.
16 JUDGE McDADE: We'll stand in recess to 17 12:45.
18 (Off the record.)
19 JUDGE McDADE: Is New York ready to 20 proceed?
21 MR. SIPOS: Yes, your Honor.
22 MS. LIBERATORE: Your Honor, it's Kathryn 23 Liberatore for the State of New York. I just have a 24 few clarification questions, and I will try to keep it 25 as short as possible.
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Page 2523 1 Doctor Sheppard, does the site-specific 2 nature of the 50-mile radius surrounding Indian Point 3 inform your decision as to whether it's reasonable and 4 appropriate to consider commuters in the SAMA 5 analysis?
6 DR. SHEPPARD: Absolutely. This is a very 7 unique site, with few comparable sites around the 8 country. So I have taken specific account of the 9 structure of labor market flows, using census data, 10 just as I used census data to take specific account of 11 non-white and minority populations in making my 12 analysis of census undercount.
13 So this is a unique site, and I have taken 14 into account those site-specific characteristics.
15 MS. LIBERATORE: Thank you.
16 MS. HESLIN: Your Honors, this is Laura 17 Heslin from the State of New York. Dr. Sheppard, in 18 Entergy's second sensitivity analysis, they predicted 19 that the population of New York County will peak in 20 2020. Do you agree with that?
21 DR. SHEPPARD: I cannot say that I agree 22 with that. I've undertaken no separate study of when 23 the New York population, the New York County 24 population, or the three county populations that were 25 alleged to have -- that will peak.
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Page 2524 1 I have undertaken no separate study in 2 this, but I am aware of studies undertaken by other 3 government agencies that hold contrary -- that have 4 put forward contradicting projections, including that 5 the population of New York County, for instance, will 6 not peak in the period between now and 2035.
7 MS. HESLIN: And what do you mean by "will 8 not peak?"
9 DR. SHEPPARD: I mean 2035 -- in these 10 forecasts, 2035 is actually the maximum population.
11 There isn't an intermediate year after which the 12 population declines.
13 MS. LIBERATORE: Kathryn Liberatore for 14 the State of New York. This next question is directed 15 to Dr. Bixler. In order to calculate the population 16 dose risk associated with only the commuter 17 population, couldn't you simply run the MACCS2 code 18 using only the commuter population, and use the 19 population dose risk from that run to calculate that 20 population dose risk associated with commuters?
21 DR. BIXLER: Yes, I think that would work.
22 That would be one way to do it.
23 DR. GHOSH: Could I clarify, though? But 24 MACCS would assume that those are people living at 25 their workplace, presumably.
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Page 2525 1 DR. BIXLER: Yes, that's correct. The 2 population dose that would be calculated would assume 3 that they lived there 100 percent of the time, which 4 clearly that wouldn't be the case. But you would be 5 able to get a population dose for that population.
6 You'd just have to be careful, and realize that they 7 don't really reside there 100 percent of the time.
8 MS. LIBERATORE: Thank you. This question 9 is directed to Entergy, specifically to Entergy's 10 sensitivity analysis, disclosed on Friday, October 11 12th, that has been offered as an exhibit.
12 Isn't it true that Entergy has determined 13 that to render IP2 SAMA 025 cost-effective, its 14 benefit would only have to increase by 11 percent?
15 MS. POTTS: This is Lori Potts for the 16 applicant. Yes, with the current implementation cost 17 estimate, if we increased the benefit of SAMA IP2 025 18 11 percent it would show potentially cost beneficial.
19 Yes.
20 MS. LIBERATORE: I'd like to pose a 21 hypothetical. For the purposes of this hypothetical, 22 please assume that population dose risk remains the 23 same and off-site economic cost risk increases by a 24 factor of three to seven. In this hypothetical, would 25 IP2 SAMA 025 become cost-effective?
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Page 2526 1 MS. POTTS: Lori Potts for the applicant 2 again. In that hypothetical, I do not know the answer 3 to that question. I would like to state that 4 increasing the OECR by three percent does not equate 5 to increasing the benefit of any particular SAMA by 6 three percent.
7 MS. LIBERATORE: I believe you may have 8 misunderstood my question. In my hypothetical, I 9 would like you to assume that population dose risk 10 remains the same, and OECR increases by a factor of 11 three to seven, not three to seven percent.
12 MS. POTTS: I'm sorry. As I stated, 13 increasing the OECR by a factor of three does not 14 equate to increasing the benefit of any particular 15 SAMA by a factor of three.
16 MS. LIBERATORE: What would increasing the 17 OECR by a factor of three translate to as far as the 18 benefit of a given SAMA?
19 MS. POTTS: It is SAMA-specific.
20 MS. LIBERATORE: Let's focus on IP2 SAMA 21 025, since it appears that you've done some analysis 22 on that. What would an increase in OECR by a factor 23 of three translate into for IP2 SAMA 025?
24 MS. POTTS: I don't know at this point, 25 without looking into it.
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Page 2527 1 MS. LIBERATORE: Does anyone else on the 2 panel? Can anyone else on the panel respond?
3 MR. TEAGARDEN: Well, let me augment Ms.
4 Potts' answer. The factor of three increase that's 5 being hypothetically postulated could be coming from 6 various means. And you don't know how those various 7 means are being incorporated into any specific SAMA 8 candidate evaluation, whether this is being the result 9 of a frequency change, a consequence change. And each 10 SAMA candidate has its own unique footprint of how it 11 impacts the risk. So it's something that would need 12 to be evaluated.
13 JUDGE McDADE: Mr. Teagarden, are you 14 saying that you wouldn't be able to estimate it 15 without actually running the calculation for that 16 particular SAMA, which is not something you could do 17 here in your head?
18 MR. TEAGARDEN: Yes, your Honor. It could 19 be dependant -- it's dependant upon how the risk is 20 being increased, and how that relates to the 21 mitigation that that SAMA candidate is providing.
22 DR. GHOSH: Could I add something? This 23 is Tina Ghosh of the staff. That particular SAMA 24 candidate mitigates steam generator rupture problems 25 that might occur during a severe accident.
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Page 2528 1 And there are actually potentially cost-2 beneficial SAMAs that are already in the FSEIS listed 3 to mitigate exactly those types of accidents, and SAMA 4 025 would be a more costly way to mitigate those same 5 types of accidents for which these other SAMA 6 candidates are already identified. Just for some 7 perspective.
8 MS. LIBERATORE: Going back to my 9 hypothetical, please assume that the increase in OECR 10 by a factor of three to seven is caused by an increase 11 in population. Can you now answer my question as to 12 what effect this OECR increase would have on the cost-13 beneficial-ness of IP2 SAMA 025?
14 MS. POTTS: If the increase in OECR was 15 due to an increase in population, the population dose 16 risk would also increase. I can't do the other part 17 of your hypothetical, where you said it would not 18 change.
19 MR. SIPOS: Your Honor, John Sipos for the 20 State of New York. I'd like to ask Mr. Wilkie if he 21 could pull up Entergy Exhibit 000464, and specifically 22 the first page?
23 And could we go to the bottom of the page, 24 sir?
25 And my question is for Ms. Potts. Ms.
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Page 2529 1 Potts, is it correct that the responsible engineer for 2 this document was Kou-John Hong?
3 MS. POTTS: Yes.
4 MR. SIPOS: And is it also correct that 5 the reviewer was M. Golshani?
6 MS. POTTS: That is also correct.
7 MR. SIPOS: And that the supervisor was C.
8 Yeh, Y-E-H?
9 MS. POTTS: Yes.
10 MR. SIPOS: Thank you. I have a question 11 for -- your Honor, I have no further questions.
12 JUDGE McDADE: Entergy?
13 MS. STOLLEY: For Entergy, Martha Stolley, 14 your Honors. Thank you. By Dr. Sheppard --
15 MR. SIPOS: Your Honor, could I just ask 16 a point of clarification? Is Entergy requesting the 17 opportunity to conduct cross or redirect?
18 JUDGE McDADE: They have, yes.
19 MR. SIPOS: Thank you.
20 MS. STOLLEY: Dr. Sheppard, in your 21 analysis regarding the census undercount, you rely 22 wholly on the September 2001 final report to Congress, 23 correct?
24 MS. LIBERATORE: Objection, 25 mischaracterizes the witness's testimony?
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Page 2530 1 JUDGE McDADE: The witness is certainly 2 free to disagree with the statement. Would you repeat 3 your question?
4 MS. STOLLEY: Sure. Dr. Sheppard, in your 5 analysis regarding the census undercount and whether 6 that should be included in the SAMA analysis conducted 7 by Entergy, you rely, if not wholly than in major 8 part, on the September 2001 final report to Congress.
9 Is that correct?
10 DR. SHEPPARD: No, I don't agree that that 11 is correct. I reviewed a variety of reports on census 12 undercount, the problem's magnitude. Several of those 13 reports are cited in my report on this contention.
14 MS. STOLLEY: And that includes the 15 September 2001 final report to Congress. Is that 16 correct?
17 DR. SHEPPARD: It does include that.
18 MS. STOLLEY: And that, the final report 19 to Congress, is based on the A.C.E. -- I'll call it 20 the A.C.E. I report for lack of a better term. The 21 A.C.E. I analysis, which was conducted in March of 22 2001. Is that correct?
23 DR. SHEPPARD: That report is based on 24 A.C.E. I revisions.
25 MS. STOLLEY: And you're aware, of course, Neal R. Gross & Co., Inc.
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Page 2531 1 of the A.C.E. Rev II analysis, right?
2 DR. SHEPPARD: I am.
3 MS. STOLLEY: And that was issued a full 4 two years later in March of 2003, is that correct?
5 DR. SHEPPARD: We could call it up and 6 verify it. I'll accept your word. I know it was 7 issued later.
8 MS. STOLLEY: And that was after about a 9 year, a full year of analysis of the A.C.E. I report 10 and the final report to Congress. Is that correct?
11 DR. SHEPPARD: That was after ongoing 12 research by Census Bureau researches on different ways 13 of estimating undercount.
14 MS. STOLLEY: Now, do you deny that the 15 A.C.E. Rev II report supersedes the A.C.E. Rev I 16 report?
17 DR. SHEPPARD: I think that that is a 18 mischaracterization.
19 MS. STOLLEY: Mr. Wilkie, could you please 20 call up Entergy Exhibit Number 000016?
21 Page 1?
22 Yes, the first paragraph. Could you 23 enhance the first paragraph? Thank you.
24 Dr. Sheppard, starting at the sentence 25 that says "The March 2001," could you please read Neal R. Gross & Co., Inc.
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Page 2532 1 that? Out loud?
2 DR. SHEPPARD: Sure. "The March 2001 3 A.C.E. estimates of Census 2000 coverage were 4 determined to be unacceptable because A.C.E. failed to 5 measure a significant number of erroneous census 6 enumerations, and thus overstated the net undercount."
7 I would emphasize in that reading "The net 8 undercount."
9 MS. STOLLEY: Mr. Riggs, is there any 10 doubt in your mind that the A.C.E. I report was 11 superseded by the A.C.E. Rev II report?
12 MR. RIGGS: No.
13 MS. STOLLEY: And based on that, would it 14 be fair to say that the A.C.E. I report is not 15 reliable?
16 MR. RIGGS: The A.C.E. I report is not 17 reliable.
18 MS. STOLLEY: If you could pull up Entergy 19 Number 000018, please?
20 Page 2, please?
21 If you could pull up the first paragraph 22 underneath "Results of A.C.E. Revision 2?"
23 Dr. Sheppard, if you could please read out 24 loud the sentence beginning with "The results of 25 A.C.E. Rev II?"
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Page 2533 1 DR. SHEPPARD: Yes, I see the one. You 2 mean the one that refers to the net undercount rather 3 than the undercount of minority populations?
4 MS. STOLLEY: I mean the sentence that 5 begins with "The results of A.C.E. Revision II."
6 DR. SHEPPARD: Oh, I see. "The results of 7 A.C.E. Revision II are substantially different from 8 those of March 2001, changing the net coverage of the 9 total household population from a net undercount of 10 1.18 percent to a net overcount of 0.49 percent."
11 That applies to the entire population, not 12 exclusively to the minority population.
13 MS. STOLLEY: And the overall population 14 was not, in fact, an undercount of 1.18 percent, as 15 A.C.E. Rev I reports stated, but in fact a net 16 overcount of 0.49 percent, as according to the A.C.E.
17 II report. Is that correct?
18 DR. SHEPPARD: You may recall from my 19 testimony earlier that there was, in the A.C.E.
20 Revision II, an estimate of an undercount of minority 21 population. You may also recall from my testimony or 22 my report that I applied the undercount numbers not to 23 the entire population, which these figures refer to, 24 but only to the minority population.
25 MS. STOLLEY: Dr. Sheppard, there is still Neal R. Gross & Co., Inc.
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Page 2534 1 some question as to how you came up with the three 2 percent figure for the undercount, but my question to 3 you was "Isn't it true that the A.C.E. Rev II found a 4 net overcount of 0.49 percent and not a net undercount 5 of 1.18 percent?"
6 DR. SHEPPARD: For the entire population.
7 MS. STOLLEY: Is that true or not, Dr.
8 Sheppard?
9 MR. SIPOS: Objection, your Honor.
10 MS. LIBERATORE: Objection, asked and 11 answered.
12 JUDGE McDADE: The objection is overruled.
13 The question really wasn't answered. The question was 14 "Does the A.C.E. II reflect a net overcount of 0.49 15 percent," and a responsive answer to that is either 16 yes or no.
17 DR. SHEPPARD: Yes.
18 JUDGE McDADE: Okay. Do you have another 19 question?
20 MS. STOLLEY: Yes, your Honor. And in 21 fact, based on the A.C.E. Rev II -- actually, based on 22 either the A.C.E. Rev I or the A.C.E. Rev II, there 23 were no adjustments made to the census data. Isn't 24 that correct, Dr. Sheppard?
25 DR. SHEPPARD: The Census Bureau proposed Neal R. Gross & Co., Inc.
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Page 2535 1 such adjustments. They were contested in court when 2 used for reapportionment purposes, and the court 3 decided the census should not apply those adjustments.
4 MS. STOLLEY: So as I asked, in fact --
5 DR. SHEPPARD: None were applied due to 6 the court order, not because of Census Bureau 7 recommendations.
8 MS. STOLLEY: There were no adjustments 9 made to the Census Bureau data for 2000. Is that 10 correct, Dr. Sheppard?
11 DR. SHEPPARD: That is correct.
12 JUDGE McDADE: That question was answered 13 by Dr. Sheppard, with an explanation.
14 MS. STOLLEY: Just a few more questions, 15 your Honor, for clarity's sake.
16 For Entergy, does MACCS2 differentiate 17 between Hispanics, Asian-Americans, African-Americans, 18 Caucasians, in any way?
19 MR. TEAGARDEN: No, it does not. A person 20 is a person, and is a resident.
21 MS. STOLLEY: And a person is a person and 22 is treated as a permanent resident, correct?
23 MR. TEAGARDEN: That's correct.
24 MS. STOLLEY: And in terms of the analysis 25 done by Entergy, just to clarify, the number that was Neal R. Gross & Co., Inc.
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Page 2536 1 included as permanent residents for transients and 2 business travelers was about 349,000, is that correct?
3 MR. TEAGARDEN: That's correct.
4 MS. STOLLEY: And if Entergy had stuck 5 strictly to NEI 05-01 guidance in terms of calculating 6 the transient population and the non-resident employee 7 population within the 10-mile emergency planning zone, 8 that number would have been approximately 160,000, is 9 that correct?
10 MR. TEAGARDEN: That is correct.
11 MS. STOLLEY: So the numbers that Entergy 12 used, which were included as permanent residents as if 13 they lived there 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day, 365 or 66 days a 14 year, was more than twice as many as they would have 15 come up with if they had stuck to that 10-mile zone.
16 Is that correct?
17 MR. TEAGARDEN: That is correct.
18 MS. STOLLEY: Out of curiosity, Ms. Potts, 19 perhaps you can answer this. As far as you know, 20 other applicants for license renewals, do they use the 21 10-mile zone, or do they generally use the 50-mile 22 zone that Entergy used?
23 MS. POTTS: Most of the ones that I have 24 experienced have used the 50-mile zone, although 25 several other utilities -- that may be because they Neal R. Gross & Co., Inc.
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Page 2537 1 were Entergy ones -- several other utilities that I 2 have done peer reviews on have used the 10-mile 3 information from their ETE, or their evacuation time 4 study.
5 MS. STOLLEY: Just a minute, your Honors.
6 Nothing further, your Honors. Thank you.
7 JUDGE McDADE: From the staff?
8 MR. HARRIS: Nothing further, your Honor.
9 JUDGE McDADE: Okay. That being said, we 10 are completed with contention 16. Thank you very much 11 to the witnesses. I know some of you are going to be 12 testifying this afternoon on New York 17. If we break 13 until 2:00 for lunch, is that adequate?
14 MR. SIPOS: Your Honor, it's a little 15 tight. Could we have until 2:10?
16 JUDGE McDADE: Okay. It's your witness 17 who wants to get out of here. We can break until 18 2:10. Entergy, is that enough time?
19 MR. SIPOS: Your Honor, we could go at 20 2:00.
21 MR. BESSETTE: 2:00 p.m. is fine for us, 22 your Honor.
23 JUDGE McDADE: Staff?
24 MR. HARRIS: 2:00 is fine for us, your 25 Honor.
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Page 2538 1 JUDGE McDADE: Riverkeeper?
2 MR. MUSEGAAS: 2:00 is fine, thank you.
3 JUDGE McDADE: Clearwater?
4 MR. WEBSTER: Yes, that's fine, your 5 Honor. Thank you.
6 JUDGE McDADE: Okay. We're in recess 7 until 2:00. Thank you.
8 (Whereupon, the hearing in the above-9 entitled matter went off the record at 1:09 p.m., and 10 resumed at 2:02 p.m.)
11 JUDGE McDADE: The hearing will come to 12 order. Mr. Sipos.
13 MR. SIPOS: Good afternoon, Your Honor, 14 John Sipos for the State of New York. Your Honors, I'd 15 like to introduce two colleagues of mine. To my left 16 first is Susan Taylor, Assistant Attorney General, and 17 to her left is Adam Solomon. I don't believe you have 18 seen them before in person.
19 JUDGE McDADE: Greetings. Welcome.
20 MS. TAYLOR: Thank you.
21 MR. SOLOMON: Thank you.
22 JUDGE McDADE: Mr. Sipos, we the first 23 thing this morning had raised various issues with 24 regard to the availability of Mr. Bradford. I had 25 raised various possibilities. What is the position of Neal R. Gross & Co., Inc.
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Page 2539 1 the State of New York at this point as how you wish to 2 proceed?
3 MR. SIPOS: Your Honor, the parties have 4 consulted this morning during the lunch break, and one 5 proposal that the parties are collectively considering 6 is to go forward with Contention New York State 37 on 7 Wednesday with all the witnesses save for Mr.
8 Bradford. And then if it was acceptable to Your Honors 9 to locate a date that was convenient to Your Honors 10 and to NRC counsel, and Entergy counsel and their 11 witnesses and have Mr. Bradford come down to Rockville 12 for a shortened session at some date between the time 13 we break here and before the 10th of December mindful 14 of Your Honor's schedule, we would try to work around 15 that.
16 JUDGE McDADE: My -- and I'll hear from the 17 other parties, as well, but my first reaction to that 18 is not positive. One of the issues with that is if Mr.
19 Bradford testifies alone, what we've had basically 20 here is an opportunity for witnesses with opposing 21 views to hear what the witness has to say. And for us 22 after hearing the witness answer our questions be able 23 to turn to witnesses representing another party, and 24 in the short term get their perspective on it to make 25 sure that we truly understand both sides of the issue.
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Page 2540 1 If we were going to do that and have Mr.
2 Bradford testify by himself, we as members of the 3 Board wouldn't have that opportunity. It would be 4 basically just asking questions of him based on his 5 direct testimony just seeking to clarify it, but we 6 wouldn't have the opportunity of gaining the insight 7 into the issue that the witnesses for the other 8 parties, Entergy and the Staff might have.
9 MR. SIPOS: And, Your Honor, I apologize 10 but I did not do an adequate job of explaining the 11 proposal. It would also -- Mr. Bradford would not be 12 in Rockville before Your Honors and the lawyers by 13 himself, but Entergy's experts and the NRC expert, Mr.
14 Stuyvenberg, would be there, as well. And presumably 15 by the time he testified he could be provided with 16 whatever transcripts, so he could almost be caught up 17 to where we are when we -- wherever we are on 18 Wednesday.
19 JUDGE McDADE: Okay. And we will discuss it 20 among ourselves, but I -- my first reaction is I would 21 be more disposed to just moving it to Track 2 starting 22 with the premise that he physically isn't going to be 23 able to be here on Wednesday, and that New York has a 24 strong aversion to doing it telephonically. Between 25 those two alternatives of either moving it to Track 2 Neal R. Gross & Co., Inc.
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Page 2541 1 or having a special session -- and, I mean, that puts 2 the other witnesses at a significant inconvenience.
3 I recognize that counsel for all of the 4 parties with the exception of New York -- well, not 5 with the exception of New York, we have Riverkeeper 6 and Clearwater, and we have interested government 7 entities are located here, but Entergy's counsel and 8 the Staff counsel are down in D.C.
9 Let me just go, from Entergy's standpoint 10 between moving it to Track 2 and following the 11 proposal put forward by Mr. Sipos of having a special 12 session in Rockville, what do you view is the pluses 13 and minuses of each?
14 MS. SUTTON: Yes. Kathryn Sutton for the 15 Applicant, Your Honor. We, like you, would like to 16 proceed with Mr. Bradford by telephone but that just 17 doesn't appear to be a possibility. Given that we 18 strongly oppose moving this to Track 2, we have 19 witnesses who are fully prepared, who have been here, 20 who are ready to go. We understand even from Mr.
21 Sipos' characterization that Mr. Bradford's role in 22 this is somewhat limited. We think that this 23 supplemental session would be limited in nature, 24 several hours, not a full day, and we fully support 25 bringing our witnesses to bear to support this Neal R. Gross & Co., Inc.
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Page 2542 1 alternative proposal versus waiting for Track 2.
2 JUDGE McDADE: I mean, it would probably be 3 a lot less than several hours.
4 MS. SUTTON: Correct, Your Honor. I'm 5 assuming it would not exceed that.
6 JUDGE McDADE: From the Staff?
7 MR. TURK: Yes, Your Honor. The Staff would 8 prefer to have a special session some time between now 9 and that week of December for several reasons. One, 10 the witnesses have been reviewing documents, they're 11 prepared to testify now. If we slip the contention to 12 Track 2, there would be something like a five or six 13 month lag in time. They would have to go back and 14 study, spend a lot of time getting refamiliar with all 15 the evidentiary materials, and I think that would be 16 a tremendous waste of time and greater inconvenience 17 to them than having to appear in Washington for a half 18 day or less session.
19 So, although we would prefer to have 20 Commissioner Bradford with us even by telephone this 21 week, we believe that doing an additional session 22 before the December session would be the preferable 23 way to go.
24 And may I take a moment also to introduce 25 Beth Mizuno to you. You may know her from telephone Neal R. Gross & Co., Inc.
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Page 2543 1 conference calls but she is lead on this contention 2 for the Staff.
3 JUDGE McDADE: Okay. Thank you, Mr. Turk.
4 Greetings. We have met many times before. Ms.
5 Brancato, what is your view on specifically the sort 6 of lump session as opposed to Track 2?
7 MS. BRANCATO: Riverkeeper has no objection 8 to that proposed special session, and would request 9 that to the extent Riverkeeper would like to observe 10 that there would be measures taken to have a call-in, 11 or a webcast, or some alternative to physically 12 appearing in the event that that would be not feasible 13 for Riverkeeper.
14 JUDGE McDADE: Okay, thank you. Clearwater, 15 do you have a view on this?
16 MR. WEBSTER: No objection, Your Honor.
17 Thank you.
18 JUDGE McDADE: Okay. At the break we will 19 discuss is among ourselves and let you know, because 20 certainly if we are going to go ahead with 37 this 21 week you'd want to let your witnesses know as soon as 22 possible. And if they're not going to be testifying 23 this week, to let them go as soon as possible.
24 MS. SUTTON: Kathryn Sutton for the 25 Applicant again, Your Honor. While we're doing Neal R. Gross & Co., Inc.
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Page 2544 1 introductions we, to, would like to introduce our lead 2 on this particular issue. Next to me is Mr. Ron 3 Tenpas, and next to Mr. Tenpas is Jonathan Rund.
4 JUDGE McDADE: Greetings. Okay, we have 5 some new people here, some old people.
6 MR. TENPAS: Your Honor, there is a 7 preliminary procedural matter to New York 17. I don't 8 know whether you want to address that before 9 identifying witnesses and moving to discussing the 10 contention or after doing those introductions.
11 JUDGE McDADE: Let's take care of it now.
12 MR. TENPAS: Okay. Your Honor, it is -- as 13 the Board is aware, there are two disclosure documents 14 that you have been provided with. One is, just for the 15 record, was Entergy's disclosure document 9422, the 16 second was a New York State disclosure document, I 17 believe number 1638. Our understanding is that the New 18 York State witness in this contention will likely 19 intend to refer to and discuss the results reflected 20 in disclosure number 1638, which is a number of charts 21 and printouts that reflect data analyses.
22 We believe that the witness should be 23 directed to refrain from doing so as we do not believe 24 those disclosures can be properly relied upon at this 25 point, and that is for several reasons.
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Page 2545 1 It's perhaps useful to begin this by 2 understanding chronologically there was a disclosure 3 from Entergy. That is number 16 -- I'm sorry, that's 4 number 9422. And I start with that because as we 5 understand it, New York's position is somehow the 6 disclosure 1638 that they made Saturday night, less 7 than 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> ago at 10:30 at night or thereabouts is 8 somehow justified and responsive to Entergy 9422. So, 9 let me start with 9422, and then move on to discussing 10 why that justification is not appropriate.
11 If you look at the sequence of testimony 12 here you will see that in Dr. Sheppard's rebuttal, 13 that is his final piece of testimony in a context 14 where, obviously, New York State got the first and the 15 last word in the exchanges of testimony. In his 16 rebuttal, which is New York State number 434, and 17 particularly at page 36, he -- and we'd be happy to 18 have that brought up, or I can walk you through it, 19 Your Honor.
20 He -- at that point, Dr. Sheppard suggests 21 that Dr. Tolley might have adopted what he calls a 22 functional form of the square root of distance. I 23 think the important point here is to simply note that 24 you can search throughout all of the testimony up to 25 that point and you will not find any discussion of Neal R. Gross & Co., Inc.
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Page 2546 1 this functional form square root of distance. And I 2 think it is fair to say that Dr. Sheppard's critique 3 was to say well, using this kind of analysis on some 4 of the data that has been developed; and, in 5 particular, using that analysis when applied to 6 something called the MLS data set, there is something 7 to be learned. That was, essentially, Dr. Sheppard's 8 position.
9 Dr. Tolley, who obviously didn't have an 10 opportunity then for further responsive testimony in 11 preparing for this hearing essentially scratched his 12 head and said well, one way to think about that 13 question and whether this square root of distance 14 function is useful, provides insight, is to see how -
15 - what results it reveals if you use it applied to a 16 second data set, what is called the Assessor's Data.
17 That is all, that and that alone is all that is 18 represented in the disclosure 944 that the NRC made.
19 And if you look at -- I'm sorry, Entergy 9422. And you 20 can see that if you look at that document by simply 21 looking about halfway down, and you will see a line 22 that says, "SQRT_DIST."
23 JUDGE McDADE: Hold on a second.
24 MR. TENPAS: All right.
25 MR. TURK: Your Honor, we don't have Neal R. Gross & Co., Inc.
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Page 2547 1 anything on our computer screen. Is there an exhibit 2 that --
3 JUDGE McDADE: Well, we don't --
4 MR. TENPAS: It's not yet an exhibit, so --
5 6 jUDGE McDADE: Which document is this? Is 7 this one that's --
8 MR. TENPAS: This would be --
9 jUDGE McDADE: -- headed STATA?
10 MR. TENPAS: Yes. The heading of it is 11 STATALOG, all as one word, S-T-A-T-A.
12 JUDGE McDADE: And where on that document 13 are you referring?
14 MR. TENPAS: L-O-G. If you move about 15 halfway down you will see a line labeled, "Sales 16 Price." Go about -- if the clerk could go a little 17 further down, "Sale Price," keep moving down. Okay. In 18 that last block move the cursor up slightly, you see 19 SQRT_DIST. It's the first line in that block that the 20 cursor is hovering near. There you go. Thank you.
21 That line, and that line alone is what Dr.
22 Tolley was focused on. And the reason to do that 23 calculation on this data set that Dr. Sheppard had not 24 performed it on was Dr. Sheppard's critique offered 25 as, again I say, for the first time in his rebuttal.
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Page 2548 1 So, let us now with that by way of 2 background turn to the New York State disclosure 1638 3 which, as I say, was received Saturday evening. As you 4 look at that, you will see a number of charts on it.
5 And I would like --
6 jUDGE McDADE: Let's go back, 1638. What's 7 the heading on that?
8 MR. TENPAS: It is on the upper left, it 9 says STATA, S-T-A-T-A, and a kind of -- and what looks 10 a little bit like a banner. The clerk has it up 11 correctly now. It says STATA to the left, and then to 12 the right is says "User Steven Sheppard," at the very 13 top.
14 JUDGE McDADE: Okay. Before we go further, 15 the Board exhibits for identification, we've gone up 16 to Board Exhibit 3 or Board Exhibit 4? The first of 17 these will be marked right now as Board Exhibit 4 for 18 identification, what we have up in front of us right 19 now will be marked at this point Board Exhibit 5 for 20 identification, and in the event we determine that 21 they can't be entered into evidence, then whoever 22 offers them into evidence if we accept them, they 23 would then be marked as the next successive exhibit by 24 the offering party. But at this point, just so we know 25 what we're talking about here, they're marked as Board Neal R. Gross & Co., Inc.
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Page 2549 1 Exhibits for identification.
2 (Whereupon, the above-referred to 3 documents were marked as Board Exhibits 4 4 and 5 for identification.)
5 JUDGE McDADE: Continue.
6 MR. TENPAS: Thank you, Your Honor. So, I'd 7 like to start at page 3 of this document, because the 8 first three -- the three charts on top of page 3, 9 bottom of page 3, and top of page 4 go together as a 10 group.
11 The first chart is reporting information 12 that had earlier been provided. And New York State, I 13 think as the Board is likely familiar from the 14 testimony, one of the theories of Dr. Sheppard is 15 essentially that the operation -- initiation of 16 operations of the units in the `74 to `76 period 17 caused some depressive impact on property values. And 18 a way to identify or confirm that hypothesis is to 19 compare kind of rates of return on properties for 20 people who owned the property throughout that period 21 versus people who didn't. And he used to develop that 22 analysis initially, which was provided in his first 23 direct testimony, he used something called the 24 Assessor's Data.
25 When Dr. Tolley provided his direct Neal R. Gross & Co., Inc.
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Page 2550 1 testimony responding to that, which is Entergy 132, 2 and when he provided his report, which is Entergy 144, 3 he as the New York State acknowledges in lines 3 and 4 4 of this document says, "Dr. Tolley raises a question 5 about inclusion of data where one or more sales 6 involved a vacant lot. Essentially, the critique of 7 Dr. Tolley that was offered back in March of this year 8 was that Assessor's Data you used had a number of bad 9 records in it because it wasn't fair to think about 10 this question if you had a property that was vacant on 11 one sale, and then somebody put a home on it, so it 12 was then worth $400,000, the first sale had been 50.
13 What that is reflecting, or possibly reflecting is the 14 improvement from the home."
15 That critique that that was a problem and 16 that he found many such records in the Assessor's Data 17 that Dr. Sheppard used, as I say was expressly and 18 pointedly laid out at Entergy 144 at page 38. And if 19 the clerk could call that up, I'd like to show the 20 Court -- show the Board how --
21 JUDGE McDADE: There's no need for --
22 MR. TENPAS: Okay. So, that was directly 23 laid out at that point. So, that's March of 2012.
24 There is literally not a word of mention 25 of that critique then in Dr. Sheppard's rebuttal. It Neal R. Gross & Co., Inc.
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Page 2551 1 simply goes completely ignored. And as I think I have 2 shown the Court, this one additional chart that Dr.
3 Tolley has now done relates only to the square root of 4 distance.
5 So, essentially, what you have here is New 6 York State ignoring the criticism that was laid out in 7 the direct, our direct testimony, ignoring it in their 8 rebuttal, and now some -- as we're halfway into the 9 hearing providing something that they pretend responds 10 to Dr. Tolley, but really has nothing to do with this 11 last chart. They want, basically, a do-over on their 12 rebuttal testimony.
13 Similarly, if you move down to the next 14 chart at lines 13 and 14, New York State identifies 15 what are they trying to do with the last chart? They 16 say, "Dr. Tolley objected to including sales that 17 occurred in times of rapid house price increases." So, 18 his next table is designed to address that criticism.
19 Well, when was that criticism made? It was not as part 20 of the square root of distance table that was 21 provided. In fact, that criticism, too, was identified 22 in the March 2012 direct testimony of Dr. Tolley. And 23 that can also be found at Entergy 144 at pages 38-44, 24 and in the testimony which is Entergy 132 at pages 25 116, questions 146 and forward.
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Page 2552 1 JUDGE McDADE: Okay. Let me cut you off at 2 this point. I'm going to overrule the objection. At 3 this point, I do not know whether the exhibit will be 4 accepted into evidence. It may, or it may not. These 5 issues probably will come up, but Dr. Sheppard is 6 going to be responding to our questions here. And from 7 reading the direct testimony of Dr. Tolley, it appears 8 to me that he is very capable of explaining and 9 articulating his position, and can explain to the 10 Board clearly on a document what it is, how he used 11 it, and in his opinion the significance of it, which 12 may differ from Dr. Sheppard. But I don't think it is 13 unfair to Dr. Tolley for Dr. Sheppard to make 14 reference to this. And if Dr. Sheppard does make 15 reference to it during the course of his testimony, we 16 would certainly be inquiring of Dr. Tolley and asking 17 for his read and explanation of the significance. So, 18 I don't think it has a potential either to prejudice 19 Entergy or to mislead the Board. So, the objection is 20 overruled. We are going to proceed.
21 I would mention a couple of things.
22 MR. TENPAS: Your Honor, respectfully, I do 23 need to note that we disagree on the prejudice. And I 24 do need to note factually just one other point about 25 this in terms of Dr. Tolley's opportunity to respond.
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Page 2553 1 When you look at this data, you see that on the 2 first go around there were 1,511 observations. In this 3 new stuff, there are now 1,222 observations; that is, 4 it appears that Dr. Sheppard has taken out some of the 5 data. We have not been given that underlying data, so 6 we have no idea what was -- which of the data was 7 taken out, whether it is, in fact, the repeat -- the 8 problematic Assessor's Data cards that Dr. Tolley 9 identified, or some other group. So, in fact, Dr.
10 Tolley has not had an opportunity to review this work 11 other than to see in summary fashion the purported 12 results. But we understand the Board's ruling. I 13 simply need to note that for the record. Thank you.
14 JUDGE McDADE: And one of the benefits of 15 the Board allowing brief interrogation by the parties, 16 both of their own witnesses and the opposing witnesses 17 is that if at the conclusion of this session you 18 believe it is important for us to understand how the 19 data was changed, why the data was changed, and the 20 significance of the change, you will have an 21 opportunity to inquire both of Dr. Sheppard and Dr.
22 Tolley to make sure that we do not misapprehend the 23 significance of any of that.
24 If these are offered, if they are referred 25 to as a witness as part of their testimony, then the Neal R. Gross & Co., Inc.
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Page 2554 1 party sponsoring that witness would enter it as the 2 next exhibit. And I also do want to mention, I'm not 3 sure I mentioned before, we did receive, I believe, 4 Entergy 589 at the earlier session. We do have an 5 electronic copy of it, but for our record purposes if 6 you could file that through the EIE and also the 7 revised exhibit list through the EIE so that we have 8 those properly in the record.
9 MS. SUTTON: We will do so, Your Honor.
10 JUDGE McDADE: Okay, thank you.
11 Since we have some different witnesses, 12 additional witnesses, before we get started I'd like 13 to swear the witnesses. Would you raise your hand, 14 please.
15 (WITNESSES SWORN.)
16 JUDGE McDADE: Okay. And, again, since we 17 have some additional witnesses, let me just give some 18 very brief introductory remarks.
19 First of all, if you don't understand a 20 question don't be shy about asking for clarification.
21 We want to make sure that the question that you're 22 answering is the same question that we think we're 23 asking.
24 Secondly, this is going to basically be a 25 dialogue between you and us. We're going to ask you Neal R. Gross & Co., Inc.
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Page 2555 1 questions, you're going to respond to us. Although we 2 are going to be going back and forth from one witness 3 to another, this is not a dialogue between two of the 4 witnesses. You may argue with each other but you're 5 going to do it derivatively through us, and not talk 6 back and forth to each other.
7 The other thing is if for any reason 8 anybody needs a break, don't suffer in silence. First 9 of all try to get out attention and don't by shy about 10 asking for a short break. If you can't get our 11 attention, try to get the eye of the counsel who 12 sponsors you and they certainly won't be shy about 13 asking us for a break.
14 I think we're ready to get started. Okay.
15 This contention has to do with land use, and land 16 value. There's an allegation that the EIS was 17 inadequate in that it did not consider the effects of 18 changes in land value on land use in the event the No 19 Action Alternative; that is, the No License 20 Alternative were to be exercised and only looked 21 sufficiently at the impact in the event the license 22 was renewed. And, specifically, I believe Dr.
23 Sheppard's initial statement was he concluded that the 24 value of the land in the vicinity of the Indian Point 25 facility would, in the event of the license being Neal R. Gross & Co., Inc.
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Page 2556 1 denied, increase by approximately 27 percent, which 2 could constitute over $1 billion in the increase in 3 the land value.
4 That said of what we're looking at, let me 5 go first. Dr. Sheppard, can you describe for us, first 6 of all, what you mean and understand by a disamenity, 7 and then explain to us how as an economist you would 8 go about differentiating between the effects of one 9 disamenity and another. For example, in a circumstance 10 like Indian Point, you have Indian Point. You have it 11 in an industrial area. You have other potential 12 disamenities such as the resource recovery plant, 13 wallboard factory, et cetera. So, first, what is -- in 14 your view, how do you define a disamenity? And when 15 you're doing your analysis how are you able to 16 differentiate the impact of one as opposed to another 17 or several?
18 DR. SHEPPARD: I understand, Your Honor.
19 So, as I understand as a disamenity, a localized land 20 use or this could be a structure or activity on the 21 land that generates some -- generates an adverse 22 impact that reduces the desirability or use of the 23 land by other nearby land owners or occupants.
24 So, this typically is understood to happen 25 through the classic indicia of nuisance in which this Neal R. Gross & Co., Inc.
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Page 2557 1 could involve either substances, noise, unusual levels 2 of activity, warning alarms, a variety of different 3 things that could happen at a particular location that 4 would affect the desirability of using land in nearby 5 locations. So, that's sort of in a nutshell what we 6 understand to be disamenity.
7 These can take a variety of forms, of 8 course. And the way we typically look for them or test 9 for them as economists is to look for some alteration 10 in nearby property values. This can give us both an 11 indication of the extent of the disamenity and its 12 importance or magnitude for local property owners.
13 Identifying, measuring the disamenity, and 14 distinguishing it from others is a part of the skill, 15 our training of an urban economist, and it's something 16 that I have engaged in for most of my career. There 17 are a couple of different approaches that can be used.
18 One is the traditional hedonic approach that Dr.
19 Tolley discusses in his report, and that I, myself, 20 have employed in other settings.
21 That's quite useful if you have a 22 spatially distinct or isolated disamenity, and there's 23 no ambiguity about other nearby disamenities that 24 could be causing -- affecting property values. But 25 when you have other nearby disamenities, it's helpful Neal R. Gross & Co., Inc.
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Page 2558 1 to tie the estimation of the impact down to a 2 particular point in time. And for that you can either 3 -- for that I, in my report, I've employed, and others 4 have employed a resale price analysis in which you 5 track properties over time and observe the purchase 6 price and sale price of the property, and estimate the 7 impact on property values at the time that a possible 8 source of disamenity emerges.
9 Of course, when one approaches this 10 analysis one wants to be careful not to presume 11 existence of a disamenity, or presume existence of any 12 impact of a particular magnitude. One wants to be open 13 to what the data has to teach us, so we -- what I have 14 done is collected information over time from property 15 tax records and examined how the -- calculated, 16 essentially, the annual rate of return or the annual 17 percentage interest rate that the owner of a home gets 18 viewing the home as an asset. So, think of what annual 19 interest rate would be equivalent to the difference 20 between the purchase price and the sales price of the 21 home. And then I distinguish those homes both by 22 location, their proximity to Indian Point, and by the 23 time period when Indian Point IP2 and IP3 commenced 24 commercial operations.
25 This establishes for me a treatment group Neal R. Gross & Co., Inc.
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Page 2559 1 that can be compared with the control group. The 2 control group is the set of properties that are either 3 bought and sold before IP2 and IP3 commenced 4 commercial operation, or bought and sold after IP2 and 5 IP3 commenced commercial operation. Because in either 6 of those cases, the impact of commercial operation 7 would affect both purchase and sales price.
8 And those are contrasted with the 9 treatment group that are properties, as you alluded to 10 in the earlier discussion, properties that are 11 purchased before IP2 commenced commercial operation 12 and sold after IP3 commenced commercial operation.
13 That establishes a treatment group to help me 14 understand, analyze, and estimate the impact of 15 operating these plants as commercial electricity 16 generators. Why that's important as a control group?
17 This provides a clear experimental design than 18 standard hedonic analysis, although standard hedonic 19 analysis still has something to teach us in this case, 20 but looking at the resale price analysis establishes 21 a cleaner experimental design, and it directly 22 addresses exactly the question posed when we ask about 23 the impact of the No Action Alternative.
24 The No Action Alternative will lead to the 25 -- not the instantaneous disappearance of the plant, Neal R. Gross & Co., Inc.
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Page 2560 1 but the cessation of the operation as a commercial 2 generator of electrical power. So, my treatment group 3 is the properties that experienced the commencing of 4 commercial operation, so I'm using that as a way of 5 estimating what will happen when that commercial 6 operation ceases, as would happen under the No 7 Treatment -- under the No Action Alternative.
8 JUDGE McDADE: Okay. In this particular 9 instance, you used the opening of Indian Point 2 as 10 the event to create your treatment group. Correct?
11 DR. SHEPPARD: It's actually the beginning 12 of the event, and then the opening of Indian Point 3 13 is the end of the event.
14 JUDGE McDADE: Why did you use that as 15 opposed to the beginning of the construction of Indian 16 Point I in 1956, or the opening of Indian Point 1 in 17 1961?
18 DR. SHEPPARD: Those would have been 19 interesting alternative things to investigate, but 20 they wouldn't be as directly relevant for the question 21 that's on the table in this Environmental Impact 22 Statement or before us in Contention 17.
23 What we need to ask ourselves in 24 evaluating the impact on land use, it's an indirect 25 question, the impact on property values which will Neal R. Gross & Co., Inc.
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Page 2561 1 generate the impact on land use, we want to know what 2 will be the impact of the cessation of commercial --
3 of operation as a commercial power generator. That's 4 what's really going to happen in 2015 if the No Action 5 Alternative is adopted. In 2015, there will cease to 6 be commercial generation of electric power at that 7 site.
8 JUDGE McDADE: But if the presence of a 9 electric generating facility is the disamenity, that 10 disamenity began in 1956. Certainly, people knew it 11 was coming as of then, and by 1961 it was open and 12 operating. And it continued to be open and operating 13 until Indian Point 2 and 3 came on line and took their 14 place. Why would you believe that there would be a 15 significant additional disamenity with the opening of 16 Indian Point 2 that had not preexisted going back to 17 the late 1950s?
18 DR. SHEPPARD: So, first off, let me say 19 that the question you opened with to me was -- the 20 second part of it was how do you separate out many 21 different disamenities, and a particular site may have 22 many different types of disamenities. As you've just 23 observed, there could be an early, sort of early stage 24 disamenity at the site that consists of construction 25 noise or something like that. And then there's a Neal R. Gross & Co., Inc.
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Page 2562 1 second phase disamenity that consists of the operation 2 of IP1.
3 What's at issue here is not to evaluate 4 those other sources of disamenity. That's why I have 5 adopted the methodology I have adopted. I'm trying to 6 isolate just that part of the disamenity that is 7 relevant for evaluating the No Action Alternative, 8 and that means evaluating the cessation of commercial 9 operation of IP2 and IP3.
10 So, I may have gotten a different estimate 11 if I had chosen an alternative control group, or an 12 alternative time period, but by focusing on this 13 particular time period I'm zeroing in on exactly that 14 part of the disamenity that's most relevant for the 15 issue at hand.
16 And, of course, if I'm missing a major 17 part of the disamenity, the data might have told me 18 there is no statistically significant impact, but 19 that's not what the data tell me. When I look at the -
20 - when I estimate the impact what I find is that those 21 properties that were subject to the treatment of being 22 owned when IP2 and IP3 began -- commenced commercial 23 operation they did experience a diminution in value.
24 JUDGE McDADE: Given other circumstances at 25 the time and we're talking now about the late 1970s, Neal R. Gross & Co., Inc.
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Page 2563 1 as I recall during that time period somebody got 2 elected President talking about the misery index of 3 interest rates and unemployment. How do you factor out 4 if you start as a time period as an event in the mid 5 to late `70s, how you factor out the changes in the 6 rate of appreciation of that property wouldn't be as 7 attributable, more attributable, or at least partially 8 attributable to factors totally unrelated to Indian 9 Point, such as interest rates at 15 or 16 percent, or 10 high unemployment.
11 DR. SHEPPARD: Okay. So, one way that you 12 factor that out is by having and end to the time 13 period that constitutes the treatment. So, I'm using 14 `74 to `76 as my treatment because that's when the 15 plants commenced commercial operation. And the 16 maladies to which you refer, concerns about high 17 interest rates or other dislocations in the housing 18 market, those -- some of those are happening before 19 the commencement of commercial operation, many of them 20 have been happening since then. So, those will affect 21 the control group. They might affect the treatment 22 group, as well, but what I'm -- my estimates are 23 driven by the difference between the experience of 24 those properties that experience -- that are in the 25 treatment group compared with those in the control Neal R. Gross & Co., Inc.
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Page 2564 1 group.
2 JUDGE WARDWELL: You mentioned the plant is 3 going to cease operations in 2015 under the No Action 4 Alternative. Isn't the plant going to cease operations 5 under the other alternative?
6 DR. SHEPPARD: Not in 2015.
7 JUDGE WARDWELL: Not in 2015. Well, how do 8 you factor that in then? In fact, the plant will cease 9 operations some time in the future anyhow. It's really 10 the difference between ceasing in 2015 and ceasing in 11 some other area that is of interest in regards to when 12 and if any rebound occurs. And isn't that the only 13 difference that we're interested in when we're trying 14 to compare the No Action Alternative to any other 15 action that this Agency is taking, i.e., the license 16 renewal?
17 DR. SHEPPARD: I understand your question 18 but I'm not sure I can accept the conclusion that's 19 implied in it that there is no difference between the 20 two. So, in terms of evaluating socio economic impacts 21 on --
22 JUDGE WARDWELL: No, I'm asking how did you 23 separate that out? I mean, because we're --
24 DR. SHEPPARD: Sorry, okay.
25 JUDGE WARDWELL: -- not dealing with just Neal R. Gross & Co., Inc.
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Page 2565 1 -- we are dealing with a comparison of the No Action 2 Alternative to the federal action which is license 3 renewal. And under both situations the plant does 4 cease.
5 DR. SHEPPARD: Yes.
6 JUDGE WARDWELL: So, how does your study 7 have any -- provide any data or useful information in 8 regards to evaluating that?
9 DR. SHEPPARD: So, my study provides very 10 useful information regarding evaluating that because 11 it gives you the magnitude, an estimate of the dollar 12 value magnitude of property value recovery that can be 13 expected after cessation of operations. And then you, 14 the Board, or whomever can consider the difference 15 between getting $1 billion now, or getting $1 billion 16 in 2015 versus getting $1 billion 20 years later.
17 JUDGE WARDWELL: And how do you account for 18 that in your analysis?
19 DR. SHEPPARD: I don't account for it in my 20 analysis. What I am doing is estimating -- in my 21 December 2011 report, I am estimating the magnitude, 22 the dollar value magnitude of impacts. I'm testing the 23 statistical significance of the impact and estimating 24 the dollar value magnitude of the impacts that can be 25 expected to occur when operations cease.
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Page 2566 1 JUDGE WARDWELL: But with that you need to 2 somehow come up -- how did your analysis come up with 3 the rebound number?
4 DR. SHEPPARD: My analysis estimates that 5 properties that were subject to the treatment, that is 6 the commencement of commercial operations, experienced 7 a 3 percent per annum lower return for owners during 8 that ownership period. I then used the average 9 ownership period for the properties, so if you have a 10 3 percent, approximate -- I'm rounding here but 11 approximately a 3 percent per annum reduction in the 12 return to owning the home as an asset, and if you hold 13 that home for eight or nine years, you're going to get 14 approximately a 27 -- I calculate it more precisely, 15 but that's where the 27 percent impact on property 16 values comes. A 3 percent per annum reduction over the 17 average holding period of the property gives you that 18 estimated impact on the properties.
19 JUDGE WARDWELL: I guess I'm still not 20 clear on how your numbers were really crunched, 21 because you were comparing -- well, tell me what were 22 you comparing in order to generate those numbers 23 exactly?
24 DR. SHEPPARD: Okay.
25 JUDGE WARDWELL: What sales were you using, Neal R. Gross & Co., Inc.
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Page 2567 1 what groups of sales?
2 DR. SHEPPARD: Right.
3 JUDGE WARDWELL: And when they were 4 occurring, and how they relate to the fact that the 5 plant is still operating at the time you're doing it.
6 And then how do you discount it for changes in market 7 value generally that occurred, that has nothing to do 8 with not being within this `74 to `76 period. That's 9 the period you think the houses were depressed. Is 10 that correct?
11 DR. SHEPPARD: What I -- they may have been 12 depressed for other reasons at other times, but I'm 13 trying to isolate only that impact on their value that 14 was associated with commencement of commercial 15 operations. And the way I estimate that is by 16 assembling a large amount of data, as we've referred 17 to and as is illustrated in the various tables and in 18 my report, it's over 1,500 pairs of transactions; that 19 is a purchase and sale. And for each one of those 20 pairs, I've got a purchase date and a sales date s I 21 can -- and a price for each so I can calculate the 22 annual rate of return associated with that period of 23 ownership for that property.
24 I know where those properties are, and now 25 I know what rate of return per annum was realized for Neal R. Gross & Co., Inc.
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Page 2568 1 holding that. And then I estimate the relationship 2 between the annual rate of return to holding the 3 property, and the distance from Indian Point Energy 4 Center, and whether or not the property was bought 5 before and sold after the commencement of commercial 6 operations.
7 So, the real hypothesis to be tested is, 8 does the impact of being in that treatment group, is 9 it (a) statistically significant, my analysis finds 10 that it is. And (b) what is the magnitude of it? My 11 analysis finds that it's approximately 3 percent per 12 annum. So, that's a 3 percent per annum reduction in 13 the rate of return to holding a home over the -- and 14 then I apply that to the average holding period of a 15 house for that region for the sample. And that's about 16 nine years, so if you're getting -- a little less than 17 nine years. If you're getting 3 percent per annum less 18 and you're holding -- imagine you take your money and 19 you put it in a bank account that's paying you 3 20 percent per annum less than you could get elsewhere, 21 and then what you want to calculate is what's the 22 total hit, what's the total diminution in your assets 23 that results from that treatment of depositing your 24 savings in a less attractive bank or savings 25 institution. And that's where I calculate that the Neal R. Gross & Co., Inc.
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Page 2569 1 total impact is 27 percent.
2 So, the per annum impact is estimated 3 using data that I collected and related to when the 4 properties were bought and sold. And then I apply that 5 to the average holding period to get an overall 6 estimate of the percent impact on property values 7 that's generated from that -- the event that happens 8 at that location because I'm relating these to 9 distance from the Indian Point Energy Center and at 10 that time. I'm not trying to capture every disamenity 11 that may or may not be associated with the plant. I'm 12 trying to focus in on that disamenity that will --
13 that disamenity, if any, that will cease once the 14 plant ceases commercial operation.
15 JUDGE WARDWELL: Did you use all 1,500 16 observations in your analysis?
17 DR. SHEPPARD: In my original analysis, I 18 did.
19 JUDGE WARDWELL: Didn't you disqualify some 20 for various criteria, or something?
21 DR. SHEPPARD: Yes, I'm sorry. I should 22 say, so, 1,500, there were actually more than 1,500.
23 There are some observations that were -- that 24 exhibited either unusually large -- so, if a property 25 appeared to double in value or to lose all value Neal R. Gross & Co., Inc.
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Page 2570 1 entirely, I excluded them from my original analysis.
2 And that was the source of my 3 percent. Other than 3 that, I included --
4 JUDGE WARDWELL: You're confusing me.
5 DR. SHEPPARD: I'm sorry.
6 JUDGE WARDWELL: How many numbers did you 7 start with?
8 DR. SHEPPARD: Let me look at my chart, or 9 my table. My analysis was based on -- and my estimates 10 were based on 1,511 paired sales. That excludes a 11 small number, and I'm sorry, I just don't have the 12 numbers here in front of me. It's a small number, like 13 on the order of 40 or something of observations that 14 exhibited a nominal return that was either a complete 15 loss of value of the property, or more than a doubling 16 of value of the property. Those seemed to be extreme 17 values, to me, and I didn't include them. The effects 18 aren't affected very much if you do include them. They 19 just don't seem correct to me, and I was concerned 20 about that.
21 JUDGE WARDWELL: So, you didn't disqualify 22 any others for any other reason, like the fact that it 23 appeared to be -- didn't you go through the data --
24 I'm recalling from memory. I can't pull it up right 25 now --
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Page 2571 1 DR. SHEPPARD: Yes, so there was --
2 JUDGE WARDWELL: There were some that 3 appeared to be vacant lots and then someone built on 4 them or vice versa.
5 DR. SHEPPARD: Okay.
6 JUDGE WARDWELL: They burned down or 7 something. I can't remember exactly, but weren't there 8 ones like that that you threw out, also?
9 DR. SHEPPARD: So, in this last analysis as 10 I'm -- in the analysis that was recently filed, I do 11 have an evaluation of that that demonstrates that if 12 you --
13 JUDGE WARDWELL: Be specific. What do you 14 mean by the "recent analysis?" We've had -- you've 15 done something like five analyses or so.
16 DR. SHEPPARD: Yes, I have.
17 JUDGE WARDWELL: Do we take any credence 18 with the first four, or were you doing -- is it your 19 position we should focus only on the fifth analysis 20 that you ran?
21 DR. SHEPPARD: The fifth report.
22 JUDGE WARDWELL: Fifth report.
23 DR. SHEPPARD: The December 2011. The 24 December 2011 report is the only report that I have 25 filed that actually presents analysis of data Neal R. Gross & Co., Inc.
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Page 2572 1 collected from area around Indian Point.
2 JUDGE WARDWELL: Why didn't you do that 3 earlier?
4 DR. SHEPPARD: Because at the time we were 5 engaged in the process of collecting and recording 6 those data continuously over a couple of year period.
7 Westchester County is an unusual situation. I've 8 worked with many data -- a great deal of property tax 9 data in the State of New York. Most counties have 10 their local taxing authorities centralized at the 11 county level, and the data are all computerized, that 12 is by state law. Westchester County has a special 13 exemption from that, so their tax records are not 14 computerized. So, we had to -- I had to send a 15 research assistant to the towns in Westchester County 16 to collect information, to make copies of the property 17 tax record cards. Those had to be scrutinized for 18 readability information, that data had to be entered 19 into a database.
20 JUDGE WARDWELL: Okay, go on. Proceed.
21 DR. SHEPPARD: Okay.
22 MR. BESSETTE: Your Honor, this is Paul 23 Bessette. I do have to -- I'm a bit surprised to learn 24 that Dr. Sheppard is collecting data throughout the 25 process of his other five reports. We have -- there Neal R. Gross & Co., Inc.
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Page 2573 1 were no disclosures on any of that data until he 2 produced his fifth report, so we'd like to note that 3 for the record. Again, that's the first time I've ever 4 heard of this.
5 JUDGE WARDWELL: Dr. Sheppard, so you were 6 back to this 1,500 observations, and you're saying 7 that all of those you've used in this analysis, that 8 you didn't disqualify any because you've done into 9 them and found out they're vacant lots and that type 10 of thing.
11 DR. SHEPPARD: So, I have included -- I 12 have endeavored to include all the observations that 13 had valid prices and appeared to be representing valid 14 transactions, and conveying useful information about 15 the rate of return to home ownership during the 16 period.
17 It is the case that concerns have been 18 raised about using transactions that involve vacant 19 lots. I undertook no separate evaluation of the --
20 which transactions included vacant lots, but I did 21 accept the characterization that was provided to me by 22 Dr. Tolley, not indirectly I should say, that 23 identified 300 odd properties as involving sales that 24 -- where one of the sales was a vacant lot. And what 25 I found is that by excluding all of those observations Neal R. Gross & Co., Inc.
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Page 2574 1 it made no difference to my basic estimates. In fact, 2 it actually strengthened my estimates, resulted in 3 slightly higher estimated damage and more precise 4 estimates.
5 MR. TENPAS: Your Honor, at this point we 6 have to renew our objection. That's directly 7 discussion of the analysis we've objected to.
8 JUDGE McDADE: You've renewed your 9 objection.
10 MR. TENPAS: Thank you.
11 JUDGE McDADE: Okay. Dr. Sheppard, you 12 talked about 1,500 pairs of transactions. How many 13 properties are we talking about?
14 DR. SHEPPARD: Five hundred odd.
15 JUDGE McDADE: Okay. So, by pairs we have 16 a number where you have multiple sales, multiple times 17 where you've had a buyer and a seller, but 18 approximately 500 properties total.
19 DR. SHEPPARD: Correct.
20 JUDGE McDADE: Okay. And you've eliminated 21 ones that did not appear to be arm's length such as 22 based on sales within the family. What other criteria 23 did you use for eliminating them? Was it totally 24 subjective, or did you have any objective criteria?
25 DR. SHEPPARD: No objective criteria other Neal R. Gross & Co., Inc.
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Page 2575 1 than we had to be able to read the property tax record 2 card and enter the data so that it would be useable.
3 We started with an initial set of properties that were 4 sales that had taken place. And I believe I've 5 reported that the time period in my report, it's 6 around 2009, and our research assistant, my research 7 assistant pulled those records and made copies of the 8 property tax record cards which would include 9 information about prior sales, the dates when those 10 sales occurred, and the transactions prices.
11 JUDGE McDADE: Okay. And going back to the 12 concept of event again we were talking about a little 13 bit ago, we start, or I started with the premise that 14 there was an event in 1956 through 1961, the beginning 15 of construction of Indian Point 1 through the opening 16 for operations of Indian Point 1. There were also 17 other occurrences during that period of time; namely, 18 the zoning as industrial of areas in and around the 19 Indian Point area. Correct?
20 DR. SHEPPARD: Correct.
21 JUDGE McDADE: And there was also then the 22 beginning of industrialization in what had been a 23 relatively undeveloped area, as well.
24 DR. SHEPPARD: So, a mixture of 25 industrialization in some nearby areas, and Neal R. Gross & Co., Inc.
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Page 2576 1 deindustrialization in other areas within five miles 2 of Indian Point. But, yes, there were ongoing changes 3 in the patterns of industrial land use.
4 JUDGE McDADE: So, we were developing a 5 history of land use in the area for almost 20 years 6 before the event that you described.
7 DR. SHEPPARD: Correct, or longer.
8 JUDGE McDADE: Is there any way of in your 9 calculations determining whether or not there were any 10 other contemporaneous, equally significant events 11 going on in the area at the time? In other words, 12 you've described Indian Point 2 as opening. Were there 13 any other facilities or entities that could serve as 14 a disamenity that were being constructed or operated 15 in or about the same time that could skew your 16 analysis, if you know?
17 DR. SHEPPARD: So, there were other things, 18 obviously, going on at the same time, but not, I 19 believe, that would skew my analysis. So, let me 20 mention I'm aware of the fact that there were other 21 generating facilities that had been built, there were 22 other -- as you just mentioned, there were other 23 industrial land uses, and other changes in land use 24 that happened during the time. But my analysis focuses 25 not only on this very specific time period and the Neal R. Gross & Co., Inc.
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Page 2577 1 specific location. So, when I estimate the impact on 2 property values, or the impact on the annual rate of 3 return of owning a property, I'm estimating an impact 4 that also adjusts for how far away the property is 5 from the Indian Point Energy Center.
6 So, in order for it to seriously skew my 7 analysis, what would have to be true is it would need 8 to be not only happening exactly in the interval `74 9 to `76, but happening essentially at or extremely near 10 to the site of the Indian Point Energy Center. And 11 since that, essentially, focuses our attention to the 12 commencement of commercial operation of IP2 and IP3.
13 JUDGE McDADE: Dr. Tolley, am I pronouncing 14 your name correctly?
15 DR. TOLLEY: Beg your pardon?
16 JUDGE McDADE: Am I pronouncing your name 17 correctly?
18 DR. TOLLEY: Yes, sir.
19 JUDGE McDADE: Okay. Doctor, would you 20 comment on Dr. Sheppard's selection of an event and 21 his selection of what he described as a treatment 22 group. Do you think those were sound?
23 DR. TOLLEY: No, I do not.
24 JUDGE McDADE: Why not?
25 DR. TOLLEY: Well, an event needs to be as Neal R. Gross & Co., Inc.
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Page 2578 1 narrow as possible in the first place because there 2 are these other confounding things, and they are 3 certainly not constant. They're going on all the time, 4 and they're affecting returns. It's not as if the 5 control group could earn this 9 percent every year. It 6 was always going up and down, so you need a narrow 7 control group.
8 On the contrary, Dr. Sheppard has chosen 9 a three-year time period. And as you've been bringing 10 up, it isn't -- the effect of the plant is not 11 connected to that. Moreover, the saying that we're 12 focusing on `74 to `76, if we have these earlier 13 observations that are effective, it's polluting the 14 observations. It is affecting the returns of the 15 control group. He's neglected to say that, so that's 16 another reason that he has violated the situation.
17 I question whether it is possible to do --
18 and his testimony he calls it event study, and then 19 by some discovery materials that came along later it's 20 beginning to be known as repeat sales. Either way, 21 there are very stringent methodological requirements 22 out of the economic literature that need to be 23 followed to make this approach valid. If you're using 24 an event study, it's loud and clear what you need to 25 do is hold everything else constant. That's the whole Neal R. Gross & Co., Inc.
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Page 2579 1 idea. All the houses, all the residences need to be 2 affected by the same thing and very similarly, because 3 the whole idea is to just separate out this one thing 4 that you're trying to measure. And if you allow all 5 these other events in, then it's not valid. We've 6 heard the reasons that are being brought out here. I 7 could go on, but those are some of the major reasons.
8 JUDGE McDADE: Dr. Sheppard, as I 9 understand it, suggests that he can differentiate the 10 appropriate event by time to a degree by looking at 11 the changes in the property values related to the 12 distance from Indian Point. And is that sufficiently 13 narrow to be a workable hypothesis?
14 DR. TOLLEY: I don't really see that that 15 affects the analysis, frankly. The -- let's see, you 16 have the -- what Dr. Sheppard's analysis is doing, his 17 treatment -- all his properties, both treatment and 18 non-treatment, control are within a certain radius. I 19 think it's 3.1 miles, 5 kilometers. And he takes all 20 properties within that area. Well, that doesn't --
21 still those properties are not -- all these shocks 22 we're talking about, or all these changes other than 23 this `74 to `76, which is supposed to be somehow the 24 major shock, all those are affecting all those 25 properties, so I don't see that that controls for it Neal R. Gross & Co., Inc.
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Page 2580 1 at all.
2 JUDGE McDADE: You, I think, described your 3 analysis as hedonic. Am I --
4 DR. TOLLEY: Yes, right.
5 JUDGE McDADE: Can you describe the 6 difference in methodology or theory between that and 7 Dr. Sheppard's? But Judge Wardwell had a question 8 before we get to that.
9 JUDGE WARDWELL: Yes, I just -- I was just 10 -- I'm still confused exactly what Dr. Sheppard did, 11 so I'd like to, if it's all right, clarify that before 12 I get muddled with another second layer of 13 understanding here.
14 So, your treatment `74 to `76.
15 DR. SHEPPARD: My treatment are the --
16 maybe we should just be real clear. I'm sorry to -- I 17 don't want to be disputatious. I just want to make 18 sure that I try to explain it as clearly as possible.
19 The observations here are a property over an interval, 20 so what characterizes each observation is a sales date 21 -- a purchase date and a sales date, the price at 22 each. And then we calculate the annual rate of return 23 to that. So, an observation is a property over an 24 interval. And the treatment group are those intervals 25 that span the `74 to `76 time period.
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Page 2581 1 JUDGE WARDWELL: What do you mean those 2 intervals are --
3 DR. SHEPPARD: So, those observations, that 4 is properties that involve ownership over the interval 5 1974 to `76.
6 JUDGE WARDWELL: That subsequently had sold 7 and then bought again and resold, or --
8 DR. SHEPPARD: So, if it's an observation 9 in my data set it was purchased and sold, so if it was 10 -- it could be the exact same house, you know, some 11 houses might be sold four, five, six, seven times in 12 the data.
13 JUDGE WARDWELL: What are you comparing in 14 your analysis? That's what I --
15 DR. SHEPPARD: Right. Exactly. So, the 16 group of observations that receive the treatment, 17 those are properties that were purchased sometime 18 before `74 and sold sometime after `76. So, not --
19 with no intervening sales in between. Okay? And then 20 they may have been sold and suppose -- let me 21 illustrate, for example.
22 Suppose a home was purchased in 1968, and 23 sold in 1980. So, it was owned for a 12-year time 24 period. That would clearly be in my treatment group.
25 If that same home was then purchased by someone in Neal R. Gross & Co., Inc.
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Page 2582 1 1980, sold again in 1992, another 12-year span, it 2 would -- that same home would then be in my control 3 group because now I would have a time period when the 4 commercial operation of Indian Point was affecting 5 both the purchase and the sale.
6 Similarly, if I had a recorded sale for 7 that same house in the time period before the 8 hypothetical 1968 purchase date, maybe it was 9 purchased in 1964 and sold in 1968, that also would be 10 in the control because neither the purchase nor the 11 sale would be affected -- they'd be affected by Indian 12 Point all right because, as was mentioned previously, 13 Indian Point existed, and IP1 was buzzing along, et 14 cetera. But it wouldn't be -- it would be part of the 15 control because it's not an ownership interval that 16 spans the commercial -- the commencement of commercial 17 operations. And that's what's central in terms of 18 understanding what property value impacts might result 19 from cessation of commercial operations.
20 JUDGE WARDWELL: That -- you had me right 21 to the very last thing.
22 DR. SHEPPARD: Okay.
23 JUDGE WARDWELL: Where does cessation of 24 operations come into play?
25 DR. SHEPPARD: Well --
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Page 2583 1 JUDGE WARDWELL: You just said it was 2 affecting the rate of return during that time frame 3 because it was included in that -- in the span between 4 bought and sold.
5 DR. SHEPPARD: Right. So, I'm --
6 JUDGE WARDWELL: What that's saying to me 7 is that may have some indication of what strictly the 8 startup operations of only IP2 and 3, not the startup 9 of IP1, have on that rate of return. How do you then -
10 - how did you then massage, manipulate, interpret, 11 whatever you want to call it to come up with a value 12 that will indicate --
13 DR. SHEPPARD: The impact.
14 JUDGE WARDWELL: -- the rebound when 15 operations cease, because isn't that what we're really 16 after? And then it's the differential between that 17 over the two different time frames that will occur 18 between the No Action and the license renewal.
19 DR. SHEPPARD: Right. So, you're quite 20 correct that what we're really after is the change in 21 property values that will happen after it ceases 22 commercial operation, after IPEC ceases operation.
23 JUDGE WARDWELL: And to add to that, I'm 24 going to have another question on top while I think of 25 it so you can be thinking of this, too, at the same Neal R. Gross & Co., Inc.
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Page 2584 1 time.
2 DR. SHEPPARD: If I can remember it.
3 JUDGE WARDWELL: During this time frame, 4 also, one might speculate that just -- it isn't just 5 the startup operations but it's the continual 6 operations of this plant that changes market value.
7 That could be another hypothesis. And you're not 8 concerned with that because the disamenity that you're 9 looking at is only the startup operations. You're not, 10 as you've described it so far, focusing on the impact 11 of ongoing operations.
12 DR. SHEPPARD: Right. So, I'm not saying 13 that -- obviously, when a person purchases a property 14 they're forward looking, so the impact of startup is 15 going to be associated -- people also understand that 16 nuclear -- that IPEC is not going to start and then 17 cease at some random point. It's all well understood.
18 So, it's correct to say that the impact that's 19 measured associated with the startup of commercial 20 operations involves a measure of the impact that's 21 expected to be felt during the continued commercial 22 operations that will happen after they actually start 23 up.
24 To go back to your original question, I 25 think you were spot on in saying what we want to do is Neal R. Gross & Co., Inc.
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Page 2585 1 estimate the impact of cessation of operations, and 2 then be able to compare these at different times. That 3 seems exactly correct to me. And the problem we have 4 is that that has to be estimated because we're asking 5 about an event that has not yet occurred. So, we 6 employ different methods to try to figure out, to 7 estimate what will be that impact.
8 So, what I'm doing is making an estimate 9 that's based on -- well, let's -- we're trying to 10 figure out what will be the impact of when it stops.
11 Let's look at what the impact was when it started. And 12 then when it stops, we can hypothesize, I hypothesize 13 that the effect will undo itself.
14 JUDGE WARDWELL: Assume. You're not 15 hypothesizing. You're assuming --
16 DR. SHEPPARD: I'm assuming.
17 JUDGE WARDWELL: -- it's going to rebound 18 the same amount and debound.
19 DR. SHEPPARD: Right, to rebound the same 20 amount that -- and I'm not assuming that it goes down.
21 I estimate, my estimate suggests that it went down.
22 But I'm assuming that -- what I'm putting forward as 23 an estimate of what will be associated with the 24 stopping is to undo what was associated with the 25 starting. And that's where I think actually the Neal R. Gross & Co., Inc.
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Page 2586 1 hedonic analysis does have something to teach. If we 2 observe -- if the hedonic analysis that's done is 3 consistent with my estimate then that gives us greater 4 confidence.
5 I think that my experimental design is 6 more desirable, but we want to compare it with other 7 sources of information, other ways of looking at the 8 problem.
9 JUDGE WARDWELL: Why didn't you use 10 construction rather than the startup, because --
11 DR. SHEPPARD: You mean the construction --
12 13 JUDGE WARDWELL: Of the IP2 and 3 plants.
14 I mean, that to me, if I was a home buyer forward 15 looking I would know those are going to be built. And 16 what's the difference between the startup and the 17 construction? I would hazard a guess that probably 18 most people didn't realize when it did start up. They 19 knew when construction started but they didn't have 20 any idea when the plant actually turned on the switch.
21 DR. SHEPPARD: And it may well be the case 22 that there were additional disamenities associated 23 with the construction that would have, if I had 24 included those in the way I set up my experimental 25 design, that I would have captured additional Neal R. Gross & Co., Inc.
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Page 2587 1 disamenities. And then my estimates of the property 2 value impacts would be greater than they are, 3 possibly. And then I would be being criticized for not 4 focusing on what's going to happen when they cease 5 operations, but incorporating some sort of disamenity 6 due to construction. So, by choosing the interval I 7 chose, I helped to focus our attention squarely on 8 what's likely to get undone when they stop operation.
9 JUDGE McDADE: Okay. Dr. Tolley, we talked 10 a second ago about a hedonic analysis which is what 11 you did. Dr. Sheppard testified that he thought the 12 analysis he conducted was more desirable. Could you 13 explain to us from a macro standpoint, not a micro 14 standpoint, the difference in methodology between a 15 hedonic analysis and what Dr. Sheppard did?
16 DR. TOLLEY: Yes, I'll try. If I could, 17 Your Honor, I'd like to make two brief comments on 18 what's been said. These previous events, construction 19 and so forth, it's not that they -- the point here is 20 that you cannot isolate the `74 to `76 by this 21 methodology because these previous events have been 22 put in the control group. It's just mistake in 23 analysis to do that. That's the first thing. And we 24 had a very good discussion of what some of these other 25 previous events are.
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Page 2588 1 Something else that needs to be brought in 2 here is anticipation effects. This IP2 and IP3 were 3 publicized in the New York Times, there's all kinds of 4 publicity. It is well known. People are not -- people 5 take account of anticipation effects. If they know 6 that this plant is going to open and they don't like 7 it, they're not going to bid as much for the property.
8 So, these are things that will occur beforehand just 9 because of anticipation of what's going to happen even 10 if the `74-76 event were -- could be isolated, which 11 I do not believe it can for the reasons we're saying.
12 JUDGE WARDWELL: But wouldn't that just 13 reduce the difference between the treatment group and 14 the control group if, in fact, that did take place?
15 DR. TOLLEY: Well, I think it might well do 16 that. It's a bit more complicated than that. You have 17 this control group, and it has so called measurement 18 error. You're not measuring the thing that you're 19 trying to measure. You're polluting the data. You're 20 putting in there something that's affected by the 21 plant if there's an effect, and you're counting that 22 in the control group. You're just -- you're 23 introducing error into your analysis. It's not an 24 analysis that would stand up to rigorous thinking.
25 JUDGE McDADE: Now, if you were trying to Neal R. Gross & Co., Inc.
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Page 2589 1 estimate the impact of Indian Point using a hedonic 2 analysis, would it be possible, and again how that 3 would analysis differ in methodology from what Dr.
4 Sheppard described?
5 DR. TOLLEY: Right, let me proceed to that.
6 So, I used hedonic analysis which is the analysis that 7 has overwhelmingly been used in power plants, and in 8 particular nuclear plants. Several studies have been 9 done at other nuclear plants around the country. I 10 used that. I followed the customary procedures in 11 doing this, that the vast, vast majority of 12 investigators have used, and that's the hedonic 13 analysis.
14 I would like also to point out that --
15 well, I'll come to the sales, the repeat sales. So, 16 what the hedonic analysis does is a statistical 17 technique, and you take a regression technique. You 18 get a sample of homes and their sale prices, and then 19 that's the dependent variable. You're trying to 20 exclaim that, and you then -- so you ask yourself what 21 explains the price of a home? Well, it's the number of 22 bedrooms, the number of rooms, lot size, whether it's 23 detached or single, how old it is, a variety of 24 characteristics like that. And then you get a sample 25 of sales, and the best way to do it is to get a sample Neal R. Gross & Co., Inc.
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Page 2590 1 of sales at one point in time, because if you get that 2 one point in time you're not introducing all these 3 confounding effects and so forth. You just get at that 4 one point in time what is affecting the sale of the 5 house.
6 Then what you put in that, if you're 7 interested in some possible disamenity, something like 8 that, you put that in. So, these plant studies put in 9 proximity to the plant, to the nuclear plant. And that 10 is the one variable that you add to a hedonic 11 analysis. You could add other disamenities, too, if 12 you have enough data to do it and so forth, but that's 13 what you do.
14 And then what the regression analysis 15 does, it's a method of holding everything constant.
16 It's a method of measuring the independent influence 17 of each of these things like number of bedrooms, house 18 age and all that kind of thing. And it also -- the 19 coefficient on distance to the plant measures the 20 extent to which this is -- a plant is an amenity or a 21 disamenity, so it's the coefficient on that, and it 22 holds constant everything else. So, it's a much --
23 using the word clean, it's a much cleaner way to do 24 things. And it is the way that is overwhelmingly used 25 by analysts for all kinds of work in housing.
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Page 2591 1 JUDGE McDADE: Using that kind of an 2 analysis, doctor, how do you differentiate a 3 disamenity such as Indian Point as opposed to other 4 disamenities in the area, say like Clark Point 5 Resource Reclamation Center, or factories, or other 6 facilities or entities that might be viewed generally 7 as a disamenity?
8 DR. TOLLEY: Right. Well, two things. One, 9 to the extent that you have enough data and time, and 10 resources, and so forth, you put in these other 11 disamenities. In the Indian Point case and in most of 12 these other -- some of the other cases they are put 13 in. But you put them in to the extent that you can.
14 Then the other part of this is that no matter --
15 jUDGE McDADE: Excuse me. Does that mean 16 you run them separately? In other words, you do the 17 analysis with Indian Point, then you do the analysis 18 with Clark Point, and then you do the analysis with 19 the paperboard company, and then you see what 20 differences there are between the three?
21 DR. TOLLEY: Well, I think in this case 22 we're interested in Indian Point, and the analysis is 23 focused down to within a very small distance, three to 24 five miles. So, the analysis is confined to that, so 25 you pick out the amenities and disamenities within Neal R. Gross & Co., Inc.
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Page 2592 1 that 5-mile area, and that's going to be a good deal 2 more limited. For the analysis of the power plant, you 3 just want the other amenities that would affect these 4 properties within this confined area. So, you try to 5 do that. However, no matter how hard you try in a 6 spatial situation, there are always things you're not 7 going to be able to measure. So, there are so called 8 econometric problems. You just do the best you can.
9 You get the size of sample really, frankly, that you 10 can afford and then you run this regression. And if 11 you can get information on some of these other 12 amenities, I think some -- I recall a plant that put 13 in a beach and things like that, and you put those in 14 if you can.
15 Frankly, in the case of Indian Point I 16 don't think either -- neither Dr. Sheppard or I have 17 put in these other amenities, and that's just part of 18 the game in statistics. You do the best you can, you 19 make your estimates and your standard errors on the 20 coefficients. You have measures of reliability. You 21 have a very good fit, you'll have a very narrow 22 confidence interval, to use that terms. I don't know 23 whether they're comfortable to you, or not. But you 24 have measures of the reliability of it. Have I 25 explained enough about hedonic?
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Page 2593 1 JUDGE McDADE: We'll find out.
2 JUDGE WARDWELL: To fix some of these 3 points, can we go to page 72 of your testimony, and 4 that's Entergy 132. You want to pull that up, Andy.
5 Yes. It's going to be -- try 74. Yes, which is 6 actually page 72 of the document.
7 Is that a plot of your results?
8 DR. TOLLEY: No. That is a plot of what you 9 would expect if Indian Point were, in fact, a source 10 of disamenity. If it were depressing planned values.
11 And that's -- yes, so that's the so called expected -
12 - if you have a disamenity that's what you expect.
13 JUDGE WARDWELL: How -- why -- the formula 14 still confuses me a bit, though. That formula says 15 that Y should equal zero if X is zero. Correct?
16 DR. TOLLEY: Well, no -- yes, actually it 17 does. The --
18 JUDGE WARDWELL: The graph doesn't seem to 19 indicate that.
20 DR. TOLLEY: That's correct. There should 21 be a -- it should have ax minus bx plus c, plus a 22 constant, or it really might have a lot of -- see, it 23 really had -- that's just the hedonic --
24 JUDGE WARDWELL: I'm sorry. You hit the 25 mike, I didn't hear that.
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Page 2594 1 DR. TOLLEY: Yes, that's just the property 2 -- that's the affect of this distance on the property 3 values. So, it says --
4 JUDGE WARDWELL: So, that's not a formula 5 for the line.
6 DR. TOLLEY: No, it's not. The total line, 7 the simplest way of thinking about the total line is 8 that there are many other terms in this equation which 9 are part of the number of bedrooms, other things.
10 Also, the constant is -- it's affected by people's 11 alternatives of where they can live nearby. So, if 12 we're talking about the whole line we can get into 13 things about that. But this is just trying to 14 illustrate the distance effect.
15 JUDGE WARDWELL: Could we now go up to page 16 78. It'll be 76 on the number on the bottom. There you 17 go. Now, is that your -- is that a schematic 18 representing what your analysis showed?
19 DR. TOLLEY: Yes, it is.
20 JUDGE WARDWELL: You want to explain what 21 that says to you?
22 DR. TOLLEY: Let's see. This says that --
23 what this configuration, if you're close to the plant 24 -- the first place, the x term dominates if you're 25 close to the plant, the x squared term dominates as Neal R. Gross & Co., Inc.
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Page 2595 1 you get further away because x squared gets bigger and 2 bigger and relatively grows much faster than x. So, 3 what this shows is that if you get a negative a, 4 you're actually in the vicinity of the plant. As you 5 move away from the plant the property values will 6 decline, which means it's an amenity, not a 7 disamenity. You move away from the plant and you get 8 lower values. So, people somehow are liking to live 9 close to the plant.
10 Then you reach a certain point here, the 11 minimum where the x squared term begins to take over 12 and then it begins rising. From that point, you do 13 find it a disamenity. The problem there is that it's 14 an increasing disamenity, so that if I am five miles, 15 I value an extra mile distance by some amount. Then if 16 I'm at 20 miles, I -- disvalue it by double that 17 amount, I guess, by the square of that amount. So, the 18 farther away from the plant I get, the more I might 19 get an increasing rate. It's, as I say, 20 counterintuitive. It doesn't make economic sense.
21 That's not the way people behave. And we have all 22 kinds of -- otherwise we'd be eating oranges out of 23 our ears if we started consuming oranges like this.
24 So, this is the result that I got, and it's my -- it's 25 a major reason for saying that there's no -- this Neal R. Gross & Co., Inc.
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Page 2596 1 result doesn't make sense. I think it's due to these 2 measurement errors, these things that no matter how 3 hard you try you can't get them into the analysis. And 4 it's called Omitted Variable Bias, and it will pick up 5 some distance effect and throw that in there and make 6 an estimate of it.
7 What you have to do when you're 8 interpreting with regressions is think sensibly. You 9 don't just mechanically run the regression. You think 10 sensibly about what the results mean. And if they 11 don't make economic sense you throw them out. You're 12 not going to be a slave to a statistician. A 13 statistician has wonderful tools. The statistician 14 doesn't know how to think about the sense of these, or 15 the common sense of these. Have I answered that 16 question?
17 JUDGE WARDWELL: Yes, you have. Thank you, 18 Dr. Tolley.
19 JUDGE McDADE: Okay, doctor. This graph 20 would indicate on the face of it that there are a 21 certain number of people who view it as an amenity.
22 They want to live close to the plant. Would that be 23 explained by people who are commuting to the plant to 24 work there?
25 DR. TOLLEY: Are you asking about whether Neal R. Gross & Co., Inc.
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Page 2597 1 they work there?
2 JUDGE McDADE: Yes.
3 DR. TOLLEY: Yes. Okay. Well, there are so 4 few people who work in this plant, so few people who 5 work in the plant who live anywhere near close to it, 6 that 10 or 20 people living in the Town of Buchanan or 7 something, which is what it would be, to me it's 8 completely unbelievable that those people could be 9 responsible for that. You would find a scarcity value 10 to being right near the plant, and you just don't find 11 it.
12 The technical requirement is that a bidder 13 who wants to be there has to be the marginal bidder.
14 He has to outbid someone else. Well, there are plenty 15 of people who want to live in Buchanan, because 16 they're obviously living there, but you wouldn't have 17 to pay them very much at all in order for them to give 18 up their residence because it doesn't mean that much 19 to them.
20 In any case, in my belief this argument 21 about living close to the plant is -- I don't want to 22 be too strong about it, but it's a red herring in my 23 opinion.
24 MR. REAMER: Your Honor, Bill Reamer for 25 the Applicant. Just I think I can help on this. In the Neal R. Gross & Co., Inc.
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Page 2598 1 Applicant's Environmental Report is a table on page 3-2 30 that's Entergy Exhibit 15B. And we don't 3 necessarily need to look at this right now, but the 4 numbers are in Buchanan 20, 20 and then employees in 5 the City, in the Village of Buchanan, and 200 6 employees in the entirety of Westchester County. And 7 that number, let's see. That number is also in 330.
8 And then preceding that table is an indication that 9 there are 1,255 employees totally that work at the 10 plant.
11 JUDGE McDADE: Okay, thank you. Doctor, 12 using your hedonic analysis, do you need to come up 13 with an event?
14 DR. TOLLEY: I'm sorry, I did not hear the 15 question, sir.
16 JUDGE McDADE: Using your hedonic analysis 17 do you start with an event?
18 DR. TOLLEY: No. You start with a sample of 19 homes where you can get it, take it. I should say 20 similar analyses will sample homes over a few years, 21 and in that sense it has different time periods. It is 22 not oriented to events at all. It can be taken any 23 time, so I think that's the basic answer.
24 JUDGE McDADE: So, you would not focus, as 25 Dr. Sheppard did, on the opening of Indian Point 2 for Neal R. Gross & Co., Inc.
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Page 2599 1 operation.
2 DR. TOLLEY: Yes, I would not focus on what 3 about Indian --
4 jUDGE McDADE: You would not focus on the 5 opening of the Indian Point 2.
6 DR. TOLLEY: No, not at all, not at all.
7 These samples -- this was -- this analysis was run on 8 two samples of data. One was a sample of homes taken 9 on I think it was July 11th of 2011 on a particular 10 day from a multiple list, which has certain advantages 11 to it because it definitely rules out all other 12 events. Analyses will sometimes take a sample over 13 several years and then they will put in so called time 14 dummies to control for the year that it's in. And 15 that's another way of doing it. But these time dummies 16 are usually consecutive years very close together, 17 anyhow. But neither one of them focuses on events.
18 It's a completely different approach.
19 JUDGE McDADE: Okay.
20 JUDGE WARDWELL: Dr. Sheppard, would you 21 like to comment on these two graphs, and whether the 22 first one represented what should be there, if the 23 hypothesis was that the plant was impacting costs, and 24 then the one that Dr. Tolley came up with in his 25 analysis. And then, also, I would like to see whether Neal R. Gross & Co., Inc.
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Page 2600 1 or not you have some summary chart or a plot that best 2 represents your conclusions besides just the raw 3 numbers that I'm aware of.
4 DR. SHEPPARD: Okay. So, my comment on this 5 plot, I understand the plot and I agree that this 6 provides a rough approximation of the result that Dr.
7 Tolley obtained. I have several comments about that 8 result.
9 The first comment is to remember that this 10 is, essentially, a radial slice so that there's a much 11 larger area, and much larger number of homes that are 12 located in that portion of the curve that -- where the 13 curve is increasing. So, if were to actually imagine -
14 - if were actually to imagine well, removing the plant 15 would cause this line to go flat, there are much --
16 there's a larger number of homes that would 17 increasing in value than would be decreasing. The 18 number of homes that are in this -- the portion of 19 this curve that's downward sloping where you could say 20 it represents an amenity, that number of homes is much 21 smaller. They're not proportionally located along this 22 line, just because this is a slice through a circular 23 area around the plant.
24 Second, in Dr. Tolley's analysis the 25 linear term which is generating the downward sloping Neal R. Gross & Co., Inc.
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Page 2601 1 portion is not statistically significant. He discusses 2 that somewhat in his report and reports the so called 3 T test statistic that measures the statistical 4 significance, and notes that the linear portion is not 5 statistically significant, but the quadratic portion 6 is. And even alludes in his report to the possibility 7 that one could, as statisticians and econometricians 8 often do, consider alternative functional forms, even 9 dropping out the linear component of the equation.
10 All of these different components are 11 essentially different ways of capturing the idea of 12 proximity. Okay? We can measure the proximity of a 13 property to Indian Point either as the straight line 14 distance, or we could measure it according as the 15 square of the straight line distance, or the square 16 root of the straight line distance, or a combination 17 of the linear straight line distance and the square of 18 that distance.
19 This particular image, and Dr. Tolley's 20 particular results, are a direct consequence of the 21 way he has chosen to represent proximity as a 22 combination of the straight line distance plus the 23 square of the straight line distance.
24 If one explore -- and I would recommend 25 exploring alternative ways of measuring proximity or Neal R. Gross & Co., Inc.
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Page 2602 1 characterizing proximity of a property to the plant.
2 And that's why I suggested using the square root of 3 distance. If you use the square root of distance you 4 end up with a model that fits the data essentially as 5 well, that looks exactly -- has the shape of the 6 relationship between property value and proximity to 7 the plant that Dr. Tolley believes would best 8 represent what would occur if the plant, in fact, 9 constituted a disamenity. And perhaps most 10 interestingly, if you estimate the model using the 11 square root of distance rather than this particular 12 form, not only does the plant show up as a 13 statistically significant disamenity, but if you 14 calculate the total impact on property values within 15 the area around the plant using that alternative model 16 you get an estimate that's almost identical to the one 17 I estimate using my repeat sales analysis. So, if you 18 use the square root and calculate the square root as 19 a way of measuring proximity, and calculate the impact 20 on property values, the estimate is about a 25 percent 21 impact on property values; whereas, my analysis 22 suggests a 27 percent impact. But to obtain such close 23 agreement between two very different ways of looking 24 at the problem makes me very confident in my own 25 analysis that that represents what's going on.
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Page 2603 1 JUDGE WARDWELL: What would the plot look 2 like as a square root?
3 DR. SHEPPARD: Actually, it looks quite a 4 bit like that first plot that we looked at in Dr.
5 Tolley's report. In my rebuttal testimony I did 6 provide some plots. We can perhaps pull --
7 MS. TAYLOR: Perhaps I could clarify.
8 DR. SHEPPARD: Can you help?
9 MS. TAYLOR: I believe that Dr. Sheppard 10 may be referring to New York State 453.
11 DR. SHEPPARD: And can we call that up?
12 That may show these plots.
13 JUDGE WARDWELL: What's the number again, 14 153 did you say, or 453?
15 MS. TAYLOR: 453, although my colleague 16 thinks I may have misunderstood what Dr. Sheppard was 17 about to refer to, page 74 of the exhibit we're 18 looking at now. That's New York State 453, if I can 19 see that far across the room.
20 DR. SHEPPARD: Yes, that's testing --
21 that's an eye test. Perhaps we could -- if we could 22 look quickly at New York State 453.
23 JUDGE WARDWELL: I don't have a 453.
24 DR. SHEPPARD: I beg your pardon then.
25 JUDGE WARDWELL: Is it Entergy's 453?
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Page 2604 1 MS. TAYLOR: Oh, I'm sorry, I transposed 2 the numbers, 435. I apologize. New York State 435.
3 DR. SHEPPARD: Right. So, the blue line 4 that's shown, this particular graph shows three lines.
5 These lines represent a calculation that I undertook 6 in which I imagined a home that had -- using Dr.
7 Tolley's MLS data, imagined a home that had the 8 average level of characteristics for all of the 9 characteristics in Dr. Tolley's data, so an average 10 age, an average income in the area and so on. And then 11 varied the distance from the plant, from IPEC from 12 zero miles at the lefthand side of the graph out to 13 five miles.
14 The violet colored line in the middle 15 represents the result of that experiment using the 16 parameters estimated in Dr. Tolley's original model.
17 If you just reestimate that model and change nothing 18 other than measuring proximity using the square root 19 of distance rather than distance, rather than distance 20 plus distance squared you get a line like the blue 21 one. So you can see it does look quite similar to the 22 one Dr. Tolley put forward as emblematic of a 23 disamenity.
24 JUDGE WARDWELL: Using the same type of 25 equations that he used would be just Y is equal to A Neal R. Gross & Co., Inc.
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Page 2605 1 the square root of X. Nothing else?
2 DR. SHEPPARD: No. So, this is using all 3 the same variables as he uses in his analysis except 4 instead of using distance and distance squared as 5 separate variables, that's his -- that's the way that 6 he characterized proximity in his original model. Drop 7 those and substitute the square root of distance as a 8 way of characterizing proximity.
9 JUDGE WARDWELL: One of those is squared so 10 then you'd be back just a distance -- then you'd have 11 a linear function --
12 DR. SHEPPARD: No. So, I'm dropping two.
13 So, he's including two variables, distance from the 14 plant and the distance squared, so he's estimating two 15 parameters. Drop both of those and include only the 16 square root of distance, not also square root of 17 distance squared, just the square root of distance.
18 JUDGE WARDWELL: I thought that's what I 19 said originally.
20 DR. SHEPPARD: Oh, I beg your pardon. I may 21 have misunderstood.
22 JUDGE WARDWELL: So Y is A times the square 23 root of X.
24 DR. SHEPPARD: Times the square root of X, 25 yes. And this -- I beg your pardon, I just Neal R. Gross & Co., Inc.
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Page 2606 1 misunderstood. This is the shape that you get. The 2 resulting model is statistically significant. It shows 3 that this -- the impact of proximity has a 4 statistically significant impact on house values. And, 5 as I said, if you apply that analysis to the values of 6 homes in the region you'll get an estimated impact of 7 about 25 percent.
8 JUDGE WARDWELL: Is there a parameter that 9 judges the relative fitness between the two models, 10 between the Tolley model and the square root Tolley 11 model?
12 DR. SHEPPARD: There are a variety of such 13 parameters. One is the standard error of the parameter 14 estimate itself. Using this approach that improves the 15 precision of the estimate of proximity significantly.
16 You're getting a much better fit on the impact of 17 proximity. The overall fit of the model is almost 18 identical using only the variable square root of 19 distance, it's small -- the fit is reduced relative to 20 the two variables in Dr. Tolley's model in the second 21 decimal place.
22 MR. TENPAS: Your Honor, I'm sorry. Could 23 I ask just for a clarification. The witness used his, 24 I think, at one point about one model being better.
25 I'm just trying to clarify who he, or which model he Neal R. Gross & Co., Inc.
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Page 2607 1 was referring to initially as the better. I'm sorry, 2 we just couldn't pick it up on the speaker and the 3 mike.
4 DR. SHEPPARD: I beg your pardon. There are 5 -
6 jUDGE McDADE: His model, you were 7 referring to your own model, or Dr. Tolley's?
8 DR. SHEPPARD: When I said his model I 9 think I was referring to Dr. Tolley's model, but just 10 to make sure that it's clear let me restate it.
11 So, I'm comparing or contrasting two 12 models here, Dr. Tolley's original model which tries 13 to capture the impact of proximity using these two 14 variables, the straight line distance and the square 15 of the straight line distance contrasted with my 16 suggested alternative that captures proximity using 17 just the single variable the square root of distance.
18 JUDGE McDADE: Okay. Dr. Tolley, why do you 19 think using the distance plus the distance squared is 20 the better approach?
21 DR. TOLLEY: Okay, let's see. Well, a 22 couple of comments. One, I used a so called quadratic 23 utility function. That just means that people have 24 diminishing margin utility as we're all familiar with, 25 the more we consume of something the less we want an Neal R. Gross & Co., Inc.
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Page 2608 1 additional unit. And then the idea that margin of 2 utility diminishes at a diminishing rate. And it is 3 perhaps the most well known utility function in the 4 literature. It's certainly one of the most well known.
5 And then there are other more standard forms, log 6 forms and so forth, I would like to point out that 7 those -- that kind of functional form is used, again, 8 I would say overwhelmingly in the literature. And I 9 would say that Dr. Sheppard has used -- has never used 10 the square root of distance in any of his writings 11 that we can find. He advised his Student Prest who I 12 think his undergraduate thesis is an exhibit here, he 13 didn't use the square root of distance. One would ask 14 why didn't Dr. Sheppard advise this student, or why 15 didn't he use that?
16 JUDGE WARDWELL: But why wouldn't you use 17 it?
18 DR. TOLLEY: Because I was following state-19 of-the-art. I was following what most people do. I've 20 just done, in that sense, a very standard analysis.
21 JUDGE WARDWELL: Theoretically, do you 22 think it would work to give an appropriate analysis?
23 DR. TOLLEY: It does work. Let me continue.
24 So, it's true that if you search around enough and 25 you're looking for an answer, some people, I don't Neal R. Gross & Co., Inc.
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Page 2609 1 like to be unkind, call it cherry picking. You choose 2 the hypothesis that shows what you're trying to prove.
3 Now, I didn't do that. I did a straight standard 4 analysis of things.
5 If you look at the literature, there are 6 hundreds of hedonic analyses, more than Google knows 7 how to count actually. If you go to the square root of 8 distance out of all those thousands, probably hundreds 9 if not thousands, there are seven studies that have 10 used the square root of distance. And of those seven 11 studies, several of them were testing alternative 12 functional form. They were somewhat unusual studies, 13 like it was -- one was the affect of a power line, and 14 because of various physical obstacles they wanted to 15 test various functional forms and so forth. So, they 16 threw in a whole bunch of functional forms to this, 17 not usually done in hedonic analysis, at all. So, then 18 I think there were two or three where they actually 19 came out and said well, that was the preferred 20 functional form.
21 Now it is certainly true that you can find 22 a functional form that will suit the hypothesis you're 23 looking for. But if we have a thousand, let me says 24 hundreds of functional forms that don't fit the data 25 and you find this paltry few down here, paltry one Neal R. Gross & Co., Inc.
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Page 2610 1 that's used by a very fraction, 1 percent of 2 investigators, are you going to conclude that 3 therefore Indian Point is a disamenity, when most of 4 the functional forms don't fit it. So, that would be 5 the kind of thing. It's not, as Dr. Sheppard, it's not 6 an obvious alternative at all. I don't like to call it 7 cherry picking, but that what it seems like to me, 8 because why was this only one picked up, why has Dr.
9 Sheppard not used it before, why didn't he advise his 10 student to use it before? So, it's true you can find 11 a functional form that will fit the data, but is that 12 the test of scientific inquiry?
13 JUDGE McDADE: Okay. I'd like to move on to 14 a different area here while we still have some time.
15 And first to Dr. Sheppard, and then to Dr. Tolley.
16 MS. MIZUNO: Excuse me, JUDGE McDade, if we 17 could take a break shortly, that would be much 18 appreciated.
19 JUDGE McDADE: Okay. Let us go for just a 20 few minutes here, if we could, and then we'll take a 21 break. Let me just get through this one little area.
22 Dr. Sheppard, Indian Point is located in 23 a mature community. It has historical land use, it has 24 zoning. Even if Indian Point were to close in 2015, is 25 there any reason to believe that an industrial site, Neal R. Gross & Co., Inc.
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Page 2611 1 an electric generating facility wouldn't, given the 2 historical use of the property and the zoning continue 3 to be the best and highest alternative for the use of 4 that property?
5 DR. SHEPPARD: So, I've undertaken no 6 separate evaluation of what might constitute the 7 highest and best use. But I don't think we need to 8 assume that it would be the highest and best use.
9 There are many examples of reclaiming brownfield sites 10 for use as residential property. One that I've studied 11 very carefully and extensively is in Kenosha, 12 Wisconsin which is similarly on the edge of water, in 13 that case Lake Michigan rather than the Hudson River, 14 but it's an industrial facility that was closed, taken 15 over by the city and completed rehabbed into 16 residential use and a museum. So, I don't think we 17 need to -- I wouldn't necessarily assume --
18 jUDGE McDADE: Would you necessarily assume 19 the contrary?
20 DR. SHEPPARD: No, I have not undertaken a 21 study of what's likely to happen there.
22 JUDGE McDADE: Given the fact that Indian 23 Point as an industrial facility in this area is not 24 unique, it's not the only facility in the area, is it 25 not reasonable to expect, and again even if Indian Neal R. Gross & Co., Inc.
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Page 2612 1 Point were to close, it's still an area zoned heavy 2 industrial. Is there a reason to believe that that 3 would change, and that the land use would change?
4 DR. SHEPPARD: There's certainly reason to 5 believe that the land use would change whether that's 6 accommodated or could change, and that's driven by the 7 estimates of changes in property values. So, if the 8 value of residential property at a particular location 9 increases rapidly, then land owners who own property 10 that's not currently in residential use will have a 11 strong economic incentive to alter the use and alter 12 that land use. If it's not currently zoned for 13 residential use, they will begin petitioning to have 14 it zoned for residential use. They'll begin pressing.
15 JUDGE McDADE: Would that vary whether or 16 not it was closed and decommissioned, or simply closed 17 and the decommissioning was delayed for a period of 18 10, 20, 60 years?
19 DR. SHEPPARD: It's quite possible that it 20 could vary between those. I haven't undertaken an 21 estimate of the separate effect. What I've really 22 undertaken is an estimate only of the effect of 23 closing. But even that alone appears to generate a 24 statistically significant change in property values.
25 JUDGE McDADE: Actually, wouldn't a closed Neal R. Gross & Co., Inc.
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Page 2613 1 plant which would then have security issues and 2 pollution issues be more of a disamenity than an 3 operating plant?
4 DR. SHEPPARD: It's not -- my analysis 5 contradicts that, actually, I would say. My analysis 6 does not support that. Let me just say that. I think 7 that's a better or more fair characterization. My 8 analysis does not support that.
9 JUDGE WARDWELL: How does your analysis 10 even address that?
11 DR. SHEPPARD: My analysis focuses on the 12 effect of commencing commercial operation at the 13 plant, and that generated a diminution in the property 14 values nearby.
15 JUDGE WARDWELL: So, it has no information 16 in regards to what would happen in the future as it 17 closed, and then not necessarily decommissioned.
18 DR. SHEPPARD: Well, it has information for 19 -- I think as a -- I think my analysis has 20 information for what would be -- what the impact would 21 be property values of the cessation of commercial 22 operations.
23 JUDGE WARDWELL: I believe, did you not, 24 that you testified that you just assumed it was going 25 to be the same as what dropped when it was started up.
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Page 2614 1 So, it wasn't -- you didn't have an analysis of it.
2 You made an assumption. Is that correct, or not?
3 DR. SHEPPARD: This is -- it is correct 4 that I made an assumption of that, but it's -- but I 5 guess what I'm suggesting is that's a standard type of 6 assumption in evaluating these sorts of impacts. And 7 as I've just testified in the discussion of the 8 previous issue, it's an assumption that's supported by 9 a version of hedonic analysis using Dr. Tolley's data.
10 JUDGE WARDWELL: At nuclear power plants?
11 DR. TOLLEY: I beg your pardon?
12 JUDGE WARDWELL: At nuclear power plants?
13 DR. TOLLEY: At Indian Point.
14 JUDGE McDADE: Dr. Tolley, what would you 15 anticipate would happen to land use in the event 16 Indian Point were to close given the historical uses 17 of the land, and the zoning, and what is surrounding 18 it. Would it remain an industrial site? Do we have any 19 data to draw conclusions as to what would happen one 20 way or the other?
21 DR. TOLLEY: We're speaking about what 22 happens after the decommissioning period?
23 JUDGE McDADE: Well, the first is just when 24 it closes. If it were to close in 2015, what impact 25 would that have in the short run on land use? And by Neal R. Gross & Co., Inc.
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Page 2615 1 the short run I'm talking 10 years out. It's closed, 2 it's not decommissioned. The facility is still there.
3 It's just not generating electricity.
4 DR. TOLLEY: Well, I'm not an expert on the 5 theories of the state of plant when it's operating and 6 when it's in a decommissioning period so I really 7 didn't distinguish that.
8 MR. REAMER: Your Honor, Bill Reamer for 9 the Applicant. Maybe I can help on that. The first 10 point I'd make is included in the exhibits are 11 planning development documents from Village of 12 Buchanan, Westchester County prepared in a time frame 13 that would be relevant to Your Honor's questions.
14 What's the planning for the future including perhaps 15 no plant.
16 JUDGE McDADE: Which suggests except for a 17 small treed area it would be continued to be zoned 18 heavy industrial. Correct?
19 DR. TOLLEY: That's correct.
20 MR. REAMER: That's correct, Your Honor.
21 JUDGE McDADE: And are you in a position to 22 offer an opinion as to -- and, again, any of the 23 representatives here, the effect on land use and the 24 surrounding area if you have a operating plant 25 generating electricity as opposed to a closed but not Neal R. Gross & Co., Inc.
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Page 2616 1 decommissioned facility that's sitting there. Would 2 there be a difference on the impact on land use, and 3 is there any data that you would point us to to 4 demonstrate that?
5 DR. TOLLEY: I would have to defer to 6 others on this.
7 JUDGE McDADE: Okay.
8 MR. CLEARY: Your Honor, Donald Cleary for 9 the Applicant. The Pilot payments and tax payments to 10 localities would go down, and that certainly would be 11 a significant --
12 jUDGE McDADE: We're going to get into that 13 quite a bit later.
14 MR. CLEARY: Okay.
15 JUDGE McDADE: I'm just talking about just 16 the fact of the plant itself either being there and 17 generating electricity versus being there, just being 18 there.
19 DR. TOLLEY: No, employment and --
20 MR. REAMER: Let me help on that, Your 21 Honor. The plant will still be there. The spent fuel 22 will still be there. The --
23 JUDGE WARDWELL: For 60 years, it won't be 24 there forever.
25 MR. REAMER: I believe we're addressing the Neal R. Gross & Co., Inc.
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Page 2617 1 time frame of when it shuts down.
2 JUDGE WARDWELL: Okay.
3 MR. REAMER: That's what I am addressing, 4 the time frame of when it shuts down, what would be 5 the comparison at that point.
6 JUDGE WARDWELL: Sorry.
7 MR. REAMER: The plant will remain, the 8 spent fuel will remain, the impacts like view of the 9 plant, noise, traffic remain unchanged, small, so in 10 those terms there's not a significant change that 11 happens the day the plant shuts down.
12 Also, the property, of course, remains 13 under license, the site remains restricted. It's not 14 available at that point for alternative uses to --
15 that have been discussed by the state.
16 JUDGE McDADE: Okay. We've been here for 17 about two hours. A break was requested. It might be a 18 good time to take a break. It's 4:00 right now. Why 19 don't we take 10 minutes and come back at 4:10. Thank 20 you.
21 (Whereupon, the proceedings went off the 22 record at 3:59 p.m., and went back on the record at 23 4:12 p.m.)
24 JUDGE McDADE: Please be seated. Dr.
25 Sheppard, at least the takeaway that I got from your Neal R. Gross & Co., Inc.
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Page 2618 1 testimony was that the property values around Indian 2 Point since the 1970's have been held down by a sort 3 of a nuisance-type disamenity.
4 Even if Indian Point closed, and the 5 facility were still there, wouldn't that same 6 disamenity or a disamenity significant approaching it 7 continue to exist until the plant was decommissioned, 8 and if not, why not?
9 DR. SHEPPARD: I think it's correct to 10 say, Your Honor, that there would be disamenity of 11 some type that would continue there, as long as the 12 plant were there. The question is not would there --
13 would cessation of operations remove all disamenity of 14 any sort.
15 The question is would cessation of 16 operations result in impacts on property values that 17 would in turn generate changes in land use. The 18 current Environmental Impact Statement says that no 19 significant land use changes are expected, and what my 20 analysis shows is not that all amenities would be 21 eliminated if the, you know, at the point of closure 22 of the plant.
23 What my analysis shows is that when the 24 plant closes, there will be some disamenity effect 25 that will generate, or that I think it's reasonable to Neal R. Gross & Co., Inc.
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Page 2619 1 assume it will generate consequences for residential 2 property values, that will then in turn generate 3 changes in land use.
4 I'm not arguing that 100 percent of the 5 disamenity will be removed, just that there will be 6 some change in the pattern of disamenity that will 7 result in changes in property value, and hence, 8 changes in land use.
9 JUDGE McDADE: Okay. For the 10 Environmental Impact Statement, the staff is charged 11 with making a reasonable estimate. They're not 12 charged with being clairvoyant. Aren't the actual 13 effects on land use in the area of a shutdown 14 extremely speculative?
15 DR. SHEPPARD: I think anticipating land 16 use changes that may result from significant policy 17 decisions, and in particular anticipating those land 18 use changes well out into the future, I think that is 19 intrinsically -- it involves estimation, and that you 20 might -- it might be sensible to characterize that as 21 speculative.
22 But I don't think it's speculative in the 23 sense that it's impossible to make a reasonable 24 estimate, nor do I think that it's speculative in the 25 sense that the error that's intrinsically associated Neal R. Gross & Co., Inc.
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Page 2620 1 with such estimates is so immense as to make the 2 exercise unreasonable.
3 My understanding of what staff are charged 4 with is trying to make a reasonable analysis of the 5 land use consequences of various decisions, and one of 6 those would be to try to analyze the land use 7 consequences of both the no action or the renewal, and 8 given -- that's going to require some estimation, 9 because we're talking about events that haven't 10 happened yet.
11 JUDGE McDADE: Okay, and putting this 12 question to whoever from Entergy thinks they're best 13 capable of answering this, as I understand it right 14 now, there are PILOT payments, payments in lieu of 15 taxes, and those are --
16 JUDGE WARDWELL: Can I ask one question of 17 Dr. Sheppard before we leave him, because we're going 18 to get into another area? Have you tried to benchmark 19 this latest model approach, looking at other plants 20 that are currently closed and even decommissioned, to 21 see if this actually works at other facilities, such 22 as Connecticut Yankee or Maine Yankee?
23 DR. SHEPPARD: I have not, Your Honor. I 24 have, in conjunction -- I have compared the overall 25 impact that I estimate with other hedonic approaches, Neal R. Gross & Co., Inc.
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Page 2621 1 both the hedonic approach that Dr. Tolley used and 2 that we've discussed, and the hedonic approach that my 3 student has used, and it was referenced in my report.
4 The magnitude of impacts that I'm 5 estimating from my analysis is of the same general 6 range as those other hedonic estimates that impact, 7 but I haven't actually tested it in the scenario that 8 you suggest, looking specifically at closed and 9 decommissioned plants.
10 JUDGE WARDWELL: Thank you.
11 JUDGE McDADE: Okay. With regard to these 12 payments in lieu of taxes, I assume that these are not 13 just purely a voluntary contribution on the part of 14 Entergy. How were they determined? How was that 15 amount of 22 million a year calculated?
16 MR. REAMER: Bill Reamer for the staff 17 (sic), Your Honor. They are determined by an 18 agreement that was reached between Entergy and the 19 local jurisdictions in around 2000, an agreement that 20 extends until, I believe, the end of tax year 2014.
21 JUDGE McDADE: What happens in 2014?
22 Could Entergy just simply stop making these payments?
23 MR. REAMER: Well, the agreement will, at 24 that point cease, and we won't make any assumption for 25 purposes of my answering the question at this point, Neal R. Gross & Co., Inc.
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Page 2622 1 I guess, about the status of the plant.
2 But the options at that point would be a 3 new agreement between Entergy and the nearby 4 jurisdictions; that would be one. Or the other option 5 would be that the nearby jurisdictions exercise their 6 jurisdiction to assess, for purposes of collecting 7 taxes, from Entergy. That would be another way to go.
8 JUDGE McDADE: It's my understanding that 9 they're already collecting real estate property taxes 10 based on the Indian Point facility, are they not?
11 MR. REAMER: My understanding is that 12 Buchanan, the Town of Cortlandt, the school district 13 and the fire district, receive their real estate taxes 14 through the payment in lieu of tax vehicle. Now there 15 may be other taxes that they receive, for example, 16 real estate taxes from businesses that cater to 17 Entergy's needs.
18 There may be other tax benefits that the 19 local jurisdictions receive. But the real estate tax 20 for those jurisdictions, as I mentioned, my 21 understanding is it comes through the agreement.
22 JUDGE McDADE: Okay, and Entergy 15B, my 23 recollection of that is that there was 1.9 million in 24 property taxes paid to Buchanan, in addition to what 25 they receive through the payments in lieu of taxes.
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Page 2623 1 Is that incorrect?
2 MR. REAMER: I'll have to get back to you 3 on that question. I'm not able to answer that in a 4 fashion. I'm going to ensure the accuracy of my 5 answer.
6 JUDGE McDADE: Okay. Would anyone, if you 7 have any way of knowing, one, what the assessed value 8 of the property at Indian Point is, and what the tax 9 rate would be with taxes from Buchanan or Cortlandt or 10 Westchester County?
11 MR. REAMER: Bill Reamer for the staff 12 (sic). Would need to get back to you on that as well.
13 JUDGE McDADE: And as I read the 14 testimony, one of the thoughts that I had was that in 15 the event Indian Point closed, there would be a 16 significant reduction in payments to these surrounding 17 localities, and I believe there was testimony that we 18 received, that Buchanan received approximately 40 19 percent of its revenues from Indian Point, that the 20 school district about 35 percent of its revenue.
21 One question, follow-up question that I 22 had is if the plant were to close, what would be the 23 payments from Entergy to these surrounding 24 communities, and how that change would impact property 25 values and derivatively from that, land use?
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Page 2624 1 In other words, as I understand Buchanan, 2 it's a relatively small town of about 2,000 people.
3 So one could assume, just from the $2 million that 4 they're getting, it's about $1,000 per person.
5 So I had assumed, and my take on that was 6 that the payments in lieu of taxes were in addition to 7 some basic tax. So what I'm trying to figure out is 8 if the plant closed, how much revenue would no longer 9 be paid to Buchanan, Cortlandt, Westchester County?
10 Does anyone have that information available?
11 MR. REAMER: Bill Reamer for the 12 applicant, Your Honor. We took a look at several 13 other plants that had shut down, Maine Yankee, 14 Connecticut Yankee, Yankee Rowe, to look at tax 15 payments after the plant had shut down, and those are 16 exhibits, Entergy exhibits. I don't have the numbers 17 right now, but I'll get them for you.
18 But we did an estimate that taxes could 19 reasonably assume to be approximately 18 percent of 20 the amount that Entergy currently pays under the PILOT 21 payment agreement. So that -- now that, those 22 payments we made an assumption, that they would 23 continue at that level, from the shutdown point when 24 the plant ceases to operate.
25 It's now no longer generating revenue.
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Page 2625 1 Clearly, its value has declined. We thought the Maine 2 Yankee plant, Yankee Rowe, Connecticut Yankee would 3 represent reasonable proxies. They were in the same 4 situation, and we looked at -- and then that amount, 5 that 18 percent, we said, we assumed would continue 6 throughout the period of decommissioning, up to 60 7 years.
8 And we looked at the Maine Yankee, 9 Connecticut Yankee, Yankee Rowe examples there, and 10 felt the 18 percent figure enveloped what had happened 11 at those sites.
12 JUDGE McDADE: Okay. So if that were the 13 case, then the payment to the surrounding localities 14 would drop from about 22 million a year to about 4 15 million a year?
16 MR. REAMER: I take Your Honor's 17 calculation --
18 JUDGE McDADE: Approximately, okay. Dr.
19 Sheppard --
20 MR. RUND: Your Honor. This is John Rund 21 for the applicant. I just want to, for the record, 22 just point out Mr. Reamer was referring to Entergy 23 Exhibits 164, 165 and 166.
24 JUDGE McDADE: Okay, thank you. Dr.
25 Sheppard, have you factored in that lost revenue, and Neal R. Gross & Co., Inc.
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Page 2626 1 the impact it would have on tax rates in the area, and 2 how that would affect land values and thereby affect 3 land use?
4 DR. SHEPPARD: I certainly considered that 5 issue, Your Honor, in several different ways. First, 6 as noted in my report, to the extent that these PILOT 7 payments and/or real estate tax payments commenced at 8 the time of operation of the plant, or were 9 anticipated at that time, they would factor in 10 specifically. They would already be accounted for in 11 my analysis. So whatever effect --
12 JUDGE McDADE: Explain that. How would 13 that be accounted for?
14 DR. SHEPPARD: Because -- so suppose that 15 we have a new facility opening up, that's expected to 16 generate a large amount of tax revenue for the town, 17 and that people who are, homes that are located in the 18 town or nearby, will be the recipient of a -- I don't 19 want to characterize it as a windfall, suggesting that 20 it's in some sense undeserved.
21 But it would have an impact on the quality 22 and extent of public services made available to those 23 houses. So if that were a significant factor, then 24 buyers of houses would take that into account in 25 figuring out how much they would buy, and that would Neal R. Gross & Co., Inc.
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Page 2627 1 be adjusted for, in my estimates, of the impact of the 2 treatment that we've discussed at length before we 3 took the break.
4 The second way I've taken that into 5 consideration is by consulting FERC, I mean just 6 thinking through the implications of these PILOT 7 payments for what would be the consequences of those 8 payments for house values.
9 So for example, in the discussion that you 10 were just having, you put forward, you made note of 11 the fact that this amounted to something on the order 12 of $1,000 per person.
13 And if we figure, okay, so three or four 14 people per household, that sounds like three or four 15 thousand dollars per house in the community, and we 16 capitalize that at some reasonable rate.
17 Whether it would take four or five or a 18 government-ordered seven percent, that's going to 19 generate an impact on the typical value, once that's 20 capitalized into the value of houses, that will 21 generate an impact on the value of houses on the order 22 of 40 to 60 thousand dollars.
23 That's much smaller than the estimated 24 impact that you see either from variations of the 25 hedonic model, using Dr. Tolley's data, or from my Neal R. Gross & Co., Inc.
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Page 2628 1 own.
2 So for example, if you consider measuring 3 proximity from using linear distance, which is -- if 4 you object to the use of the square root of distance 5 as a measure of proximity, the most widely used way to 6 measure proximity would just be straight-line 7 distance.
8 If you used Dr. Tolley's data to estimate 9 that effect, the impact is about $46,000 on the value 10 of a home for each mile. So that would suggest that 11 the PILOT payment impact is, would be on the same 12 order of magnitude as moving the typical home one mile 13 further away from the plant. And finally, if I may --
14 MR. TENPAS: Your Honor, at this point, 15 could we have a clarification of the analysis he's 16 referring to? If it's a document, we'd like to know 17 what it is. We believe that this may be analysis 18 that's outside the record that we've never seen.
19 JUDGE McDADE: You'll have a chance to ask 20 him about that. Dr. Sheppard.
21 DR. SHEPPARD: Finally, in Dr. Tolley's 22 own analysis, presented in his report, reiterated in 23 his testimony and verified by myself, the impact of 24 PILOT payments, they explicitly include the impact of 25 PILOT payments, and it is not -- the resulting Neal R. Gross & Co., Inc.
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Page 2629 1 estimate is that PILOT payments are not statistically 2 significant.
3 That is, we cannot reject, using Dr.
4 Tolley's data, Dr. Tolley's analysis cannot reject the 5 hypothesis that the true effect of PILOT payments on 6 property values is essentially zero. I'm not sure I'd 7 go that far, but that's the result of his analysis.
8 So the PILOT payments, I don't want to 9 minimize them. I think they're a very helpful thing 10 for the community. But their impact on property 11 values is modest, when compared to other impacts that 12 appear to be being generated by the IPEC facility.
13 JUDGE McDADE: Dr. Tolley, would you 14 respond?
15 DR. TOLLEY: Well to my mind, this result 16 shows up the weakness of the repeat cells estimators 17 (ph), which in my opinion should not be taken 18 seriously. So you were talking about the remarkable 19 coincidence of the 27 and 28. I say that's remarkable 20 coincidence to a meaningless number. I'm just putting 21 that on the record.
22 Now the puzzle here is that let's take the 23 supposed disamenity effect, and suppose we accept this 24 value of about 1.7, $1.07 billion, and that's the 25 estimate of the disamenity effect. So let's take the Neal R. Gross & Co., Inc.
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Page 2630 1 disamenity effect first.
2 That's going to occur 60 years out in the 3 future after the closure, because the plant, as we've 4 said, is going to be there and having disamenity 5 effects.
6 The present value of a billion dollars 60 7 years from now is on the order of one percent of a 8 billion dollars, and that's about, I guess, $10 9 million. Let's not get into the fine print. It's 10 something like that.
11 Meanwhile, we have the present value of 12 the PILOT payments, and the PILOT payments, if they 13 plan -- if there's a renewal, will continue at their 14 present level for 20 more years, and then they'll fall 15 to 18, 19 percent for the 60-year decommissioning 16 period.
17 Whereas if you, in the no action 18 alternative, PILOT payments fall immediately, so to 19 19 percent and stay that way for 60 years. So the effect 20 on land values from the PILOT payment is the 21 difference between the present value of the PILOT 22 payments with renewal, and with no action.
23 And because those are big losses in the 24 present, they are not so heavily discounted. So you -
25 - but you do discount them, of course, and you'll pay Neal R. Gross & Co., Inc.
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Page 2631 1 a lot more for an annuity that's going to begin right 2 now and last for several years, than you will for 3 something that's not even going to begin for 60 years, 4 which is probably really beyond the horizon you're 5 thinking about. It would be less than seven percent.
6 So you have those two things.
7 The present value of the PILOT payments 8 is, as I recall, about $180 million, as compared to 9 something on the order of $10 million, as the present 10 value of the property that you're going to realize 11 supposedly in 60 years for this $1 billion, which I 12 don't believe.
13 But suppose we accept that. Even if you 14 accept that, it's just -- the property value increase, 15 when you subtract the thing that's going to happen 60 16 years out there, subtract the present value of that 17 from the present value of the PILOT payments is $162 18 million, and that far swamps this $10 million present 19 value that you're getting.
20 So to me, I believe in these figures.
21 They ring true. Dr. Sheppard says that it doesn't 22 ring true at all. The idea that in the face of that, 23 the disamenity effects would overcome the power 24 effects, is not believable.
25 JUDGE McDADE: Okay. Dr. Sheppard Neal R. Gross & Co., Inc.
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Page 2632 1 hypothesizes that the diminution in the disamenity 2 will begin as soon as the plant shuts down, not at 3 decommissioning. It seems that you reject that 4 hypothesis. Why?
5 DR. TOLLEY: Well, my hypothesis has been 6 the certain disamenity effects are continuous for the 7 whole period. But Dr. Sheppard never does have the 8 analysis of this. All he says is that property values 9 are going to rise on the first day, and they'll keep 10 rising. He doesn't make any quantitative statement 11 about what's going to happen.
12 In my analysis, property values rise by 13 $16 million, and they rise only gradually if we want 14 to go up there, and if we really believe this is going 15 to happen in 60 years.
16 Finally, in the 60th year, it will have 17 risen to this $1 billion, but most of that rise takes 18 place in the last eight years. Half of the rise takes 19 place in the last eight years. It's the way compound 20 interest works.
21 So I would just say, I have another 22 calculation. In the first place, Dr. Sheppard in his 23 testimony has shown no calculation. He's just 24 assumed, as a qualitative matter, that this will 25 happen, because he's talking now. He's saying yes, Neal R. Gross & Co., Inc.
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Page 2633 1 there will be these; this amenity will not be quite as 2 great.
3 I'm still saying, excuse me, if I may just 4 continue my thought, and that is that disamenity will 5 still have to not be very great at all from the 6 decommissioning for this effect to outweigh itself.
7 We'd have to get into the numbers. But he hasn't 8 gotten into numbers. We're getting into speculation 9 now. Excuse me for going on.
10 JUDGE McDADE: Okay. Let me throw out 11 another unsupported hypothesis here and let you opine 12 with regard to it. In the testimony we've received, 13 Entergy points out and the staff points out that there 14 no obligation on their part to decommission the 15 facility for 60 years after the close.
16 So we're not talking decommissioning in 17 2015. We're talking about decommissioning in 2075.
18 As an economist, is it reasonable to assume that this 19 piece of property that would generate costs for 20 Entergy, real estate taxes, security, maintenance to 21 prevent contamination and lost opportunity costs, is 22 it realistic that this piece of property on the Hudson 23 River would continue to generate those costs for 60 24 years, prior to a decommissioning that has to occur at 25 some point anyway?
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Page 2634 1 Wouldn't there be an economic incentive if 2 the license is not renewed, for Entergy to 3 decommission the facility as soon as practicable, so 4 that the holding costs would be gone, and it would be 5 able to take advantage of various other opportunities 6 with the property?
7 DR. TOLLEY: Well, maybe so. But the 8 plant, as I understand it, it's been approved by the 9 NRC for a 60-year decommissioning period, I don't know 10 what would happen if Entergy tried to do it sooner.
11 But I've been going by the Entergy plan and the 60-12 year plan.
13 JUDGE McDADE: I mean the NRC has 14 authorized, from their standpoint, they've authorized 15 Entergy to take up to 60 years. There's not going to 16 be, as things stand right now, a regulatory 17 requirement on Entergy to decommission the plant, to 18 have it decommissioned before 2075.
19 But I'm not asking about a regulatory 20 requirement. I'm asking as an economist, isn't there 21 a significant economic incentive for Entergy, instead 22 of having this economic drain for the next 60 years, 23 to turn it into a current asset?
24 DR. TOLLEY: Well, I suppose there is. It 25 depends on the cost of more rapid decommissioning, Neal R. Gross & Co., Inc.
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Page 2635 1 among other things.
2 JUDGE McDADE: But isn't it reasonable to 3 anticipate that it's going to cost more 60 years from 4 now, than if they get to it promptly? I mean is there 5 any reason to believe that the decommissioning costs 6 would be less in 2007, and even in 2016?
7 DR. TOLLEY: Well, I don't know. I'm just 8 pointing out there is the cost side of more rapid 9 decommissioning. Again, that would be out of my area.
10 I frankly haven't gone into the calculations.
11 JUDGE McDADE: Okay. To the other 12 representatives from Entergy, doesn't your company 13 have an economic incentive, although from a regulatory 14 standpoint you've got 60 years to decommission, in the 15 event the license was not renewed, to turn this into 16 an asset?
17 MR. REAMER: Your Honor, Bill Reamer for 18 the applicant. The decision on the decommissioning 19 strategy has been made by Entergy, for purposes of its 20 decommissioning cost estimate.
21 So the documents in the record show that 22 Entergy has considered the cost projected out through 23 2073 as a decommissioning date, and has provided in 24 its decommissioning trust fund sufficient funds, that 25 if it's sufficient in its view, and sufficient, I Neal R. Gross & Co., Inc.
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Page 2636 1 believe, in the staff's view, because the staff did 2 accept the Entergy cost estimate.
3 JUDGE McDADE: Now does this plan 4 contemplate a slow and steady decommissioning over the 5 60-year period of time, or does it envision a period 6 of inactivity, followed by significant decommissioning 7 activities on the back end?
8 MR. REAMER: Bill Reamer for the 9 applicant. The latter.
10 JUDGE McDADE: And if that's the case, Dr.
11 Sheppard, again please explain to me why do you 12 believe that a derelict plant which contains toxic 13 materials, would be less of a disamenity than a 14 maintained, secured at a very high level, industrial 15 facility?
16 DR. SHEPPARD: So two points. First, so 17 we were talking about PILOT payments, and you've asked 18 about the disamenity. I don't know if we're still on 19 the PILOT payments or not. I mean Dr. Tolley's own 20 analysis suggests that the PILOT payments have no 21 effect on property values.
22 DR. TOLLEY: Excuse me. That's not true.
23 JUDGE McDADE: Okay. You'll have an 24 opportunity to respond.
25 DR. TOLLEY: Sorry, sorry.
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Page 2637 1 DR. SHEPPARD: But the -- so that's what 2 his estimates, his hedonic function estimates show.
3 But in terms of the disamenity, so as I understand it, 4 and according to the testimony that had been given, it 5 will be secured in either event.
6 So it will remain secured. It will, it 7 has toxic substances on the plant now. It will 8 continue to have toxic substances on it. So many of 9 these classic indicators of disamenity or nuisance 10 would remain the same. But there will be some that 11 would or could remain, would or could be decreased.
12 So there would be -- there won't be the 13 regular refueling that involves, you know, an annual 14 process of moving fuel into the facility and taking 15 care of that sort of thing. There may be fewer alarms 16 going off and less traffic of workers going in and 17 out.
18 So I don't think that we can conclude 19 automatically that the level of disamenity would not 20 go down, and the data seem to be consistent with there 21 being a disamenity associated with the commencing of 22 commercial operations at the plant.
23 JUDGE WARDWELL: But haven't you stated 24 that your assumption is that the disamenity ceases the 25 minute the plant closes? Isn't that a far stretch or Neal R. Gross & Co., Inc.
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Page 2638 1 did I misinterpret what you said?
2 DR. SHEPPARD: I think perhaps I failed to 3 communicate clearly.
4 JUDGE WARDWELL: Good. It's not my fault.
5 DR. SHEPPARD: I just didn't -- I don't 6 want to go there.
7 JUDGE WARDWELL: Good. I don't want to be 8 there.
9 DR. SHEPPARD: Let me just be clear. My 10 testimony and the conclusion of my analysis is not 11 that all disamenity will cease. Think in terms of 12 levels of disamenity or degrees of disamenity, and 13 what I'm --
14 I think the conclusion in my analysis and 15 the assumptions that underlie it are that some of the 16 disamenity will cease. It will be turned down a 17 notch, but not go away all together.
18 JUDGE WARDWELL: And how much is that and 19 how do you project that over the 60-year period, and 20 have you discounted it?
21 DR. SHEPPARD: I haven't done any 22 discounting. I'm just estimating the impact of 23 cessation of commercial operations.
24 JUDGE WARDWELL: And how did you stretch 25 that out in regards to the reduction of the disamenity Neal R. Gross & Co., Inc.
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Page 2639 1 after shutdown?
2 DR. SHEPPARD: So after shutdown, I 3 haven't undertaken any analysis that says well, what 4 will be the dynamic process of drawdown of disamenity 5 or increase in property values.
6 JUDGE WARDWELL: So you, when you're 7 throwing out the $11 billion estimate, you have 8 nothing to regards -- there's no time value of that 9 associated with that number? That's just the number 10 that you calculated for the difference in the property 11 values associated with a start-up, and assuming that 12 that is recouped at some time in the future, within no 13 defined time frame?
14 DR. SHEPPARD: Right, associated with the 15 start-up that was experienced over, let us say roughly 16 a ten-year time period, because that's the average 17 duration of home ownership.
18 So really a nine-year time period is the 19 average, and so the disamenity effect that my analysis 20 discovered and documented, that was associated with 21 the start-up, I would think it would be reasonable to 22 say that it would be over a similar period of time 23 that it would be drawn down.
24 Not that the disamenity would go away all 25 together. There still would be disamenity associated Neal R. Gross & Co., Inc.
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Page 2640 1 with the plant.
2 JUDGE McDADE: So five years out, are we 3 talking about a $1 billion increase in land values or 4 half billion dollar increase in land values, or $100 5 million increase in land values?
6 DR. SHEPPARD: I think a fair way to 7 characterize it, I mean if you'll allow me to speak in 8 generalities, I would say a decade after closure of 9 the plant, we could expect about a 20 -- let me just 10 round everything to the nearest five, okay.
11 A decade after closure of the plant, it 12 would be reasonable to expect a 25 percent increase in 13 property values. That's basically $1 billion, if 14 we're talking about the area within five miles --
15 JUDGE McDADE: But you're basically saying 16 that all of the increase would be within that first 17 decade, even though there would be significant 18 disamenities remaining?
19 DR. SHEPPARD: Yes. There may be 20 additional increases that would be experienced, as the 21 full panoply of disamenities associated with storing, 22 the safe store status of the plant, etcetera. As all 23 of those are eliminated, there may be yet further 24 appreciation in property values. I haven't attempted 25 to estimate those.
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Page 2641 1 Just as there were, and this goes back 2 what we were discussing earlier in the afternoon, 3 about there may -- there could well be disamenities 4 associated with the construction. There may be 5 disamenities associated with the construction 6 equipment required to remove the building and remove 7 the plant from the site.
8 JUDGE McDADE: Okay. Dr. Tolley, Dr.
9 Sheppard has suggested that you believe the 10 termination of the PILOT payments would have no impact 11 on land values. Is that accurate?
12 DR. TOLLEY: Well, if I heard Dr. Sheppard 13 correctly, he said that I said that my statistical, if 14 I may talk for a couple of minutes here. My estimates 15 show that their estimated, there was an impact. But 16 it's true. In my hedonic analysis, it was not 17 statistically significantly different from zero.
18 I would like to point out that it was much 19 closer, a much higher level of significance of being 20 close to a reasonable value. This is saying before; 21 we have to not be a slave to the statistics. If we 22 look at a great body of literature, started with 23 Allison and Metz (ph) and people probably about 1980, 24 they established very clearly that taxes, local taxes 25 do get passed through, and they are borne by the Neal R. Gross & Co., Inc.
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Page 2642 1 property owners in the -- where the taxes are levied.
2 So if you don't accept this, you don't 3 accept the body of received public finance literature 4 on this point, and we have to look at this as 5 reasonable human beings, as an economist, that there 6 is such an effect, if we believe the literature.
7 This estimate is not significantly 8 different from that. In fact, it's quite significant.
9 It's quite consistent with it, because it is a 10 reasonable value. However, what Dr. Sheppard did not 11 do is deal with the analysis on his own data. If we 12 do the analysis on his own data, the PILOT payment 13 variable in my regression becomes highly significant.
14 So I'm sorry for the outburst, but I 15 completely reject the idea that I am saying that 16 there's no effect on property value, of PILOT payments 17 on property values.
18 JUDGE McDADE: Okay. Dr. Sheppard, in his 19 testimony, Dr. Tolley cited studies by Clark, 20 Michelberg (ph), Allison and Metz, of Diablo Canyon 21 and Rancho Seco, Entergy Exhibits 155, 156, as well as 22 studies of Plymouth and Three Mile Island, Exhibit 23 145, which in his view showed no correlation between 24 the presence of a nuclear facility and depressed 25 property values surrounding it.
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Page 2643 1 Do you think those studies are wrong, or 2 do you think his interpretation of those studies is 3 wrong?
4 DR. SHEPPARD: I think that those studies 5 contain flaws, but --
6 JUDGE McDADE: But you disagree with their 7 conclusion?
8 DR. SHEPPARD: I disagree with their 9 conclusion. I think that -- so let me say two things.
10 One is I disagree with their conclusion. I cite other 11 studies that do show a positive impact, and Professor 12 Tolley, in his comments on my own analysis, disagrees 13 with those studies as being flawed or having, missing 14 variables or econometric issues.
15 So in all of these, one can identify 16 issues and say well, I'll take the results I like and 17 I'll endorse those, and take the results I don't like 18 and find the flaws in those. I think actually what I 19 would suggest is the best approach for the present 20 proceeding, is to focus on the analysis of the data we 21 have, and as I said, Dr. Tolley's MLS data in his own 22 data suggest a statistically significant impact of the 23 presence of the plant on property values, and a 24 statistically insignificant impact of PILOT payments 25 on property values.
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Page 2644 1 My own analysis is a different method, but 2 it also is supportive of a significant disamenity 3 impact on property values.
4 JUDGE McDADE: Okay, and I'm trying to get 5 a feel for the degree of precision in these kinds of 6 studies. For example, another one cited, Entergy 7 Exhibit 235, would indicate that the proximity to 8 chemical weapons storage facilities and hazardous 9 waste storage facilities have a positive effect on 10 land values.
11 That seems, from just an intuitive 12 standpoint, to be illogical. Are these studies 13 precise enough to be relied on for any purpose?
14 DR. SHEPPARD: I think that they are 15 precise enough to be relied upon. However, I think it 16 would be completely reasonable to ask this question.
17 It's completely reasonable to say what is the 18 precision of this analysis, and how much faith can we 19 put in it? That seems a reasonable question to me.
20 And I agree with you. Part of the 21 problem, Dr. Tolley did summarize some of the issues 22 in undertaking hedonic analysis, that you're trying to 23 adjust for a variety of impacts that may be present in 24 a location. If you're taking data all from a 25 particular point in time, there may be several sources Neal R. Gross & Co., Inc.
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Page 2645 1 of disamenity that have to be, that should in 2 principle be considered, and ideally you would add 3 variables for those to the model.
4 Some of these studies to which you refer 5 miss certain disamenities. Some of them fail to 6 account for the attractiveness of the facility as an 7 employment location. So there are -- my student, 8 Brian Press, has studied this. A big part of the, of 9 the important contribution of his study was to 10 separate out the impact of green space and open space 11 and its attractive features from the proximity to the 12 nuclear power plant.
13 So this is difficult. It is subject to 14 error. To me, the most important part of the analysis 15 that's come forward from all the experts in this case 16 is to find two completely different approaches that 17 come up with somewhat similar numbers.
18 JUDGE McDADE: Okay. Dr. Tolley suggested 19 that an inability to control for certain small area 20 influences affect the precision of these studies. How 21 do you, in your study of Indian Point, control small 22 area influences?
23 DR. SHEPPARD: So I don't disagree with 24 that statement, by the way. I think that that is a 25 correct statement that you have to worry about, small Neal R. Gross & Co., Inc.
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Page 2646 1 area influences. So I control for those influences in 2 two ways in my analysis.
3 One, by using repeat sales analysis, I'm 4 focusing on a particular time period, as we've 5 discussed. And so that has the effect of controlling 6 for or excluding those changes that don't happen at 7 that point in time.
8 So small area changes, like the building 9 of a waste incinerator or an alternative roadway or 10 whatever, if they happen at completely different 11 times, then my analysis isolates them from the effect 12 that I'm looking at. So that's one method.
13 The second method is that my analysis 14 controls for distance of the property from the Indian 15 Point Energy Center. So that again focuses attention 16 on the role of being proximate to IPEC, not just in 17 the general neighborhood. So with those two --
18 JUDGE McDADE: Doesn't the Diablo Canyon 19 and Rancho Seco studies use that same analysis?
20 DR. SHEPPARD: They don't use the -- they 21 don't do exactly the same analysis, because they don't 22 use the repeat sales approach, going over time to 23 isolate the change at that point in time.
24 JUDGE McDADE: Okay, and other than the 25 repeat sales analysis, again, how else do you control Neal R. Gross & Co., Inc.
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Page 2647 1 for small area influences?
2 DR. SHEPPARD: In the course of my repeat 3 sales analysis, the model that I used to estimate the 4 impact, I'm using the distance from the IPEC facility 5 for each property as a control variable. So that 6 helps to focus attention only the effect that's 7 related to proximity to the plant.
8 JUDGE McDADE: Okay. Dr. Tolley, do you 9 think those are adequate to control those small area 10 influences, and if not, why not?
11 DR. TOLLEY: Well no, I don't. I don't 12 think that they -- we went through part of this 13 before. It's a meaningless analysis, because there 14 are all these other events that are influencing land 15 values.
16 You know, if it were such that you just 17 had a constant rate of return, and then it was going 18 up, property values were increasing at that rate, and 19 then you have this one event that suddenly it will go 20 down, and then it would continue up on a smooth line, 21 those are the conditions under which the repeat sales 22 analysis would be valid.
23 That's not at all what's going on here.
24 This is a complex time; it's a complex area. Not all 25 houses are the same. There may have been different Neal R. Gross & Co., Inc.
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Page 2648 1 influences. We went over it. We talked about this 2 before. So as I say, to me, it's a meaningless 3 exercise. It may be valiant, but it violates all the 4 rules of a good investigation.
5 Then the other point is this distance.
6 This is a technicality, but possibly very important.
7 Dr. Sheppard includes this in his regression distance 8 from the plant. But he says, in his own words, that 9 distance from the plant is not in there to pick up the 10 effects of disamenity.
11 In fact, he says that it's in there in 12 order to pick up influences on the general rate of 13 return; not on the level, but on the rate of return 14 from being different distances from the plant. That's 15 kind of a strong relationship.
16 How could, what could possibly cause that?
17 Why should if I buy near the plant, I should get a 18 seven percent return, but if I buy a little further 19 away, I should get an eight percent return and that 20 kind of thing? If I find one out at 12 miles, I'll 21 get a bigger rate of return.
22 That's not what his control group does.
23 His control group is an either/or situation. Either 24 you're within the scope of the plant and you take this 25 hit, or you're not. That's what the treatment group Neal R. Gross & Co., Inc.
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Page 2649 1 and the control group are. So as he himself says, I 2 believe he says exactly that.
3 But it's not intended to control for this 4 hit in property values. So to me, this is just an 5 example to really understand these property values 6 over time. It could be your life's work.
7 Anyhow, it's not anything that anybody's 8 done, and all these problems just point out to me the 9 fact that this is meaningless, and that we should have 10 to have a much deeper analysis of events before we 11 could start doing things over time.
12 I would like to get to a point you were 13 asking about earlier, about comparing hedonic analysis 14 with repeat sales analysis. Hedonic analysis again is 15 overwhelmingly used. The repeat sales technique, if 16 it's properly done, which Dr. Sheppard violates the 17 rules in the literature of how he's supposed to do 18 these things.
19 We can go into that. He's supposed to 20 have similar houses, similarly affected and so forth.
21 It's common sense but it's in the literature there.
22 You have to isolate the phenomenon that you're trying 23 to do, and you have to isolate that effectively.
24 So it's a neat technique, but it's almost 25 never used. Dr. Sheppard, in discovery, was able to Neal R. Gross & Co., Inc.
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Page 2650 1 send me two repeat sales analysis, one of which was in 2 not a very recent article, and not a very prominent 3 journal. The other article, I had reviewed that 4 article years ago, and it was an excellent article.
5 Very few people use it because it's very 6 hard to use, and it's not applicable at all to this 7 Indian Point situation.
8 JUDGE McDADE: Okay. Dr. Sheppard, the 9 way you describe the land values increasing 10 significantly after the plant closes, does that 11 suggest to you that this amenity is the result of a 12 perception of nuclear power, as opposed to being based 13 on any actual physical impact on the environment?
14 DR. SHEPPARD: No, it doesn't suggest that 15 to me, Your Honor, and the reason why I say that is 16 because the effect that I'm estimating, okay, is an 17 effect that sets in at the beginning of commercial 18 operations of the plant.
19 So this is happening -- the initial impact 20 is happening, the impact on the treatment group, as it 21 was happening in '74-'76, over this reasonably short 22 amount of time, and it's not a time period when there 23 may have been undue additional alarm. We're not 24 spanning necessarily the Three Mile Island accident or 25 other accidents.
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Page 2651 1 We're focusing on that time period and 2 estimating an impact from then. In order to support, 3 in order to come to the conclusion that this was 4 really just capturing a fear of nuclear power or 5 something like that, we would have to accept the 6 interpretation that suddenly the fear of nuclear power 7 wasn't present and then emerged in 1974-'76. I don't 8 accept that hypothesis, and so I don't think it's 9 correct.
10 I think it's fair to say I haven't 11 undertaken a separate evaluation or interviews with 12 buyers or sellers to consider why they paid what they 13 paid for houses. But I don't think my analysis can be 14 laid at the foot of simple fear of nuclear power.
15 JUDGE McDADE: If Entergy were to replace 16 the Indian Point facility with a new gas fuel 17 electric-generating facility, in your view would that 18 have the same disamenity as the nuclear facility there 19 now, or would there a material difference?
20 DR. SHEPPARD: I have no professional view 21 on that, because -- but I would say that I think that 22 would be a really interesting question. I mean as a 23 scholar and an economist, we study these sorts of 24 things. I'd be quite interested to know what the 25 impact of that would be.
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Page 2652 1 JUDGE WARDWELL: I don't any research 2 dollars for you, I'm sorry.
3 DR. SHEPPARD: Okay. Well, I'll look 4 elsewhere. But so I would hesitate. I would just say 5 that's an open question. It's an interesting 6 question, and one that is amenable to research using 7 the methods that I've employed. I just don't have an 8 answer for you.
9 JUDGE McDADE: Okay, and the Rancho Seco 10 study, which suggested that there was no adverse 11 impact on property values, why is that study not 12 analogous or relevant to Indian Point, and why do you 13 think it's flawed?
14 DR. SHEPPARD: Well, I don't think it's --
15 it's not an analogous. I don't want to say it's 16 completely irrelevant, because I think that we do 17 learn things from these studies, and all studies have 18 areas where they fall short and areas where they pose 19 interesting problems and discover interesting things.
20 As I say, my view is that that study is 21 failing to pick up an effect or is not directly 22 analogous, because they didn't look carefully at the 23 evolution of property values over time, and track them 24 -- you know, they didn't have as clean of an 25 experimental design as I have in my analysis.
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Page 2653 1 JUDGE McDADE: Okay. Dr. Tolley, do you 2 view that as a well-designed study?
3 DR. TOLLEY: I'm sorry, sir. I'm having 4 trouble hearing you.
5 JUDGE McDADE: I'm sorry. The Rancho Seco 6 study. Do you view that as a well-designed and 7 executed study?
8 DR. TOLLEY: As I recall, yes it is. It 9 was a multi-year study, a very expensive study done by 10 quite able scholars, and it was -- we evaluated all 11 these regressions step by step, and it's certainly one 12 of our, one piece of evidence among -- we looked at 13 seven nuclear plants in several different studies.
14 JUDGE McDADE: And then concluded that 15 there was no adverse impact from the location of the 16 nuclear facility?
17 DR. TOLLEY: Yes.
18 JUDGE McDADE: Okay. Dr. Sheppard, a 19 factor of difference between you and Dr. Tolley, you 20 did not consider in your analysis renters as opposed 21 to owners; is that correct?
22 DR. SHEPPARD: I think it's correct to say 23 -- well, I considered all properties, without regard 24 to whether they were occupied by their owner or a 25 renter. So I do include renter-occupied. There may Neal R. Gross & Co., Inc.
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Page 2654 1 well be included renter-occupied properties. I have 2 not undertaken a separate valuation of renters.
3 JUDGE McDADE: Would the fact that the 4 housing was rental property as opposed to an owner-5 occupied property affect your analysis at all? In 6 other words, would it be reasonable to anticipate that 7 the rental price would be higher, because renters 8 would not view disamenities in the same way as owners?
9 DR. SHEPPARD: I think that would be 10 reasonable. I think that renters are as subject to 11 disamenities as owner occupiers.
12 If there is a disamenity, that does affect 13 how much a renter would be willing to pay for the 14 property, and that changes, that will change the 15 market equilibrium rent that's paid, and that will in 16 turn have an impact on the actual market value of the 17 property.
18 JUDGE McDADE: Yeah. Well actually isn't 19 the increase in market value to a degree a self-20 fulfilling prophecy? If people believe the market 21 value of a property is going to go up, they'll buy it, 22 which in turn causes the market property value to go 23 up?
24 DR. SHEPPARD: There can be times in the 25 housing market where that psychology is quite Neal R. Gross & Co., Inc.
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Page 2655 1 operative and an important factor. But it's not 2 operative at all times.
3 So if that becomes an important factor, 4 where the price is going up simply because people 5 believe it's going up, that will usually -- that 6 process comes to an end, as we've learned to our 7 discomfort in recent years.
8 JUDGE McDADE: Okay. Dr. Tolley, in your 9 testimony, Entergy Exhibit 132, you did three 10 analyses, on page 101, 105 and 112. Mr. Wilkie, could 11 you put up Exhibit 132, page 101?
12 JUDGE McDADE: Doctor, could you walk --
13 what I'm going to ask you to do is to walk us through 14 each of these three, and explain to us the differences 15 in the assumptions that are operating here in each.
16 So could you start with page 101?
17 (Pause.)
18 DR. TOLLEY: Well --
19 JUDGE McDADE: And if this is something 20 you feel comfortable doing here, great. If not, don't 21 feel obligated to. We can muddle through it 22 ourselves. But I thought you might --
23 DR. TOLLEY: Well, let me give it a try, 24 sir. I just wanted to make sure I was -- this seems 25 to have taken Dr. Sheppard's analysis from the Neal R. Gross & Co., Inc.
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Page 2656 1 Blomquist report and used that as his estimate, in 2 this case, of what this distance or disamenity effect 3 of it is. If we take that estimate, we get the 4 difference between the action, no action and renewal.
5 That comes out to a loss of $7.37 million.
6 That again is just subtraction of the supposed rebound 7 of one situation from the other. So you get a loss 8 there of $7.37 million. Then, there is kind of a 9 little multiplier effect here, if you will. But the 10 local governments are going to have their tax revenues 11 affected, to the tune of a few million dollars.
12 So those two things really go together, 13 and it's a loss of minus 7.37 and minus 2.49, which is 14 something like about ten million. Then we come to the 15 PILOT payment effect, and Dr. Sheppard assumes that 16 the PILOT payment effect is zero. Therefore, he comes 17 out that there's this loss of approximately $10 18 million, $9.86 million.
19 So that's the calculation of a present 20 value effect of Sheppard's assumptions, based on 21 Blomquist. Is that okay?
22 MR. REAMER: Your Honor, if I can, Bill 23 Reamer for the staff. The Blomquist is New York State 24 Exhibit 226, and it's a report prepared by Dr.
25 Sheppard in 2007.
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Page 2657 1 JUDGE McDADE: Okay, thank you.
2 DR. TOLLEY: Yeah, thank you.
3 JUDGE McDADE: Okay. What I'm trying to 4 get at, this is part of a critique of Dr. Sheppard and 5 the methods, and I'm trying to get at, from your 6 standpoint, to walk us through what assumptions here 7 are valid, what assumptions here are invalid, what 8 conclusions here do you agree with; what conclusions 9 here do you disagree with?
10 DR. TOLLEY: Well, okay. Thank you. This 11 is an illustration of disagreement with Dr. Sheppard.
12 He uses the Blomquist. I'm going too fast, so 13 Blomquist did an analysis of a coal plant in 1974, and 14 it was a very -- in the first place, it was a coal 15 plant, and it shouldn't -- that's not applicable to 16 a nuclear plant.
17 JUDGE McDADE: This is the facility in 18 Winnetka, Illinois?
19 DR. TOLLEY: Yeah, uh-huh.
20 JUDGE WARDWELL: And is this a critique of 21 his 2007 report?
22 DR. TOLLEY: Yes, it is. That's --
23 JUDGE WARDWELL: Didn't we have in 24 testimony that in fact the only report of interest 25 before us is the 2011 now?
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Page 2658 1 JUDGE McDADE: Well, I was trying to get 2 at how they change. We have three separate analyses 3 here on page 101, 105 and 112, and they each represent 4 a critique of the studies. I wanted to make sure I 5 understood the critiques, and how they changed over 6 years, with 112 being the last -- page 112 being the 7 last one. Can you flip ahead to that, Dr. Tolley?
8 DR. TOLLEY: Okay. So this did, this was 9 the earlier time, and this was a criticism of the 2007 10 report. Now are we --
11 JUDGE McDADE: If we flip ahead to page 12 112.
13 DR. TOLLEY: Page 112, okay.
14 (Pause.)
15 DR. TOLLEY: Okay. This analysis is what 16 happens if we accept Dr. Sheppard's estimate, one of 17 his estimates. I would have to look up others; the 18 Blomquist estimate of the estimate based on his repeat 19 sales. I think it's the Blomquist estimate at this 20 point, because this was written before the other.
21 So let's say it's an estimate of Dr.
22 Sheppard's -- it's the present value of Dr. Sheppard's 23 estimate of the property value effect, and we see that 24 that's a $14 million loss, because of the difference 25 in this big revenue out there, 60 years or 80 years in Neal R. Gross & Co., Inc.
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Page 2659 1 advance, because the property is going to rise in 2 value, according to him, at an earlier date if there's 3 no license renewal, if there's no action.
4 Then that adds into this this little 5 kicker of the government revenue effect. Is that 6 clear? When the property values go down, then the 7 assessed value of the property will go down, and 8 therefore the local governments will also take in a 9 little less money.
10 So it's the total of these two things 11 which is really the total loss to taxpayer property 12 owners here. So the sum of those is the minus 13, 13 minus 14.6. Then we come down to the PILOT payment 14 effect, and we've talked about the PILOT payment 15 effect. That's the difference in the present value of 16 the reduction of the continuation of pilot payments 17 for 20 years, plus the falling for 19 years.
18 If there's renewal plus immediate fall to 19 19 percent for 20 years, and then fall, oh, I guess 20 for 60 years, I'm sorry, and then falling to zero.
21 But that's the big -- we talked about this before.
22 That's the big present value loss of the PILOT 23 payments, and they're overwhelming the loss in 24 property, in the property value rebound, because the 25 property value rebound isn't felt for so many years in Neal R. Gross & Co., Inc.
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Page 2660 1 the future. So I don't know if that's adequate, but 2 that's --
3 JUDGE McDADE: Okay. Now you used a seven 4 percent discount rate?
5 DR. TOLLEY: This uses a seven percent 6 discount rate.
7 JUDGE McDADE: Is that appropriate?
8 DR. TOLLEY: Well, that's used, as we get 9 back to this conservative idea, the definition of 10 conservative. My personal feeling is that nobody 11 cares about, no real estate person, no property owners 12 cares about 60 years from now, because he doesn't 13 necessarily believe it.
14 But he's much more concerned in the near 15 term. I was just choosing 25 years as a cutoff, and 16 probably we should really value that at zero after 25 17 years. But the NRC recommends a seven percent 18 interest rate. I don't want to get into a big 19 argument about just exactly what it is.
20 So I used a seven percent interest rate.
21 That's clearly far lower than should really be used, 22 and that would only -- if I used a higher discount 23 rate, it would strengthen these results, could 24 strengthen them quite a lot.
25 JUDGE McDADE: Okay. To any of Entergy's Neal R. Gross & Co., Inc.
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Page 2661 1 witnesses, you've anticipated that the -- between the 2 PILOT payments and the property taxes, they would --
3 it is unlikely that they would remain at their current 4 level, that they would go down.
5 You indicate that the assessed value, in 6 your view, of the Indian Point facility would diminish 7 after it ceased operations. While it would have 8 significantly less value to Entergy, what is your 9 rationale for believing that the local governments 10 would assess it significantly lower, simply because it 11 no longer was producing revenue, when it would be 12 available for decommissioning and sale or development, 13 either after sale or by Entergy, at any time?
14 MR. REAMER: Bill Reamer, Your Honor. I 15 guess two things I'd say. One, you ought to look at 16 the other three plants that I mentioned earlier, where 17 the 18 percent figure that we arrived at as kind of a 18 reasonable proxy for what it would be after PILOT 19 payments ceased. It seemed reasonable in light of the 20 experience at those three plants.
21 Then there is also a study that was done 22 for Westchester County by a group, I believe, called 23 Levitan. I'm not sure what the full name of the title 24 was, but they -- this was approximately 2004, and I 25 believe it dealt with a number of issues that are not Neal R. Gross & Co., Inc.
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Page 2662 1 relevant here today.
2 But it did address PILOT payment taxes and 3 reductions, and it laid out the very kind of approach 4 that we're talking about here, which is its value is 5 going to be reduced, because it's not generating 6 electricity. It's not going to have the value that it 7 had before.
8 And I don't have the terms immediately in 9 front of me, but it basically characterized the 10 remaining value as a fraction of what it was before, 11 when the plant was generating.
12 JUDGE McDADE: Would it be unreasonable or 13 illegal, and let me just go with reasonable; I don't 14 worry about the latter word myself. Would it be 15 unreasonable for the surrounding governments to tax 16 the facility, based on the best and highest use of the 17 property, even though Entergy was not choosing to use 18 it for that purpose?
19 DR. TOLLEY: Well, I would just certainly 20 make a comment that if it has waste, undisposed of 21 waste, it's hard to see that it would have very much 22 value for any other use, until that waste is removed.
23 MR. REAMER: Well Your Honor, I hesitate 24 to speculate. But of course you know I know that any 25 assessed value is contestable by the other party, and Neal R. Gross & Co., Inc.
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Page 2663 1 I do recall in looking at the Maine Yankee facility, 2 that there was a dispute, as to how that facility was 3 going to be valued after shutdown. Ultimately the 4 matter, I think, was taken to court and maybe 5 ultimately was dealt with in an agreement of the 6 parties. But it stayed at less than ten percent.
7 JUDGE McDADE: I think that pretty much 8 answers the questions that the Board came here with.
9 I thank you. I would ask if Entergy could get back to 10 me with some information with regard to what the tax 11 rate is if, and the assessed value of the facility.
12 MR. BESSETTE: So Your Honor is looking 13 for the current assessed value of the facility.
14 JUDGE McDADE: Yes.
15 MR. BESSETTE: And whether there's any 16 taxes charged other than PILOT payments? Is that what 17 Your Honor's looking for?
18 JUDGE McDADE: Well, it's are there taxes 19 charged in addition to the PILOT payments, but also if 20 the PILOT payments were to terminate, is the tax rate 21 on that property $1 per hundred, $5 per hundred, $10 22 per hundred. Just to find out, so that I know whether 23 or not the change in payments from Entergy to the 24 surrounding government entities would be materially 25 different.
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Page 2664 1 The consequences of that are still to be 2 determined in my own mind, but I would like at least 3 to know what that information is, and if you could 4 furnish that in a form of a declaration from somebody, 5 so that it would be in evidence.
6 MR. BESSETTE: Yes, Your Honor, and I have 7 not consulted with the company. But the assessed 8 value, I don't know if that's confidential or not.
9 We'll handle it at that point.
10 JUDGE McDADE: Okay.
11 MR. SIPOS: And Your Honor, John Sipos for 12 the State of New York. Just a point of order, and I 13 didn't want to jump in while their colloquy was going 14 on.
15 But just so that the record is clarified, 16 I think, and it may be something akin to a scrivener's 17 error or a speaker's error. I thought I heard Mr.
18 Reamer twice say that he was speaking for staff, and 19 maybe that's an artifact for his previous career.
20 But I understand he's here testifying for 21 Entergy, and just so that Mr. Toby Walter, our court 22 reporter, can at least know the State's calling that 23 to the attention in the record.
24 JUDGE McDADE: Okay, and I have to confess 25 I didn't notice, if that were made. But you are Neal R. Gross & Co., Inc.
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Page 2665 1 testifying here on behalf of Entergy?
2 MR. REAMER: Bill Reamer on behalf of the 3 applicant.
4 MR. SIPOS: And it wasn't a criticism at 5 all, Your Honor.
6 JUDGE McDADE: I know. You want it, and 7 as you should, for the record to be clear, and now it 8 is.
9 MR. SIPOS: Thank you very much.
10 JUDGE McDADE: At this point, what I would 11 propose to do, it's about 5:25. If we stand in recess 12 for 10 minutes, 15 minutes, and does New York 13 anticipate a desire to interrogate any of these 14 witnesses?
15 MR. SIPOS: Yes, Your Honor. Could we 16 have until 5:45 please?
17 JUDGE McDADE: Would that be enough time 18 for Entergy?
19 MR. TENPAS: Yes, Your Honor. We'd 20 actually join in that, and appreciate a few more 21 minutes. Our room is, you know, for folks is 22 downstairs, and so there's a little delay getting up 23 and down the stairs.
24 JUDGE McDADE: That's fine.
25 MR. TENPAS: Thank you.
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Page 2666 1 JUDGE McDADE: Is that sufficient for the 2 staff?
3 MR. HARRIS: Yes, Your Honor, thank you.
4 JUDGE McDADE: Okay. We will stand in 5 recess, then, until 5:45.
6 (Whereupon, a short recess was taken.)
7 JUDGE McDADE: Does New York have any more 8 questions? Apparently not?
9 (Pause.)
10 MR. TENPAS: I apologize, Your Honor. We 11 had a little way to walk.
12 (Pause.)
13 MS. TAYLOR: I'm sorry, Judge. Our room 14 is not just downstairs; it's across the hotel and 15 halfway to the city it feels like.
16 JUDGE McDADE: We all set?
17 MS. TAYLOR: Yes.
18 JUDGE McDADE: Okay. Then the same sort 19 of general guidance, as far as non-repetitive, trying 20 to clarify. You can ask questions of both your own 21 witnesses and the others, in an effort to clarify if 22 you think there's something that we perhaps might have 23 misunderstood, or some part of the record that has yet 24 to be clarified.
25 Let's try to keep it 15-20 minutes, and Neal R. Gross & Co., Inc.
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Page 2667 1 New York, are you ready to go?
2 MS. TAYLOR: Yes, and I'm confident we can 3 do that, Judge. Susan Taylor for the State of New 4 York. If I could ask that Entergy Exhibit 144 be 5 brought up. I have a question for Dr. Tolley. Can 6 you hear me, Dr. Tolley?
7 DR. TOLLEY: Yes, I can.
8 MS. TAYLOR: Thank you. We want to look 9 at page five of Entergy Exhibit 144, paragraph two, 10 the third sentence. That is the paragraph that begins 11 "the findings from previous studies." If I could have 12 Dr. Tolley read the third sentence, which commences 13 with "The analysis"? If you could read that out loud 14 to us, sir please?
15 JUDGE McDADE: Well perhaps -- I don't 16 know if the screen is too far away for him.
17 DR. TOLLEY: I can see it.
18 MS. TAYLOR: That could be. It's too far 19 away?
20 DR. TOLLEY: No, it's fine. I can see it.
21 Thank you. "The analysis used asking prices for 22 Multiple Listing Service (MLS) properties in 2011."
23 MS. TAYLOR: Thank you. That's all.
24 DR. TOLLEY: Okay.
25 MS. TAYLOR: Does that accurately describe Neal R. Gross & Co., Inc.
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Page 2668 1 the study that you did?
2 DR. TOLLEY: Yes.
3 MS. TAYLOR: Thank you. Then I have a 4 couple of questions, just to clarify Dr. Sheppard's 5 testimony. These questions are for Dr. Sheppard. Dr.
6 Sheppard, in your opinion, is the Indian Point -- does 7 the Indian Point facility have a statistically 8 significant impact on property values?
9 DR. SHEPPARD: Yes, it does. That is my 10 opinion.
11 MS. TAYLOR: To follow up on that, are Dr.
12 Tolley's data, in your opinion, inconsistent with your 13 conclusion?
14 DR. SHEPPARD: No, they're not. To my 15 surprise, they're quite consistent. His data, when 16 estimated using one of several different ways of 17 representing proximity to the Indian Point Energy 18 Center, are consistent with my own analysis, that they 19 show that the Indian Point Energy Center constitutes 20 a disamenity that has a statistically significant 21 impact on property prices.
22 MS. TAYLOR: Thank you. If I understand 23 Dr. Tolley's testimony correctly, he has accused you 24 of cherry-picking. Do you have a response to that?
25 DR. SHEPPARD: Yes, I do. That phrase, Neal R. Gross & Co., Inc.
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Page 2669 1 which I think he hesitated to use, but nevertheless 2 was mentioned, that phrase came up in connection with 3 my suggestion of using the square root of distance, as 4 a way of measuring or characterizing proximity of a 5 property to IPEC.
6 I've actually, using Dr. Tolley's data as 7 part of the process of just double-checking the 8 results that he included in his report, in which he 9 uses the quadratic representation of proximity, I 10 looked at what is probably truly the most common 11 representation, which would be a straight linear 12 measure of distance only.
13 I looked at the linear structure. I 14 looked at representing distance using the square of --
15 proximity using the square of distance. I looked at 16 using the square root. All of those are completely 17 consistent with each other and with my own analysis.
18 They all show that property values 19 increase as you move away from the Indian Point Energy 20 Center, and the estimate is very statistically 21 significant.
22 MS. TAYLOR: Thank you, Dr. Sheppard.
23 This may get us into a little difficulty with our 24 colleagues. Without discussing, Dr. Sheppard, the 25 substance of the analysis that you did on October Neal R. Gross & Co., Inc.
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Page 2670 1 19th, could you please tell the Board what you did, 2 when you did it and why you did it?
3 DR. TOLLEY: Okay. Could you refresh me 4 on what I did on --
5 MS. TAYLOR: I'm sorry. Did I say "Dr.
6 Tolley"? I mean Dr. Sheppard. I'm sorry. I'm tired.
7 I'm talking about Dr. Sheppard's October 19th work.
8 DR. SHEPPARD: Sure. So what I did, so as 9 you know, I was here last week. On Monday, I first 10 received the disclosure of Dr. Tolley's analysis, that 11 used the square root of distance as a measure or a way 12 of characterizing proximity of property to Indian 13 Point.
14 I took that as being an attempt to be 15 responsive to my suggestion in the rebuttal testimony, 16 except that it wasn't fully responsive, in that I had 17 suggested that he apply that approach in estimating 18 his own hedonic.
19 He had actually applied that to a subset 20 of my own data, which were collected for a different 21 purpose and had different characteristics. So when I 22 next had the opportunity, I wanted to evaluate or 23 consider what would happen if he had used the square 24 root of distance applied to his own data, that he used 25 as the basis of his analysis in his report.
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Page 2671 1 Tuesday, I was teaching class. Wednesday 2 and Thursday, I was here, as part of preparing for 3 Contention 16 testimony, and being available in case 4 Contention 16 was able to come onto the agenda.
5 Friday, I had to return and teach my 6 classes. So Friday at four o'clock was my first 7 opportunity to sit down and using Professor Tolley's 8 data; this wasn't using any new data, but I wanted to 9 apply, wanted to follow up the suggestion and actually 10 apply the square root of distance measure of proximity 11 to Dr. Tolley's own data.
12 And so, and I also at the same time 13 considered using just linear distance, just the 14 distance from IPEC as a measure of proximity, or the 15 square of distance as a measure of proximity. I 16 undertook those analyses at that time, wrote that 17 analysis out to a document and contacted Ms. Taylor, 18 to let her know that I had undertaken a response to 19 Dr. Tolley's analysis that I had received the previous 20 Monday.
21 MS. TAYLOR: Thank you, Dr. Sheppard. The 22 State would like to move Board Exhibit 5 into 23 evidence.
24 MR. TENPAS: Objection, Your Honor.
25 JUDGE McDADE: Okay. What would the next Neal R. Gross & Co., Inc.
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Page 2672 1 New York State exhibit be?
2 MS. TAYLOR: 446.
3 JUDGE McDADE: That's the next one?
4 MS. TAYLOR: That would be the next 5 available number.
6 JUDGE McDADE: Okay. It's objected to?
7 MR. TENPAS: Yes, Your Honor. Can I be 8 heard?
9 JUDGE McDADE: Please.
10 MR. TENPAS: Two things as to that.
11 First, I think as Dr. Sheppard has just nicely 12 clarified for the Board, what he was doing was what he 13 offered as a critique in his rebuttal, that he thought 14 Mr. Sheppard -- that he believes Dr. Tolley ought to 15 have done. That evidences the fact that this work 16 could have been done and should have been done by him, 17 if he thought it was useful at the time of his 18 rebuttal.
19 Instead, we are now some, you know, four 20 or five months down the road from that, getting the 21 fruits of a critique that he says, he pointed out was 22 a problem at the time of his rebuttal, that he says 23 this is the work I wish Dr. Tolley had done, and now 24 he has undertaken to do it. So there is a huge 25 timeliness issue here, and a huge sandbagging issue Neal R. Gross & Co., Inc.
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Page 2673 1 bluntly.
2 The second point is that the description 3 you have just heard applies only to two pages of the 4 whole of the exhibit. The document, as I described 5 and started with the Board, has two other pages 6 towards the back of it, that have nothing to do with 7 the analysis that Dr. Sheppard just described.
8 So again, they are trying to get in the 9 whole of the document, having only described a half of 10 the work of it, and thereby slip it into the record, 11 and those second two pages again contain analysis that 12 could have been done, should have been done and was 13 capable of being done at the time of the original 14 response. Thank you.
15 MS. TAYLOR: If I may be heard, Judge? I 16 must disagree with Mr. Tenpas' characterization. It 17 probably will not surprise the Board to hear. First, 18 though, I think we have a concession that at least the 19 first two pages of what Dr. Sheppard did are in fact 20 a direct response to Dr. Tolley.
21 I think we also have a goose and gander 22 problem, for lack of a better phrase. Energy seems to 23 think that it is entitled to new eleventh hour 24 analyses, and no response time from the State of New 25 York. That just strikes me as patently unfair. What Neal R. Gross & Co., Inc.
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Page 2674 1 they've accused --
2 JUDGE McDADE: Okay. I don't need to hear 3 anymore on it. New York State Exhibit 446 is 4 admitted.
5 (Whereupon, the document 6 referred to as New York State 7 Exhibit 446 was received in 8 evidence.)
9 MS. TAYLOR: Thank you, Judge.
10 JUDGE McDADE: You need to file a copy of 11 that through the EIE, and also file a revised exhibit 12 list that includes that through the EIE.
13 MS. TAYLOR: We will do that promptly.
14 JUDGE McDADE: Let me suggest don't bother 15 doing it before Wednesday, because there may be more 16 exhibits that come in before Wednesday, and that way 17 you'll only have to redo the exhibit list once.
18 MS. TAYLOR: We appreciate that, Judge.
19 Thank you.
20 JUDGE McDADE: So we don't need it before 21 then, and if you wish to discuss with Dr. Tolley any 22 of the aspects of that, to have him explain any of it 23 or why it doesn't matter, you're going to be given an 24 opportunity to do that in a few moments.
25 MR. TENPAS: Thank you, Your Honor. Could Neal R. Gross & Co., Inc.
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Page 2675 1 I make one note for the record, in terms of the 2 exchange that went on. We did make a request earlier 3 today for all of the supporting, underlying 4 documentation beyond simply the document itself, the 5 analyses. I indicated there appears to be a data set 6 that we have not seen, that went to certainly the 7 latter part of that.
8 I'd simply note for the Board that we have 9 made our request, and our ability to respond 10 presumably would be calculated to first having 11 received that material. Thank you.
12 JUDGE McDADE: Wasn't this based on Dr.
13 Tolley's data sets?
14 MS. TAYLOR: Yes Judge, it was. I'm 15 prepared to respond, and I would invite Mr. Tenpas to 16 voir dire Dr. Sheppard on it if he would like to.
17 There is no undisclosed data.
18 JUDGE McDADE: Do you have a reason to 19 believe that there is -- as I said, from listening to 20 Dr. Sheppard, it was my understanding that this was 21 his analysis, based on Dr. Tolley's data. So this 22 would have been data that he received from you through 23 New York. Am I incorrect in that?
24 MR. TENPAS: No, Your Honor. Just to be 25 clear, again, this goes to the issue that there are Neal R. Gross & Co., Inc.
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Page 2676 1 two different analyses. One, the first couple of 2 things you've heard, is an analysis based on MLS data, 3 which was -- that was Dr. Tolley's data, and as we 4 understand it, they have used the full collection of 5 that data.
6 That is different than the second part of 7 the analysis, which is analysis based on assessor 8 data, where it appears that Dr. Sheppard now has 9 removed some of the data that he originally used from 10 that assessor data sample. So it's gone from, you 11 know, a sample in the 1500's to a sample of about 12 1222.
13 We do not know and we have not received 14 any of the data, to know what now is missing, what he 15 took out in the process of shaking the sample and 16 doing that second, unrelated analysis.
17 JUDGE McDADE: Well you know, and I don't 18 want to confess this for my colleagues, but without 19 the explanations and testimony from Dr. Sheppard, 20 those last two pages are somewhat meaningless to me, 21 just looking at these printouts standing alone, 22 without the benefit of his testimony.
23 From the standpoint of New York, the 24 exhibit, is there any reason, other than the fact that 25 they are attached by a staple, that the back two pages Neal R. Gross & Co., Inc.
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Page 2677 1 should be associated with the front two pages?
2 MS. TAYLOR: Yes. They are not a 3 different analysis, Judge, and I would be happy to do 4 some redirect of Dr. Sheppard to bring that out, if it 5 would be helpful, or I would be happy to let Mr.
6 Tenpas examine him on the subject, if he would like 7 to.
8 JUDGE McDADE: Well, I'm sure he will and 9 he will. Is there data that goes into these last two 10 pages, that has not already been furnished to Entergy?
11 MS. TAYLOR: No. Entergy has all of the 12 data, and Dr. Sheppard, I believe I am correct in 13 saying, used Dr. Tolley's data when he did these 14 analyses. He corrected for, as best he could, for two 15 of the three errors that Dr. Tolley, criticisms that 16 Dr. Tolley levied at him on October 12th. Have I 17 stated that correctly, Dr. Sheppard?
18 DR. SHEPPARD: Essentially yes.
19 JUDGE McDADE: Essentially is a big word.
20 Can you elaborate?
21 DR. SHEPPARD: Yes. So the analysis that 22 I undertook on Friday was to consider these 23 alternative ways of representing proximity, and to in 24 particular show -- so Dr. Tolley's analysis that was 25 submitted to us, that I received on Monday, attempts Neal R. Gross & Co., Inc.
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Page 2678 1 to look at the use of square root of distance as a 2 measure of proximity, but applies it not to his own 3 data, but to a particularly handpicked subset of my 4 own data.
5 So what I've done is looked at the impact 6 of these different ways of representing proximity 7 applied to Dr. Tolley's data. But since a major point 8 of my testimony delivered today, and of my thesis is 9 that using the square root representation in 10 particular results in an estimated total impact on 11 property values, that's very close to the estimated 12 impact that I supplied in my own analysis.
13 I want to supplement that by noting that 14 that analysis is robust to the other criticisms that 15 Dr. Tolley has raised.
16 JUDGE McDADE: Okay. But the data that is 17 used on the second two pages of this exhibit --
18 DR. SHEPPARD: Those data have been 19 submitted to -- they've been disclosed, they've been 20 submitted. Dr. Tolley has used them, and in fact 21 Doctor --
22 JUDGE McDADE: But those are data that you 23 generated?
24 DR. SHEPPARD: They're actually a mixture, 25 actually. On the second two pages, the original data Neal R. Gross & Co., Inc.
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Page 2679 1 are data that I generated, and then Dr. Tolley added 2 some additional data to that data set, and submitted 3 it back. I received that back from Dr. Tolley.
4 JUDGE McDADE: Okay. The objection is 5 noted. The exhibit is admitted. Please continue.
6 JUDGE WARDWELL: And that data set you 7 just talked about is the 1,200 numbers?
8 DR. SHEPPARD: It's actually 1,500.
9 JUDGE WARDWELL: 1,500 is the first two 10 pages.
11 DR. SHEPPARD: Actually, the whole data 12 set -- sorry, just to be clear. The first two pages 13 make use of Dr. Tolley's data that were used in his 14 report, and then to show continued consistency between 15 my own analysis and a revised version of Dr. Tolley's 16 analysis, I've used these data, the data that started 17 out as data that I collected, were provided to Dr.
18 Tolley.
19 Dr. Tolley augmented those data, with 20 indications of whether or not the sale had included a 21 vacant lot and some other information, and I've just 22 used those data that we received back from Dr. Tolley.
23 So it's data that they -- it's most assuredly data 24 that they have, and an expert in using this data 25 program like Dr. Tolley or myself, can easily read Neal R. Gross & Co., Inc.
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Page 2680 1 these statements and see exactly what I've done, and 2 double-check the analysis.
3 But I'll be happy to supply my copies of 4 copies of the data set back. But these are not new 5 data in any sense.
6 MR. TURK: Your Honor, may I speak for the 7 staff?
8 JUDGE McDADE: Mr. Turk.
9 MR. TURK: I have to admit that I'm not 10 intimately familiar with the data that are represented 11 in this exhibit. But if you look at the first two 12 pages, each of the lists, each of the data set lists 13 begin with a statement of the number of observations.
14 Three times on page one, it's indicated 15 that the number of observations was 296. On page two, 16 the chart or the summary of statistics again was 296 17 observations. But then when you turn to page three, 18 it gets to 1,511 observations, and then the next two 19 tables are listed as 1,222.
20 Dr. Sheppard just explained that the data 21 he used comes from the set of 1,522. I haven't heard 22 him explain what the 1,222 is, or better, let me 23 express that better. What is excluded from the 1,511 24 to get to the 1,222? He simply said that Entergy has 25 all the data.
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Page 2681 1 Well, I don't know what data these numbers 2 represent, and I think if the Board were to rely on 3 them in its decision, the record would be very 4 confused and unreliable.
5 JUDGE McDADE: Okay. Well, in a few 6 minutes you can ask him, and we'll clear that up.
7 Continue.
8 MS. TAYLOR: Perhaps it would help if we 9 pulled the new exhibit up onto the screens, New York 10 446. New York 446. Dr. Sheppard, I direct your 11 attention to the right-hand column, Dr. Tolley's 12 original model. Can you tell us what this analysis 13 shows?
14 DR. SHEPPARD: Yes. This is simply 15 double-checking the estimation of the model that Dr.
16 Tolley used and presented in his report, Entergy 144, 17 I believe Table 1.
18 I don't have the table here in front of 19 me. But anyway, it's just double-checking the 20 analysis that Dr. Tolley did, and you'll find if you 21 compare the estimates listed under the heading 22 "Coeff." for coefficient, those match, at least to 23 some decimal places, the numbers that are presented in 24 Dr. Tolley's report. That's why I label it in the 25 right-hand column "Dr. Tolley's Original Model."
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Page 2682 1 MS. TAYLOR: Right, and scrolling down --
2 JUDGE McDADE: Excuse me one second. The 3 296 there, that comes from Tolley report at 15, 4 Entergy 144, the 296 observations?
5 DR. SHEPPARD: That's correct, Your Honor.
6 JUDGE McDADE: Okay, continue.
7 MS. TAYLOR: And scrolling down on the 8 same page, page one, where it says "Model with IPEC 9 Impact Proportional to Linear Distance," could you 10 explain what that analysis shows?
11 DR. SHEPPARD: So this considers an 12 alternative, which is truly the most frequently used 13 way of measuring, of characterizing proximity, which 14 is just the linear distance between the property in 15 the sample, and the proposed or to be tested source of 16 disamenity.
17 It's just using the number of miles from 18 IPEC to the property as the measure of proximity. In 19 this case, we see that that very first -- all the 20 other variables are the same. That's the only change 21 that has been made here, is to change the way the 22 proximity is characterized, and this shows an estimate 23 of that coefficient of 46.89.
24 What that means is for a typical house, 25 based on these data, moving it one mile away from IPEC Neal R. Gross & Co., Inc.
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Page 2683 1 would increase its value by nearly $47,000.
2 MS. TAYLOR: Thank you. Moving, scrolling 3 down to the next page, which is page two of this 4 exhibit, "Model with IPEC Impact Proportional to 5 Square Root of Distance." Could you explain how this 6 analysis differs from the others?
7 DR. SHEPPARD: Sure. So this is an 8 analysis, again using Dr. Tolley's data. Again, all 9 the variables in the model are the same, except the 10 way that we've measured or characterized proximity to 11 the facility. That's measured by this first variable, 12 which is printed out here, with the difficult to 13 pronounce name "Distsquaretilde T." (ph) 14 But this is the square root of distance 15 from the subject property to IPEC. You can see that 16 the coefficient estimated is 149. The T statistic 17 listed there is a test of statistical significance.
18 It's highly significant. This shows that we are 99.8 19 percent, we can be 99.8 percent confident that the 20 true value of this parameter is not zero.
21 And in order to interpret it, one way to 22 think about it would be to say well, suppose we were 23 to move a house that was right next to IPEC, move it 24 four miles away. The square root of 4 is 2, and so 25 this suggests 2 times 149 would be 398,000, or sorry, Neal R. Gross & Co., Inc.
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Page 2684 1 298,000.
2 So this says if you moved a house from 3 next door to IPEC to four miles away, its value would 4 go up by $298,000. That's very precisely estimated.
5 MS. TAYLOR: Thank you, and the last 6 analysis on this page, "Model with IPEC Impact 7 Proportional to the Square of Distance." Could you 8 explain what that analysis shows?
9 DR. SHEPPARD: This analysis is yet 10 another, just for completeness, to consider all the 11 different possibilities. Dr. Tolley himself, in his 12 report, notes that the linear distance term is not 13 statistically significant; only the square of distance 14 term is significant, and alludes to the fact that a 15 common econometric practice would be to drop the 16 linear term.
17 So what this particular model does is do 18 just that. It drops the linear and distance term and 19 includes only a measure of proximity that's based on 20 the square of distance. Again, it's very precisely 21 estimated. It's positive, which is indicating that 22 property values increase as we move away from IPEC.
23 That is statistically significant. The 24 interpretation of the parameter there, roughly 7.9.
25 What that would mean is if we rounded that just for Neal R. Gross & Co., Inc.
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Page 2685 1 the sake of discussion to eight, if we were to move 2 two miles away from IPEC, 2 squared would be 4; 4 3 times 8,000 would be 32,000.
4 So this particular model suggests moving 5 a house two miles away would add about $32,000 to its 6 value. But again, it's completely consistent. All 7 three of these alternatives are consistent with my own 8 analysis, that the presence of IPEC constitutes a 9 statistically significant disamenity that has an 10 impact on property values.
11 MS. TAYLOR: And Dr. Sheppard, why is it 12 that each of these four analyses has the same number 13 of observations?
14 DR. SHEPPARD: They were all done using 15 the same data set, Dr. Tolley's data set, the MLS data 16 that he collected for his report.
17 MS. TAYLOR: And does that distinguish 18 them in some way from the next set of analyses on the 19 following two pages?
20 DR. SHEPPARD: Yes. The next set of 21 analyses make use of the data that I collected from 22 the property tax records, as augmented by Dr. Tolley.
23 So each of these is estimated using the same data set, 24 which has something over, has over 1,511 observations.
25 JUDGE WARDWELL: Excuse me, Dr. Sheppard.
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Page 2686 1 That 1,511 I thought was what you used in your 2 analysis, without any augmentation from Dr. Tolley?
3 DR. SHEPPARD: Correct. The 1,511 is what 4 I used without any augmentation, and that first table 5 of estimates exactly duplicates the table of estimates 6 that's presented in my December 2011 report.
7 But part of the point that I'm trying to 8 consider or evaluate here is the continued consistency 9 between my own results and a version of Dr. Tolley's 10 hedonic model, that would be estimated using his data.
11 So I go back to my own data, double-check my own 12 estimates. That's what's in the first table.
13 Then the subsequent tables check that 14 result for continued consistency, with the hedonic 15 estimates based on Dr. Tolley's data.
16 JUDGE WARDWELL: So Dr. Tolley took your 17 data set and excluded the vacant lot one, and ran a 18 hedonic? Is that what you're saying?
19 DR. SHEPPARD: Rather, what he did was he 20 created a variable that had the value 1, if he thought 21 the lot, the property included a vacant lot. So I've 22 made use of that variable, just accepted it from Dr.
23 Tolley, and said "Okay, we'll accept that, and 24 consider what would be the effect of excluding those 25 observations from the analysis?"
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Page 2687 1 That's why the number goes from 1,511 down 2 to 1,222, because the regression analysis that's 3 started with the command numbered line eight in the 4 document, includes a statement that follows the word 5 "if," "If sale with lot equals zero."
6 So that command has the effect of 7 excluding the subset of observations identified by Dr.
8 Tolley as involving a vacant lot. I wanted to see if 9 that would affect my asserted consistency between the 10 square root measure of proximity and my own analysis.
11 If we scroll down there, what this shows 12 is my own analysis survives intact. It remains 13 statistically significant. In fact, it's a little bit 14 stronger. But the coefficient remains negative on 15 there in the first line.
16 The T statistic remains large, and the 17 probability number is zero, indicating we can be more 18 than 99.9 percent confident, that the true impact of 19 being in the control group is a negative 1, even for 20 that subset of properties, even excluding any sales 21 involving vacant lots.
22 That shows that it remains consistent, 23 that my analysis remains consistent with the measure 24 of proximity based on square root of distance.
25 JUDGE McDADE: Okay. Do you have much Neal R. Gross & Co., Inc.
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Page 2688 1 more?
2 MS. TAYLOR: Just a couple more questions, 3 Judge. So Dr. Sheppard, is it accurate to say that 4 the descriptions in the far right column tell us 5 something about the data that has changed in each 6 subsequent analysis?
7 So model with any vacant lot data excluded 8 is a model excluding the vacant lot data, about which 9 Dr. Tolley complained? Is that accurate?
10 DR. SHEPPARD: That's accurate.
11 MS. TAYLOR: And the last one is model 12 with vacant lot data excluded and indicator variables 13 for what he characterized as "housing bubbles"? Is 14 that accurate?
15 DR. SHEPPARD: That is accurate.
16 MS. TAYLOR: Okay, and just my last 17 question. I think I speak for all the English majors 18 in the room, when I say it might help us if you would 19 walk us through the columns from left to right --
20 DR. SHEPPARD: On any of the tables.
21 MS. TAYLOR: On any of them.
22 DR. SHEPPARD: Okay.
23 MS. TAYLOR: What they mean.
24 DR. SHEPPARD: Okay. Yes, I can apologize 25 for the somewhat technical nature of this. But the Neal R. Gross & Co., Inc.
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Page 2689 1 short amount of time to respond to -- these are in 2 essentially the same form as the ones that were 3 received from Dr. Tolley earlier in the week.
4 So the very first column is really giving 5 us variable names. So the very first, if we can just 6 stick with this page, the very first variable name 7 there, "Nomreturn" is a mnemonic for the nominal 8 return per annum to holding the house.
9 So that's the dependent variable, and the 10 variables listed below it are explanatory variables in 11 this case. So I'm explaining the nominal return for 12 holding a house, as a function of the first variable, 13 is whether or not it's in the treatment group. The 14 second variable is the distance and so on and so 15 forth. I can explain more of those variables if you 16 wish.
17 The next column is the coefficient 18 estimated by the statistical procedure. So it 19 combines all the data and estimates the effect of each 20 one of those variables, and that's the estimated 21 coefficient.
22 The third column is labeled "Robust STD."
23 That really means robust standard error. So this is 24 an estimate of the precision with which the effect of 25 each variable is estimated, and this is estimated in Neal R. Gross & Co., Inc.
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Page 2690 1 what's called a robust way. I could explain more 2 about that if you wish.
3 The fourth column is labeled "T." That is 4 a statistic that's calculated as the ratio of the 5 coefficient divided by the standard error, and it can 6 be shown to give us a way of assessing the confidence 7 that we can have, that the true value of that 8 coefficient is not zero.
9 And the fifth column is the probability 10 associated with that T statistic. So for example in 11 this first line, probability of .011 tells us that we 12 can be 98.9 percent confident, that the true value of 13 being in the treatment group is not zero, and the 14 generally accepted standard for statistical 15 significance is that the probability in that column 16 should be certainly smaller than ten percent, and 17 preferably smaller than five, and that is .05.
18 The final two columns are really just 19 giving confidence intervals. So it's using the T 20 statistic and the standard error to estimate the range 21 where we can be 95 percent confident that the true 22 value of that variable falls within the range, and it 23 provides that for each of the variables. Is that 24 responsive to you?
25 MS. TAYLOR: Yes, it is. Thank you, and Neal R. Gross & Co., Inc.
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Page 2691 1 that's all I have, Judge.
2 JUDGE WARDWELL: If this last analysis 3 excluded some additional variables, in '84, '88, '99 4 to 2009, how come we still have the same number of 5 observation of 1,222?
6 DR. SHEPPARD: Because it doesn't exclude 7 them. It actually accounts for them by including an 8 indicator variable. The two indicator variables are 9 named in the far left-hand column, "Dummy_80SBE."
10 That's a variable that was created by Dr. Tolley. It 11 takes the value 1.
12 If the property was sold in this period 13 '84 to '86, when property values were -- or '84 to '88 14 perhaps, when property values were increasing rapidly, 15 and then the second one is the '99 til the end of the 16 sample time period, when house prices have also been 17 increasing rapidly.
18 So rather than exclude those observations 19 all together, it's econometrically much more sound to 20 adjust for them. The estimates show that indeed, as 21 Dr. Tolley suggested, those time periods are times 22 when the rate of return to holding a house as an asset 23 was much greater, five or six percent per annum 24 greater during those time periods.
25 But even accounting for that effect Neal R. Gross & Co., Inc.
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Page 2692 1 doesn't change my basic analysis. The impact of being 2 in the treatment group is a statistically significant 3 decline in value, in the rate of return to holding a 4 house as an asset, of about three percent per annum.
5 JUDGE McDADE: Okay, thank you. Before 6 Entergy gets started, let me mention a couple of 7 things. One, you're going to have an opportunity to 8 ask questions of Dr. Sheppard now. Also ask questions 9 of your own witness, to explain, in your view, where 10 you believe his analysis may be flawed.
11 However, given the fact that this 12 testimony has come very late, and the exhibit has come 13 very late, what I will also do is allow, within 30 14 days, which I guess is about November 21st; if that 15 falls on a weekend or holiday, then the following 16 Monday, to supply a brief statement, testimony, if you 17 wish, that will offer a fuller explanation or 18 rebuttal, if you think that that is appropriate or 19 necessary, in order to fully develop the record.
20 So one, go ahead and get started with Dr.
21 Sheppard if you wish. I realize that, you know, Dr.
22 Tolley has not had a lengthy opportunity to review 23 this. If you want to ask him questions now while it's 24 still fresh, please go ahead. But, as I said, you 25 will have an opportunity to present a written Neal R. Gross & Co., Inc.
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Page 2693 1 submission within 30 days, in the form of a 2 declaration, sworn testimony.
3 MR. TENPAS: Thank you, Your Honor.
4 JUDGE McDADE: Are you ready to proceed?
5 MR. TENPAS: Yes, Your Honor. Dr.
6 Sheppard, could we just start with New York 446, the 7 document we've been on, which is, I believe, the four 8 pages. Simply to again, to clarify, you've sometimes 9 used the phrase "your data" and "Dr. Tolley's data."
10 Is it fair to say between you and Dr.
11 Tolley there were two basic data sets that were being 12 used?
13 DR. SHEPPARD: Yes, I think that is fair.
14 MR. TENPAS: And one of those data sets 15 that was originally developed by Dr. Tolley drew on 16 data from the MLS listing; correct?
17 DR. SHEPPARD: That is correct, as I 18 understand it.
19 MR. TENPAS: And then you had a data set 20 that was developed by looking at assessor card 21 information through the process you described with 22 your graduate student; is that right?
23 DR. SHEPPARD: Just let me -- it's 24 basically right, Mr. Tenpas. I just wanted to say 25 that, and combined with data from the Office of Real Neal R. Gross & Co., Inc.
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Page 2694 1 Property Services in New York.
2 MR. TENPAS: Okay. Fair enough. Thank 3 you for that. Now a moment ago, so as we turn to the 4 analysis on the final two pages, the 15 -- where 5 there's a first table with 1,511 observations and then 6 after that the 1,222; correct?
7 You describe that 1,222 number as coming 8 from a set that Dr. Tolley had augmented; is that 9 correct?
10 DR. SHEPPARD: That's correct.
11 MR. TENPAS: Now in your experience, does 12 the word "augmented" usually convey the idea of 13 increasing something?
14 DR. SHEPPARD: I think I see where you're 15 going.
16 MR. TENPAS: Does that word usually imply 17 the idea of increasing?
18 DR. SHEPPARD: Increasing something, yes.
19 MR. TENPAS: Okay, and in fact, what 20 happened here, would you agree, is that when Dr.
21 Tolley saw your report, your 2011 report that drew on 22 assessor's data, he reviewed, he and his staff 23 reviewed the assessor's cards; correct?
24 DR. SHEPPARD: That is my understanding.
25 MR. TENPAS: And in the course of that Neal R. Gross & Co., Inc.
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Page 2695 1 review, would you agree that he identified 425 errors 2 that were contained in the assessor's cards?
3 DR. SHEPPARD: Now you're getting to an 4 area where we have to be a little careful, I think, in 5 understanding what we mean by "error." He identified 6 different categories of what he regarded as errors, as 7 I understand from his rebuttal testimony.
8 Some of those were simply concerns, were 9 concerns about whether a sale involved a vacant lot.
10 Others were more vaguely stated, concerns about 11 whether there were misspellings on the property card, 12 presumably misspellings of a street name or address.
13 It's not clear from his rebuttal testimony what all of 14 those sources of error were.
15 MR. TENPAS: Could I ask the Clerk to call 16 up Entergy 144 at page, I guess it's PDF page 38? And 17 if you could zoom in on that middle -- well first, if 18 we could go up above, to the paragraph above. Now you 19 had an opportunity to review -- this is Dr. Tolley's 20 report; correct?
21 DR. SHEPPARD: This is Dr. Tolley's 22 report.
23 MR. TENPAS: And did you review that 24 report at the time it was submitted in this 25 proceeding?
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Page 2696 1 DR. SHEPPARD: Yes.
2 MR. TENPAS: Okay, and so that top 3 paragraph there identifies a variety of information 4 that he found on the assessor's cards; correct?
5 DR. SHEPPARD: That he alleges to have 6 found, yes.
7 MR. TENPAS: And so for example, on the 8 assessor's card, if you just took F, for example, 9 there are places on the assessor's card where the 10 sales price is marked as "unverified" by the assessor; 11 correct?
12 DR. SHEPPARD: I'm reading that along with 13 you, yes.
14 MR. TENPAS: And there's a place in G 15 where actually the assessor's card itself reflects 16 that a purchase was not indicative of market value; 17 correct?
18 DR. SHEPPARD: Yes. I see that he has 19 written that.
20 MR. TENPAS: And so now scrolling down to 21 the next paragraph, would you agree that focusing in 22 on that third line there, that Dr. Tolley reported 23 that of the 1,511 observations in your original data 24 set, 425 of them were ineligible for inclusion in the 25 regression for the variety of reasons set out above; Neal R. Gross & Co., Inc.
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Page 2697 1 correct?
2 DR. SHEPPARD: I don't agree with what Dr.
3 Tolley's alleging there, but I agree that that's what 4 Dr. Tolley wrote.
5 MR. TENPAS: Okay. So what did you do --
6 let's start here. So can we agree on some basic math, 7 that 1,511 minus 425 is something less than 1,222?
8 DR. SHEPPARD: Yes.
9 MR. TENPAS: Okay. So is it fair for us 10 to understand that the 1,222 number reflected in the 11 two tables towards the back of 446, involve you 12 putting back in some portion of the 425 that Dr.
13 Tolley had identified, in his view at least, as 14 erroneous?
15 DR. SHEPPARD: Yes, and it's really clear 16 in that document which ones. So it's very clear to 17 get to the 1,222, what I've done is simply excluded 18 the ones he identified as involving a vacant lot. I 19 haven't excluded the others.
20 MR. TENPAS: Okay. So to be clear, 21 although you have referred to the 1,222 as Dr.
22 Tolley's augmented data, that is not -- 1,222 is not 23 a number of records that Dr. Tolley ever himself 24 agreed was the correct number of records for this kind 25 of analysis, is it?
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Page 2698 1 DR. SHEPPARD: I never said that, and you 2 can check the testimony. I agree; it's not the number 3 that he said would be his preferred number.
4 MR. TENPAS: Okay. I'm just trying to 5 understand what you mean when you say that 1,222 was 6 Dr. Tolley's augmented numbers.
7 DR. SHEPPARD: So can I respond to that, 8 just to make sure that I'm clearly communicating?
9 JUDGE McDADE: Sure. Excuse me. First of 10 all --
11 JUDGE McDADE: Excuse me. First of all, 12 there was no need for the comment. Ask questions, 13 give answers.
14 MR. TENPAS: Thank you, your Honor.
15 JUDGE McDADE: If you have a question, ask 16 it.
17 MR. TENPAS: Your Honor, I guess I don't 18 have an objection. If he'd like to clarify, he 19 requested that, or I'll go on with the questioning.
20 JUDGE McDADE: Well, then, ask him to 21 clarify.
22 MR. TENPAS: Okay. Why don't you go ahead 23 and clarify, as you wanted to, Dr. Sheppard.
24 DR. SHEPPARD: So when you've emphasized 25 the fact that in my testimony I used the word Neal R. Gross & Co., Inc.
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Page 2699 1 augmented to describe these data, I don't know if you 2 meant to suggest it, but I took you as suggesting that 3 there was some paradox between the number of 4 observations that show up in my analysis and the use 5 of the word "augmented."
6 The augmentation happened not by adding or 7 subtracting observations, but rather adding variables 8 to the data set. So my original data set did not have 9 a variable that flagged vacant property. Dr. Tolley 10 added that as part of his evaluation of things that he 11 thought could use improvement in my analysis. And 12 what I've done in this most recent document that we're 13 discussing, that contains my evaluation of different 14 measures of proximity and the consistency of my own 15 analysis with them, what I've done is I've said "Well, 16 let's accept Dr. Tolley's characterization of the 17 vacant lot as something that should be excluded." So 18 then I exclude those sales with vacant lots, and that 19 gives me 1,222.
20 I don't accept Dr. Tolley's 21 characterization of the other problems as obvious 22 problems because many of them were corrected or 23 supplemented with additional data. So even if the 24 assessor's data card had an incorrect price or some 25 typo, often those data could be corrected from other Neal R. Gross & Co., Inc.
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Page 2700 1 sources, such as the Office of Real Property Services.
2 So it is for that reason that I haven't 3 taken on board all of Dr. Tolley's suggestions to 4 consider dropping every variable. But I have tried to 5 be forthcoming on saying "Well, it's an interesting 6 point about whether we could use sales that involved 7 a vacant lot. Let's try excluding those."
8 MR. TENPAS: You describe this as taking 9 account of every variable. Isn't the issue here with 10 respect to the assessors' data and the information 11 reflected on the cards whether those cards can be 12 fairly expected to represent a sale value that would 13 be achieved in an arm's length transaction, and thus 14 be the market value?
15 DR. SHEPPARD: In general, we hope to 16 obtain that from the cards. It's not always possible.
17 Sometimes we used other --
18 MR. TENPAS: How do we find out which are 19 the cards and the data that you had to augment through 20 other sources, versus the ones that the assessor's 21 data was just fine as far as you were concerned?
22 DR. SHEPPARD: We worked hard to make 23 those as consistent as possible, but we drew data from 24 the Office of Real Property Services and the 25 assessor's card both. And I can't tell you at this Neal R. Gross & Co., Inc.
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Page 2701 1 point whether there was an indication in the database 2 -- I know we disclosed the Access database into which 3 the data were entered, and I cannot recall at this 4 point whether there was a separate indication of 5 whether a correction had been applied to that or not.
6 MR. TENPAS: Now, you indicated -- I guess 7 we agreed that Dr. Tolley had suggested he found 425 8 observations that he thought were problematic. You 9 have -- if math serves me right, you have taken the 10 number of observations down by 289. I believe that's 11 the difference between 1,511 and 1,222. Is that 12 right?
13 DR. SHEPPARD: I'll take your word for it.
14 I haven't checked it, but it is on that order, yes.
15 MR. TENPAS: It's either 289 or 291. I 16 get confused each time, but I think -- well, let's try 17 289. If that's --
18 JUDGE McDADE: Approximately 290.
19 MR. TENPAS: Terrific, your Honor. Thank 20 you. So if it's approximately 290, and Dr. Tolley had 21 suggested 425 observations be removed, would you agree 22 with me that that means you've left in approximately 23 135 to which he objected?
24 DR. SHEPPARD: Yes, I think that's a fair 25 statement. And it also meshes with the statement he Neal R. Gross & Co., Inc.
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Page 2702 1 made in his report that the vast majority of his 2 objections focused on sales that involved vacant lots.
3 Those are the ones I removed.
4 MR. TENPAS: Well, that remaining 135, 5 again, just in terms of basic math you'd agree that's 6 a little over 10 percent of the remaining 1,222 7 observations. Correct?
8 DR. SHEPPARD: Yes.
9 MR. TENPAS: And are you aware of any 10 disclosure to Entergy in connection with the 11 preparation of this report that demonstrates to 12 Entergy which are the 135 that you left in, but to 13 which Dr. Tolley would have objected?
14 DR. SHEPPARD: That is easily discernible 15 from an expert's reading of this last New York State 16 exhibit and the data commands that I've included. If 17 they're sitting at a computer with that program and 18 with, for lack of a better word, permit me to use it, 19 with Dr. Tolley's augmented version of my data set.
20 Because he does have variables indicating those 21 observations he objects to.
22 MR. TENPAS: So just in terms of getting 23 this Saturday night, we would have had to have had 24 access to the data set, gone back in, and looked at 25 all those variables. Is that true?
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Page 2703 1 DR. SHEPPARD: You certainly need access 2 to a data set and the computer.
3 MR. TENPAS: Thank you. There were some 4 questions, I think, from the Board about this notion 5 that -- is it fair to say that your notion is that in 6 the 1974 or '76 period, with the commencement of 7 operations, the actual producing of electricity out of 8 the facility, that the property market responded to 9 that in a negative way, and that that caused a 10 depressive effect on the property values in the 11 vicinity during that period?
12 DR. SHEPPARD: That's correct.
13 MR. TENPAS: Now, I think you were asked 14 a question about whether, to some degree, a fear of 15 nuclear power might account for that. And did I 16 fairly understand you to say you thought that 17 couldn't, because you saw no reason why people were 18 more generally afraid of nuclear power in 1973 than 19 they were in 1974?
20 DR. SHEPPARD: That's just a slightly too 21 strong, I think, interpretation of my view. If I 22 might just nuance it a touch, I would say I don't 23 agree with that assertion, and I also juxtaposed to 24 that comment the observation that I had not conducted 25 a survey or anything that could directly test the Neal R. Gross & Co., Inc.
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Page 2704 1 proposition.
2 MR. TENPAS: Do you think it would be 3 unreasonable to hypothesize that people in the 4 community might be more fearful of an operating plant 5 than one that, the day before, is sitting there and, 6 in colloquial terms, hasn't been turned on yet?
7 DR. SHEPPARD: I think it's reasonable to 8 think that people might react to an operating plant 9 that's generating more traffic in and out, one that is 10 commencing the process of accumulating waste that is 11 stored on the plant site. All of those sorts of 12 things. I think that it's reasonable that they might 13 respond to that.
14 And of course, it's also possible that 15 they don't respond to it. I'm open to the hypothesis 16 that they don't, but my statistical analysis suggests 17 that they did respond to it.
18 MR. TENPAS: I didn't ask about traffic.
19 I want to ask whether you think people -- it might be 20 reasonable to hypothesize that people would be more 21 fearful that a nuclear accident might occur, a nuclear 22 release might occur once a plant commences operation 23 than the day before, when the plant was not operating.
24 Might they not reasonably think in that way?
25 MS. TAYLOR: I'm going to object, judge.
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Page 2705 1 This is outside the scope of the testimony, and 2 outside Dr. Sheppard's area of expertise.
3 JUDGE McDADE: Sustained.
4 MR. TENPAS: Did you not hypothesize that 5 there might be some generalized fear of nuclear power?
6 MS. TAYLOR: Objection.
7 JUDGE McDADE: Sustained. Actually, I 8 asked the question whether or not that could be 9 differentiated, and I believe the witness indicated 10 that he didn't know how. Is that correct, Doctor? Is 11 that your recollection?
12 DR. SHEPPARD: I think that that's a 13 correct statement, and I think I elaborated in 14 response to your question that, for it to be 15 attributed to that, we would have to maintain the 16 hypothesis that some change in fear or concern about 17 nuclear power would have to be coterminous with that 18 '74 to '76 time period. And so I think that you've 19 correctly characterized that.
20 MR. TENPAS: You've indicated that you 21 think these disamenity effects might be cumulative, or 22 build on one another over time.
23 MS. TAYLOR: Objection.
24 MR. TENPAS: Is that correct?
25 MS. TAYLOR: Objection.
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Page 2706 1 JUDGE McDADE: I'm going to overrule the 2 objection. He's stated it. If Dr. Sheppard doesn't 3 agree, that has to be testified to. He's free to 4 disagree. He seems capable of doing that.
5 DR. SHEPPARD: I hope not unreasonably.
6 But in any event, I wouldn't agree that my analysis 7 shows these are cumulative over time necessarily. But 8 what I do think is true is you observe an effect, and 9 my analysis has detected an effect, that's associated 10 with this location and this time period.
11 My analysis does not show that there is --
12 my analysis would be consistent with the suggestion 13 that there is a maintenance of this effect, but not a 14 continuing-in-time increase of this effect.
15 MR. TENPAS: In terms of that effect that 16 you discern to be there, your analysis does not 17 further disaggregate the degree to which that effect 18 is from people reacting to traffic, noise, aesthetics, 19 or greater fear of a nuclear risk because of 20 operation, does it?
21 DR. SHEPPARD: No. I have not done that.
22 MR. TENPAS: Thank you.
23 JUDGE McDADE: Are we getting close to the 24 end?
25 MR. TENPAS: We are, your Honor. Doctor Neal R. Gross & Co., Inc.
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Page 2707 1 Tolley, there was -- if I could request that the clerk 2 take us to Dr. Sheppard's testimony, which I believe 3 is --
4 JUDGE McDADE: Direct or rebuttal?
5 MR. TENPAS: I'm sorry, Dr. Tolley's 6 testimony. So it will only be direct, your Honor. I 7 apologize. 000132, and around page 112 or 8 thereabouts, on the -- 114, I think, on the PDF. Dr.
9 Tolley, do you recall being asked some -- could I 10 request that we go to the beginning of the question 11 area in this section? There you go. If you could 12 highlight question 140?
13 Dr. Tolley, do you recall being asked some 14 questions about your analysis right around this 15 section by the Board members?
16 DR. TOLLEY: Yes, a couple of hours ago.
17 MR. TENPAS: Yes, it probably seems that 18 way. And do you recall being asked some questions 19 about which of Dr. Sheppard's several analyses this 20 critique was responding to?
21 DR. TOLLEY: Yes.
22 MR. TENPAS: Okay. And can you just, 23 looking at that now, clarify to the Board which of the 24 Sheppard analyses this critique was directed at?
25 DR. TOLLEY: Yes, this was his final, 2011 Neal R. Gross & Co., Inc.
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Page 2708 1 figure. I looked at this too quickly and I wasn't 2 sure, but that's what this was. This was is 2011 107 3 billion dollar figure from, it looks like his repeat 4 sales analysis.
5 MR. TENPAS: So if your testimony at any 6 point indicated this might have been a response to Dr.
7 Sheppard's Bomquist-based analysis, that would have 8 been mistaken?
9 DR. TOLLEY: Yes, it would have. I was 10 not clear at the time. I hope I said I wasn't.
11 MR. TENPAS: Thank you. I guess for 12 anybody on the Entergy panel, there have been some 13 questions about how quickly and when alternative uses 14 might emerge for the Indian Point location. Can 15 anybody there speak to what might be constraints, 16 regulatory, physical or otherwise, on a faster 17 decommissioning than 60 years, or even if 18 decommissioned faster than 60 years, then a conversion 19 to other uses, industrial or otherwise?
20 MR. REAMER: Bill Reamer for the 21 applicant. For the site to be available for 22 alternative uses, it needs to be released by the NRC, 23 and that would come after decommissioning of the 24 facility, decontamination of the site, to a point that 25 it could be used for alternative uses. But that's Neal R. Gross & Co., Inc.
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Page 2709 1 only with respect to the power plant that's being 2 decommissioned.
3 Separately from the power plant is an 4 independent spent fuel storage installation that is 5 also on the site, and that ultimately -- as I 6 understand Entergy's plans -- will contain all of the 7 spent fuel from Unit 1, all of the spent fuel from 8 Unit 2, and all of the spent fuel from Unit 3. And 9 that facility, looking at other plants that have 10 completed decommissioning, will remain on the site.
11 Notwithstanding that the plant has been 12 decommissioned, hat spent fuel storage installation 13 will remain on the site.
14 And I guess you ask about alternative 15 uses, it remains under a license and the area inside 16 the fence remains subject to all regulatory controls.
17 MR. TENPAS: Thank you. Dr. Tolley, there 18 was some testimony and discussion about an analysis 19 that you performed, that Dr. Sheppard then described 20 himself as sort of responding to. Can you just 21 describe for the Board what the nature of that 22 analysis was, and why you undertook to do it?
23 DR. TOLLEY: Tell me if I'm wrong, but I 24 think this is the square root of distance regression 25 that I undertook on Dr. Sheppard's data. Am I correct Neal R. Gross & Co., Inc.
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Page 2710 1 that that's what you're asking about?
2 MR. TENPAS: Do you recall doing a one-3 page document that focused on square root of distance?
4 DR. TOLLEY: Yes, I do.
5 MR. TENPAS: Okay. Can you describe for 6 the Board what that document was, why you prepared it?
7 DR. TOLLEY: Well, Dr. Sheppard had 8 performed his square root of distance analysis on my 9 data, the MLS data, alone and not done it on his own 10 data. And following the original testimony, we wanted 11 to do it on both data sets to get the total body of 12 evidence that would throw light on this, so that's why 13 we did that.
14 Do you want me to talk about the results?
15 MR. TENPAS: Can you indicate why you 16 undertook to do that analysis?
17 DR. TOLLEY: Because I wanted to see if 18 his data confirmed the conclusions that he drew from 19 my data.
20 MR. TENPAS: And to be clear, which data 21 set were you then doing this analysis with? Was it 22 the MLS, or was it the assessor data?
23 DR. TOLLEY: The new analysis I did was on 24 the assessor data. It was on his cleaned data, fully 25 cleaned data.
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Page 2711 1 MR. TENPAS: Your Honor, at this point 2 we'd move what the Board had marked as Exhibit 4 for 3 identification on behalf of Entergy.
4 JUDGE McDADE: What is the next entry 5 exhibit number?
6 MR. TENPAS: I believe it's 590, your 7 Honor.
8 JUDGE McDADE: Okay. Entergy Exhibit 9 000590 is admitted.
10 (Whereupon, the document referred to was 11 marked as Exhibit 000590 for 12 identification, and was received into 13 evidence.)
14 JUDGE McDADE: Okay. The same directions:
15 one, submit a copy through the EIE, and also a copy of 16 revised exhibit lists with that on it through the EIE, 17 but wait until we conclude on Wednesday, so we don't 18 have to just keep doing new exhibit lists in the event 19 something else comes up.
20 MS. TAYLOR: If I might, judge? I'm 21 sorry. If the State could have the same courtesy that 22 has been extended to Entergy, the extra 30 days to 23 respond to that new testimony? We have had no 24 opportunity to respond in writing or to have Dr.
25 Sheppard do any detailed analysis of the October 12th Neal R. Gross & Co., Inc.
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Page 2712 1 document to which we are currently referring, and 2 which was served on us less than a business day before 3 this hearing was scheduled to commence.
4 JUDGE McDADE: Okay. I think Dr. Sheppard 5 has responded, but I will allow you again the same 6 date, November 21st, or if that's on a weekend or a 7 holiday, the Monday after that, focusing just on this 8 one narrow area.
9 MS. TAYLOR: Absolutely. Thank you, 10 Judge.
11 MR. TENPAS: All right. Dr. Tolley, do 12 you have the page in front of you that has your --
13 what's been called the square root of distance 14 analysis?
15 DR. TOLLEY: I probably have it in here.
16 Should I look for it?
17 MR. TENPAS: All right. We'll have the 18 clerk pull it up. If you could go to the next page, 19 past the -- there you go. And perhaps -- Dr. Tolley, 20 can you now see that in front of you on the screen?
21 DR. TOLLEY: Yes.
22 MR. TENPAS: All right. Can you simply 23 walk the Board through what you did here, and why you 24 did it?
25 DR. TOLLEY: Okay. I believe this to be Neal R. Gross & Co., Inc.
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Page 2713 1 correct. I'm doing it from recollection, but I'm 2 quite sure about it. This takes Dr. Sheppard's square 3 root of distance functional form, the same one that he 4 used on my MLS data, and it applies it to the 5 assessors' data that he used. And it's showing that 6 the square root of distance is no longer -- it's not 7 significant in this regression.
8 It also shows, I would note, we looked at 9 the PILOT -- I'm looking at square root-dist, the 10 first line. We see the t-coefficient of 1.22, which 11 is not statistically significant. Then we look down 12 to the third-to-the-last line, and it has PILOT 13 payment-2011, and there we look at that t-coefficient, 14 and it's 2.37.
15 So here the PILOT paid very well, but Dr.
16 Sheppard has been claiming it should be valued at 17 zero, because of an application of a mechanical 18 statistical rule. Here we have PILOT payments that 19 are highly significant, and so this supports the 20 contention that PILOT payments are a significant 21 variable here.
22 MR. TENPAS: In the line PILOT payment-23 2011, there's a 19.408. Can you discuss what that 24 number represents, or is shorthand for?
25 DR. TOLLEY: Let's see. That number says Neal R. Gross & Co., Inc.
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Page 2714 1 that if PILOT payments go up one dollar, the value of 2 the house will go up $19.40, which is a not 3 unreasonable number for capitalization rates. You're 4 going to receive these PILOT payments over many years, 5 so you capitalize them, and this is not an 6 unreasonable capitalization rate.
7 JUDGE McDADE: I'm sorry, Doctor. You're 8 saying it is not unreasonable?
9 DR. TOLLEY: It is reasonable. Sorry 10 about that.
11 JUDGE McDADE: Okay. I just wanted to 12 make sure I didn't hear exactly the opposite of what 13 you were saying. Okay.
14 MR. TENPAS: Dr. Tolley, there's been some 15 testimony by Dr. Sheppard focusing in on particular 16 analyses of particular data sets showing statistical 17 significance, largely rooted in the MLS. There are 18 other analyses based on the assessors' data.
19 Overall, can you summarize for the Board 20 your view of how to put both of those studies, all of 21 that analysis, together from the two data sets and/or 22 put it in context with the broader literature in this 23 area about nuclear plants?
24 DR. TOLLEY: Okay. Well, this is about 25 the square root of distance formulation. It shows we Neal R. Gross & Co., Inc.
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Page 2715 1 have two bodies of evidence here. If we're looking at 2 the square root of distance, as I was saying before, 3 it's a very unusual formulation. It might 4 conceptually be consistent with economic theory, but 5 it is only one out of hundreds of functional forms.
6 And then I say that I don't see how we can conclude 7 that Indian Point has a depressing effect on land 8 values from one, highly unusual, functional form, when 9 there are so many other functional forms that don't 10 give this result.
11 I'm also commenting on the rest of this.
12 The four regressions that Dr. Sheppard submitted on 13 the first two pages of what we were looking at before, 14 when we do that, what do we find? We find that 15 there's nothing new there. If you -- I don't know how 16 to put it. If you think like an economist and not 17 like a slave statistician, you will choose these 18 functional forms on the basis of good economic 19 thinking.
20 The only two serious contenders on there 21 are the quadratic -- that was what I ran -- and the 22 square root of distance. Those are consistent with 23 shapes of these functions that you would expect based 24 on analysis of economic theory. The other two things 25 are just window dressing. To me, they show nothing, Neal R. Gross & Co., Inc.
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Page 2716 1 because they're not good economics.
2 Then if we come to the PILOT payments 3 situation, we find that the MLS data that I used show 4 a reasonable coefficient also, but it is not 5 statistically significant. Then the assessors' data 6 here shows a highly significant coefficient on PILOT 7 payments. It's what we expect from economic theory.
8 The finest economists around have examined this effect 9 of local property taxes on property values, and they 10 have ascertained that that is an expected effect. One 11 flies in the face of the best economic literature if 12 you don't accept that.
13 And I would say further, on the square 14 root of distance, if we look at Dr. Sheppard's 15 estimate, I believe we're going to see a much lower --
16 it's not only nonsignificant, it's much lower. And so 17 if we use this coefficient, we wouldn't approach this 18 27 percent figure, which as I said before is a 19 meaningless figure anyhow, but it would be much -- I 20 think, although I'm doing this from recollection, the 21 amount is about one quarter of that amount, because 22 this is a lower coefficient. I think that's the kind 23 of comments that I would have on this.
24 JUDGE McDADE: Okay. Thank you, Doctor.
25 MR. TENPAS: Thank you, your Honor.
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Page 2717 1 Nothing further.
2 JUDGE McDADE: Ms. Mizuno?
3 MS. MIZUNO: Yes, your Honor. There's one 4 matter that I think the staff may be able to assist 5 the Board in, in terms of decommissioning issues. So 6 this question goes to you, John Boska. There was some 7 testimony earlier about decommissioning, and there was 8 a discussion about Entergy's plans to use safe store.
9 That allows Entergy to delay decommissioning 10 activities, so long as the decommissioning is 11 completed within 60 years of the cessation of 12 permanent operations.
13 And at one point, Judge McDade asked 14 whether there was an economic incentive for Entergy to 15 decommission as soon as possible, and the economists 16 were having some difficulty with the question. And so 17 I'm going to ask you, John, Mr. Boska, about 18 radiological reasons, technical reasons, with respect 19 to whether or not you should move forward as soon as 20 possible --
21 MS. TAYLOR: Objection. I'm sorry, she's 22 leading the witness. Is there a question here?
23 MS. MIZUNO: I'm going to ask --
24 JUDGE McDADE: There's going to be.
25 MS. MIZUNO: There is going to be. I'm Neal R. Gross & Co., Inc.
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Page 2718 1 going to ask the question in a slightly different way.
2 Is there any radiological reason for Entergy to delay 3 decommissioning and not enter into the decommissioning 4 process as soon as possible?
5 MR. BOSKA: Yes, this is John Boska for 6 the staff. Safe store does have the benefit of 7 allowing radionuclides to decay over time, and that 8 makes it easier to decommission a plant, because you 9 don't have as many radioactive isotopes that you have 10 to deal with. It makes it easier to send the waste to 11 a waste site, and it makes it easier for the radiation 12 control technicians to monitor the work during 13 decommissioning.
14 MS. MIZUNO: Does it also decrease dose?
15 What effect does it have on dose?
16 MR. BOSKA: Yes, it does decrease the 17 overall dose for the workers who are performing the 18 decommissioning.
19 MS. MIZUNO: No further questions, your 20 Honor.
21 JUDGE McDADE: Okay. Thank you. We are 22 going to start tomorrow at 2:00 on EC-3, and we are 23 then going to start at 9:00 on Wednesday on New York-24 37. We are going to go as far as we can on New York-25 37 on Wednesday. We will, at that point, recess Neal R. Gross & Co., Inc.
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Page 2719 1 without completing New York-37. We will ask the 2 parties, and specifically ask New York, within two 3 weeks to inform the Board and the other parties with 4 regard to the physical condition of your witness, so 5 that we can get an estimate of by when he would be in 6 a position to travel.
7 It doesn't seem that it makes much sense 8 to pick a date randomly at this point, until we have 9 some idea of his medical condition. So within two 10 weeks from today, if you could report that. If you 11 have information earlier, please do that earlier.
12 What we will attempt to do, then, is to find a date 13 when we can accommodate all of the parties in 14 Rockville, some day either in November before 15 Thanksgiving or in December before the December 10th 16 hearing.
17 I would anticipate -- and let me rephrase 18 that, more than anticipate -- that hearing in 19 Rockville would take place on a single day. I don't 20 envision that it would take the whole day.
21 Mr. Sipos, anything based on that?
22 MR. SIPOS: Thank you, your Honor.
23 JUDGE McDADE: Okay. From Entergy?
24 MR. BESSETTE: No, your Honor. We have no 25 further questions.
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Page 2720 1 JUDGE McDADE: Riverkeeper?
2 MS. BRANCATO: Nothing further.
3 JUDGE McDADE: From the staff?
4 MS. MIZUNO: No, sir.
5 JUDGE McDADE: From Clearwater, Ms.
6 Greene?
7 MS. GREENE: Yes, your Honor. I just 8 wanted to let you know that Dolores Guardado will 9 definitely be here tomorrow, and is going to try to 10 get here by 2:00. And the reason I mention that is in 11 case you had scheduled the translator later in the 12 afternoon. She's not sure that she can, but she's 13 going to make that request of her employer.
14 Other than that, I have nothing else this 15 evening.
16 JUDGE McDADE: Okay. Please notify the 17 parties by email in the morning no later than 10:00.
18 Based on your earlier representations, we had directed 19 the interpreter to be here at 4:00, on the 20 representation that your witness would not be here 21 before 4:30. So if she is going to be here as early 22 as 2:00, then we need to try to make arrangements to 23 get the interpreter here earlier, and it may be that 24 there won't be an interpreter here for her at 2:00, 25 but we will make our best efforts to do so.
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Page 2721 1 MS. GREENE: Given that she may not be 2 able to get an answer from her employer, if we get a 3 favorable answer I will -- is it all right to just 4 leave it as it is if you don't hear back from me?
5 JUDGE McDADE: I would appreciate it if 6 you could notify us one way or the other. Let us know 7 if you've heard; let us know if you haven't heard.
8 MS. GREENE: Will do.
9 JUDGE McDADE: We are in recess. Thank 10 you.
11 (Whereupon, the hearing in the above-12 entitled matter went off the record at 7:07 p.m., to 13 resume the following day.)
14 15 16 17 18 19 20 21 22 23 24 25 Neal R. Gross & Co., Inc.
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CERTIFICATE This is to certify that the attached proceedings before the United States Nuclear Regulatory Commission Proceeding: Entergy Nuclear Operations, Inc.
Indian Point Units 2 and 3 Docket Number: 50-247-LR and 50-286-LR ASLBP Number: 07-858-03-LR-BD01 Location: Tarrytown, New York were held as herein appears, and that this is the original transcript thereof for the file of the United States Nuclear Regulatory Commission taken and thereafter reduced to typewriting under my direction and that said transcript is a true and accurate record of the proceedings.
Official Reporter Neal R. Gross & Co., Inc.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com