1 February 25, 2011

Via Email

Gina A. McCarthy Assistant Administrator for the Office of Air and Radiation USEPA Headquarters Ariel Rios Building 1200 Pennsylvania Avenue, N. W. Mail Code: 6101A Washington, DC 20460 E

- mail: mccarthy.gina @epa.gov

RE: Avenal Power Plant

Dear Ms. McCarthy:

Sierra Club writes to express strong concerns about EPA’s recent proposal to exempt the Avenal Natural Gas Power Plant (the “Project”) from applicable air quality standards. Such an action would have significant and detrimental impacts on air quality in the San Joaquin Valley and set dangerous precedent nationwide. Allowing the Project to operate as currently proposed would violate the federal hourly NO 2 standard, and expose local residents to ambient air quality levels that EPA has determined are unsafe.

Sierra Club strongly recommends that EPA abandon its proposal to initiate rulemaking to exempt the Avenal Project from applicable air standards. EPA should instead deny the PSD permit because the pe rmit is not necessary: Avenal has already submitted a revised proposal and received a local air district determination of compliance to operate as a minor source. Avenal need only obtain an amendment to its existing California Energy Commission license th at incorporates the revised minor source permit in order to proceed with construction. Requiring the Project to move forward as a minor source with reduced emissions of NO x and CO is a far superior option compared to2 setting the disturbing precedent of ex empting facilities from applicable ambient air quality standards, which would increase health risks and cause litigation against this project and others for violations of federal and state air quality laws.

I. B ACKGROUND
Avenal Power Center, LLC (“ Avenal ”) propose d to build a 600 megawatt combined cycle natural gas

- fired power plant within the City of Avenal in Kings County. Avenal filed an Application for Certification on February 21, 2008 with the California Energy Commission (“Energy Commission”). The Energy Commission approved the Project on December 16, 2009 (the “Final Decision”)

. To ensure compliance with federal and state air quality laws, the Final Decision relied on a Final Determination of Compliance (“2008 FDOC”) issued by the San Joaquin Vall ey Air Pollution Control District (“SJVAPCD”) on November 4, 2008. In the 2008 FDOC, the SJVAPCD evaluated the project as a major source for both NO 2 and CO. The Avenal Project therefore triggered prevention of significant deterioration (“PSD”) requireme nts of the Clean Air Act and the need for a PSD permit. 42 U.S.C. § 7476. Avenal has not commenced construction of the Project because it has not received a PSD permit from EPA.

A PSD permit must ensure that the Project does not contribute to the deter ioration of ambient air quality in the San Joaquin Air District. On February 9, 2010, EPA issued a National Ambient Air Quality Standard (“NAAQS”) for hourly concentrations of NO 2 that is more stringent than the previously applicable California standard, and any PSD permit must meet this standard

. The Energy Commission did not consider Avenal ’s emissions of NO 2 with respect to the new NAAQS because it relied on EPA to assume this burden through the issuance of a PSD permit. (Final Decision at p. 129.) H owever, EPA recently indicated that it would not enforce the legally applicable NO 2 standard for this Project by adopting a type of “grandfathering” policy. We urge EPA to abandon this course of action. As discussed below, Avenal has applied for and rece ived a permit to operate as a minor source with lower NO 2 emissions. EPA can simply deny Avenal’s permit if it does not meet the requirements for NO 2 , and the Project can proceed as a minor source.

Avenal has used litigation to force EPA to ignore the cur rently applicable hourly NAAQS for NO 2 and e xempt the Project from the mandatory PSD requirement to demonstrate that the proposed facility will not cause or contribute to a violation of the hourly NO 2 standard. Were EPA to abdicate its regulatory authorit y for the facility , the Project will likely violate both federal and California laws and regulations. Avenal’s

v iolation of the NO 2 standard would present a significant health risk to the residents of the City of Avenal and other California residents in t he San Joaquin Air District because the Project would result in concentrations of NO 2 that the federal government has deemed unsafe.

Simultaneous with its pending application for a PSD permit from EPA, Avenal submitted a revised request for a minor s ource permit from the SJVAPCD. This revised3 permit request was identical to the previous request, except that Avenal proposed to reduce NOx emissions from 288,618 lb/yr to 198,840 lb/yr and to reduce CO emissions from 1,205,418 lb/yr to 197,928 lb/yr, whi ch would bring the Avenal Plant under the 100 tons/year trigger for PSD permitting. 42 U.S.C. § 7479. The only apparent reason for this revised permit request was to avoid PSD permitting requirements. The SJVAPCD issued a revised FDOC on December 17, 20 10 (the “2010 FDOC”).

Avenal appears to be hedging its bets by pursuing two strategies: (1) proceeding with the Avenal Project as a major source if EPA exempts the facility from the legally applicable NAAQS; or (2) limiting emissions of NOx and CO to les s than 100 tons per year to avoid a PSD permit. This latter option would require Avenal to request an amendment to its license from the Energy Commission, replacing the 2008 FDOC requirements with the 2010 FDOC requirements.

Option 1 above violates fede ral and state law. The Final Decision issued by the Energy Commission reasonably presumed that EPA would fulfill its statutory mandate to ensure that the Project would not cause or contribute to a violation of applicable ambient air quality standards. (F inal Decision, p. 129.) EPA’s proposal to exempt the Project from the applicable NAAQS would undermine the basis on which the Energy Commission made its decision approving the Project. EPA’s action would also have significant health impacts for the resid ents in the San Joaquin Air District. Accordingly, the Project and the Energy Commission would face litigation risks for violating air quality laws.

As stated in the Final Decision, the Project is a stationary source that is subject to all SJVAPCD rules and regulations. (Final Decision, pp. 118, 127.) The Project is a new stationary source that, according to analyses in the Final Decision and the 2010 FDOC will likely result in total emissions of NO 2 that violate the federal NAAQS. (Final Decisi on, Ai r Quality Table 5, p. 123; 2010 FDOC, Attachment G. ) The Project will therefore violate SJVAPCD Rule 2201

- 4.14.1 because it is a stationary source that will likely cause a violation of ambient air quality standards. Typically, compliance regarding a crit eria pollutant for which the air district is in attainment would be met by relying on EPA to issue a PSD permit. However, in this case, EPA’s decision to abdicate its authority on this issue leaves a regulatory void that will cause a violation of SJVAPCD Rule 2201 and, by extension, will violate both federal and state law.

II. P ROJECT I MPACTS
In undertaking its analysis of the Project’s impacts on air quality, the Energy Commission staff worked with SJVAPCD and relied on the 2008 FDOC to conclude that the A venal Plant would not violate the then

- applicable California Ambient Air Quality Standards (“CAAQS”) for 1

- hour NO 2 . The hourly NO 2 limit under the then

- applicable CAAQS was 0.18 ppm, or 339 μ g/m 3 . There was no federal hourly NO 2 standard when the Energy Commission’s Final Staff Assessment was prepared and released. (Final Staff Assessment, Air Quality Table 2, p. 4.1

- 7.) The Final Decision concluded that the Avenal Project would just barely avoid a violation of the NO 2 hourly emission standards because the modeled Project impact and the background emissions combined for a total4 impact of 327.2 μ g/m 3 , which was 97 percent of the 339 μ g/m 3 threshold CAAQS. (Final Decision, Air Quality Table 5, p. 123.) The modeled impact of the Project therefore did
not appear to violate ambient air quality standards for NO 2 in the San Joaquin Air District. The Energy Commission did not include specific conditions of certification for the Project to reduce or offset its NO 2 emissions with respect to ambient air quality standards because an EPA issue d PSD permit would ensure that the Project would not cause or contribute to a violation of the hourly NO 2 standard in the San Joaquin Valley Air District. (Final Decision, p. 129.)

Two months after the Energy Commission iss ued the Final Decision approving the Project, EPA issued a NAAQS for hourly NO 2 that was more stringent than the California standard. 75 Fed. Reg. 6474. The new NAAQS set a limit of 100 ppb (.10 ppm), or 188 μ g/m 3 for hourly NO 2
. Under this new standard

, it is likely that the total impact of the Project would greatly exceed air quality standards . (Final Decision, Air Quality Table 5, p. 123.) The SJVAPCD analysis conducted with respect to the revised 2010 minor source permit confirmed the likelihood of a violation because the Project, operating as a minor source with significantly reduced NO x emissions, would barely meet the hourly NO 2 NAAQS standard. (2010 FDOC, Attachment G.)

III. A S OLUTION T HAT P ROTECTS A IR Q UALITY AND C OMPLIES WITH THE L AW

Avenal has filed litigation against EPA seeking to force EPA to make a final decision on its PSD permit . In its motion for summary judgment in that litigation, Avenal asserted that it should not be subject to the federal NAAQS for hourly NO 2 and that EPA should grant the PSD permit without requiring the Project to demonstrate that it meets the standard. EPA should have simply denied that request and issued a PSD permit that required Avenal to show that it would meet the applicable NO 2 standard through operation al changes or control technologies. However, i n its response to Avenal ’s

m otion for s ummary j udgment, EPA inexplicably indicated its intention to exempt the Avenal Project from PSD requirements related to NO 2
. The Project’s free pass does not, however , extend to the San Joaquin Valley or its residents. T he Avenal Project will cause violations of NAAQS that California and the San Joaquin Air District must address, and “exempting” a violation of NAAQS will result in substantial health costs to the local population.

Fortunately, Avenal has already provided a ready

- made path allowing the Project to move forward without violating the NAAQS. The Project can proceed as a minor source for NO 2 that would not require a PSD permit and would not violate NAAQS be cause of its limited NO x emissions. ( See FDOC Attachment G.) In order to finalize its permits and begin construction, Avenal need only petition the Energy Commission to amend its Final Decision to incorporate the 2010 FDOC in place of the 2008 FDOC.

IV. C O NCLUSION

Rather than forcing itself, the Energy Commission, and the San Joaquin Air District to violate federal and state air quality laws and expose residents to harmful5 pollutants, EPA should deny the PSD permit for the Project. Avenal then has the simp le task of requesting an amendment to the Energy Commission’s Final Decision that incorporates the provisions of the 2010 FDOC. This solution would allow Avenal to proceed with construction and avoid a host of serious problems.

Sincerely,

/s/ Travis Ri tchie

______ Travis Ritchie Associate Attorney Environmental Law Program 85 Second Street, Second Floor San Francisco, CA 94105 travis.ritchie@sierraclub.org

cc: Stephanie J. Talbert Trial Attorney United States Department of Justice Environment and Na tural Resources Division Environmental Defense Section P.O. Box 23986 Washington, D.C. 20026

- 3986 E

- mail: stephanie.talbert@usdoj.gov

Brian Doster United States Environmental Protection Agency Office of General Counsel Ariel Rios Building 1200 P ennsylvania Ave. NW Washington. D.C. 20460 E

- mail: doster.brian@epa.gov

Julie Walters United States Environmental Protection Agency, Region 9 75 Hawthorne St., Mail Code ORC

- 2 San Francisco, CA 94105 E

- mail: walters.julie@epa.gov