February 15, 2013 

Deborah Jordan 

Director, Air Division 

Avenal Power Center, LLC 

500 Dallas Street, Level 31 

Houston, TX 77002 

U.S. Envirorunental Protection Agency, Region IX 

75 Hawthorne Street 

San Francisco, CA 94105 

Subject: Application for Extension of the PSD Permit for the A venal Energy Project 

Dear Ms. Jordan: 

Avenal Power Center, LLC (APC), submitted a request for an 18-month extension of the 

Prevention of Significant Deterioration (PSD) permit for the Avenal Energy Project on 

December 19,2012. On February 5, 2013, we received a letter from Assistant 

Administrator Gina McCarthy recognizing that our extension request was complete and 

informing us that Region IX would be responsible for its processing. This letter is a 

follow-up to our December 19 extension request. 

As noted in our December 19, 2012letter, APC received a final, effective PSD permit for 

the Avenal Energy Project on August 18, 2011. Pursuant to 40 C.F.R. § 52.21(rX2), this 

permit expires if construction is not commenced within 18 months; that is, by February 

18, 2013. But§ 52.21(r)(2) also provides that the "Administrator may extend the 18-

month period upon a satisfactory showing that an extension is justified." Our December 

19,2012, request for an extension explained the reasons for our request, but we believe 

that the additional detail contained in this letter will assist your office in processing the 

request and understanding that an extension is justified. 

Although we are certain that you are aware of the project's history, the extension request 

cannot be fully appreciated without reference to it. APC applied for a PSD permit for a 

natural gas-fired power facility near Avenal, California, in February 2008 and EPA 

deemed the application complete in March 2008. Despite a statutory requirement to grant 

or deny the Permit within one year, 42 U.S.C. § 7475(c), EPA did not issue a "Statement 

of Basis" supporting its proposed decision to grant the permit until June 2009. (March 

2011 Supplemental Statement of Basis at 1-2.) EPA then extended the public comment 

period for another four months, but no final action on the permit was forthcoming. 

In December 2009, APC notified EPA of its intent to sue over EPA's failure to act on the 

permit within one year as required by law, and filed a lawsuit to force a decision on its 

permit application after the mandatory waiting period. EPA acknowledged that it had 

violated the statutory requirement to take action on the permit within one year, and 

characterized the delay as "unusual," "extreme," and "unacceptable." During the 

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Ms. Deborah Jordan February 11, 2013 

litigation, EPA adopted new National Ambient Air Quality Standards ("NAAQS") for 

nitrogen dioxide ("N02") effective April2010, for sulfur dioxide ("S02") effective 

August 201 0, and began regulating "greenhouse gasses" under the Clean Air Act, 

effective January 2011. Each of these standards was adopted after the original deadline 

for action on the permit, and after APC had sued to compel EPA to take final action on 

the permit application. EPA initially took the position that these new standards would 

apply based on a memorandwn issued by the Office of Air Quality Planning & Standards 

stating that EPA would generally follow that practice. EPA later reversed its position in a 

declaration that the Assistant Administrator filed with the District Court. 

In the declaration, the Assistant Administrator recognized that EPA had encountered 

"unforeseen challenges" in applying the new standards to pending permit applications, 

and had undertaken a "policy review" to determine how to make decisions in a "timely 

manner" in view of these challenges. Assistant Administrator McCarthy's sworn 

declaration further explained that EPA had concluded that it was "appropriate, under 

certain narrow circwnstances," to apply the standards in place at the time the application 

was complete, and not to apply the new standards to pending permit applications. In 

addition, EPA determined that applying the new standards to APC's application would be 

unfair and would cause further delay, and thus exercised its discretion to apply the 

standards in place when the statutory deadline for acting on the permit expired. The 

District Court ordered the agency to take action on the permit by May 27, 20 11, and 

allowed an additional 90 days for any internal agency appeals. 

EPA then completed its work in a timely fashion, issuing the permit on May 27, 2011. 

Several interested groups sought review of that decision before the Environmental 

Appeals Board, which denied the petitions for review in August 2011. Not to be 

deterred, several of those groups filed petitions for review in the U.S. Court of Appeals 

for the Ninth Circuit, challenging the legality ofEPA's decision to apply the standards in 

place at the statutory deadline for action on the permit. I The initial petitions for review 

in the Ninth Circuit were filed in November 2011, and the case was fully briefed by May 

22, 2012. Yet the delays continue. According to its latest annual report, the Ninth 

Circuit takes an average of 17.4 months from date of filing to the resolution of an appeal. 

Recognizing that this delay would jeopardize its permit and continue to cause it serious 

harm, APC sought and received agreement from the other parties to seek expedited 

review from the Ninth Circuit. After argument, the average case is resolved in 6 weeks. 

Thus, APC filed an unopposed motion to expedite argwnent on May 30, 2012, but the 

Ninth Circuit denied that motion without explanation on June 12, 2012. The case is not 

yet set for argwnent, although statistics suggest that it will be set sometime this spring or 

swnmer. 

In view of this history, it is clear that this request meets EPA's standard, as set forth in 40 

C.F.R. § 52.21(r)(2), of a "satisfactory showing that an extension is justified." APC has 

doggedly pursued every chance to begin work on this project, but has been thwarted by 

process and delay tactics at every tum. Indeed, it is apparent that some of the groups 

1 Those cases are listed as Sierra Club, et al. vs. United States Environmental Protection Agency, et al, and 

Avenal Power Center, LLC and El Pueblo Para El AireY Agua Limpio v. United States Environmental 

Protection Agency, et. al, Nos. 1173342 and 11-73356. 

1302541 I 
Ms. Deborah Jordan February 11, 2013 

challenging APC's permit intend to prolong the resolution of the pending disputes in the 

hopes of thwarting the project or delaying it as long as possible. This is not mere 

speculation or attribution of motivation. When APC initiated discussions of a possible 

settlement with petitioners to explore whether any mitigation or further studies might 

resolve their concerns about this specific project, their counsel stated in no uncertain 

terms that their goal was to stop any further power plants in California's Central Valley, 

or to "hold them off' as long as possible. Based on this extreme position, the Ninth 

Circuit mediator rejected the case for mediation and set it for briefing. 

APC has done everything possible to advance a final determination and commence 

construction on this project, but could not do so. It is also clear that APC cannot now 

commence construction on this project2. If it were simply a matter of site clearing, 

grading, or other minor work, APC would have commenced construction some time ago. 

But the operative statute and regulations provide a much higher standard for 

"commencement of construction" sufficient to keep the permit from expiring. For more 

than 30 years, EPA has made it clear that the term "commenced construction" requires a 

"continuous, physical on-site construction program." See 43 Fed.Reg. 26388, 26395 

(1978). EPA has emphasized that "only significant and continuous site preparation 

work" is sufficient to "commence" construction, and that "placement, assembly, or 

installation of unique facilities or equipment at the site" is generally required. See 

Memorandum ofDecember 18, 1975, from Roger Strelow, Assistant Administrator, to 

Regional Administrators, available at http://www.epa.gov/region07/air/nsr/nsrmemos/ 

psdapdet. pdf. 3 

The other way to "commence" construction is to enter into an irrevocable contract for a 

continuous, on site construction program. This is likewise impossible at this time 

because defining the actions and schedule required to construct are impossible given the 

uncertain outcome of the litigation. The first major step to entering into a bidding 

process is to clearly and completely define the project to be bid. As this is the largest 

single component of the project cost of$500-$600 million, it is not possible to clearly 

define the "scope" and associated cost of the project until the litigation is concluded. 

Further defining that scope requires further details to be added and plans to be drawn 

after the permit is final and financing obligations can be obtained. In brief, the detail 

necessary to obtain financing and binding contracts from suppliers can not be completed 

until there is certainty in the projects ability to move from construction to commercial 

operation, which can not be done until the litigation is complete. 

Lastly, even if APC could theoretically attempt to "commence" construction in the near 

future, it could not do so as a practical matter. As noted above, this is a significant 

project, and it will cost several hundred million dollars to get the project to final design, 

bid, and through construction. Such projects cannot be started or completed without 

financing, but financing is impossible to obtain with pending litigation that threatens to 

2 APC has spent millions of dollars and continues to spend money to maintain the viability of the project, 

including the amendments to the CEC permit and executing a binding interconnection agreement with the 

California ISO which does demonstrate a continued commitment to advance the project and move to 

construction and commercial operation as soon as possible. 3 Other regions are in accord. See, e.g., http:/lwww.envinfo.com/caain/ALLPSD.TXT 

1302541 I 
Ms. Deborah Jordan February 11, 2013 

invalidate the required PSD permit. Even the academic literature has recognized this 

fact, explaining that "all licenses and permits will be obtained before Financial Close, 

because the Lenders will not wish to advance funds unless they are confident that the 

project can proceed through to operation." Stephen Peppiat, Introduction to Power 

Station Project Financing, 13 Berkeley J. Int'l Law 46, 56 (1995). As a practical matter, 

it is impossible to convince a lending institution to put more than a half billion dollars at 

risk for a project that may be delayed for years or rendered invalid by litigation. Without 

such financing, the project cannot even reach final design, much less commence 

construction. 

For related reasons, construction cannot "commence" immediately upon the expected 

favorable decision from the federal court of appeals. If the Ninth Circuit upholds EPA's 

careful and well-reasoned permit decision, APC will have to obtain financing, complete 

engineering and satisfy all of the California Energy Commission's preconstruction 

requirements. These actions all take significant time, and the date and substance of the 

Ninth Circuit's decision is presently unknown. The necessary contracting, 

documentation and preconstruction filing obligations of the California Energy 

Commission alone could result in as much as 12 months delay in starting construction 

from the date of any ruling by the Ninth Circuit. APC is committed to taking every 

action to expedite the court's decision, and is considering renewing its motion to expedite 

if Region IX grants the permit extension request. 

For the reasons set forth above, APC believes that it meets the applicable regulatory 

standard for an extension: a satisfactory showing that an extension is justified. 40 C.F.R. 

§ 52.21 (r)(2). Given the significant delays during the permitting process, the prior 

litigation in the D.C. District Court to force a permitting decision, and the 9th Circuit 

petition for review, it would be inequitable to let APC's PSD permit expire. This is 

particularly so where the groups blocking the project have expressly stated that they 

intend to kill the project by delay and have no real interest in compromising on the 

underlying substantive issues that make up the claims in their lawsuit. . 

Moreover, and although APC believes it is not binding, APC satisfies Region IX's policy 

on PSD Permit Extensions. See Memorandum of September 8, 1988, from Wayne 

Blackard, Chief, New Source Section, to Region IX States and Districts. That 

memorandum sets forth three basic factors, all of which are met here. The administrative 

requirements are all met here, in that APC submitted a justification by a "responsible 

representative" prior to the deadline. As Ms. McCarthy' February 5, 2013, letter notes, 

my December 19, 2012, letter meets each factor. As to the procedural issues, we do not 

believe that public comment is appropriate given the extensive public participation in this 

project, nor do we believe that a 12-month limit is appropriate given the history of this 

project. 

APC also believes that it is important to note that the project is in compliance with all 

applicable standards. As set forth in the March 2011 Supplemental Statement of Basis 
Ms. Deborah Jordan February 11, 20 13 

for PSD Permit Application for A venal Energy Project, EPA has determined that it would 

be inappropriate to require APC to show that the project would not "cause or contribute 

to a violation of the hourly N02 and S02 NAAQS or establishing emissions limitations 

for greenhouse gases in the permit." EPA explained that the project would be a "wellcontrolled, natural-gas fired" facility that would "apply BACT for N02 and not cause or 

contribute to a violation of the NAAQS that were in place before promulgation of the 

hourly standards." In view of this fact, the delays noted above, the challenges in applying 

the later-adopted standards in the available time, and EPA's prior and valid decision to 

apply the standards in effect at the statutory deadline, it is clear that the project meets the 

applicable standards. Any other result would eviscerate EPA's prior decisions and 

reward the delay tactics in which opposing entities have engaged, hijacking EPA's 

process and handing control to groups opposed to a project. 

Finally, and although APC strongly objects to applying any standards adopted after 

EPA's statutory deadline for action on the permit, APC has in the past and continues to 

engage in modeling analysis and concludes that its project would meet the newly adopted 

standards in any event. Further, EPA and other delegated authorities in California have 

previously and currently conclude that natural gas fueled combined cycle power plants 

similar to APC's project are BACT for GHG. This is hardly surprising in view of EPA's 

statements above and the California Energy Commission's finding that the Project will 

produce net GHG benefits across California's electric system. 

While considering adoption of the Clean Air Act, Congress recognized that delays are 

"[i]nherent in any review-and-permit process" but specifically enjoined state and federal 

agencies to "do all that is feasible to move quickly and responsibly on permit applications 

and those studies necessary to judge the impact of an application." S. Rep. No. 94-717, 

at 23 (1976). Congress concluded that "[n]othing could be more detrimental to the intent 

of this section and the integrity of this Act than to have the process encumbered by 

bureaucratic delay." Id. Yet that is what has happened to APC. Although EPA can do 

little to remedy the impacts of the past delays, it would be manifestly unjust for APC's 

permit to expire and its project to be scuttled by delays for which it was not responsible 

and over which it has no control 

Given the Ninth Circuit historical timing for these types of cases and the required 

activities (including CEC preconstruction obligations) to move to construction 

immediately following the ruling, APC would reiterate its request for an 18th month 

extension of the permit. 

)(12~4 1 I 
Ms. Deborah Jordan February 11, 2013 

Thank you for considering our request. If you have any questions regarding this 

application, please don't hesitate to call me at 713-275-6147 or email at 

jim.rexroad@macquarie.com. 

cc: Gerardo Rios, Chief, Permits Office, USEPA, Region 9, 75 Hawthorne Street, 

San Francisco, CA 941 05 

Dave Warner, Director, Permit Services, SJV APCD, 1900 E. Gettysburg Avenue, 

Fresno, CA 93726-0244