19020 33 rd Avenue W, Suite 310, Lynnwood, WA 98036-4748 Tel: +1 425.412.1800 Fax: +1 425.412.1840 www.environcorp.com September 7, 2010 Project No. 29-23586A

Mr. Gerardo Rios U.S. Environmental Protection Agency, Region 9 75 Hawthorne Street San Francisco, California 94105 Subject: Response to Second Incompleteness Determination Sierra Pacific Industries Biom ass-Fired Cogeneration Project Anderson, California

Dear Mr. Rios: The U.S. Environmental Protection Agency, Re gion 9 (USEPA) office i ssued a letter on May 11, 2010 indicating that the Prevention of Signi ficant Deterioration (PSD) permit application submitted on March 26, 2010 in support of the biomass-fired cogeneration project proposed by Sierra Pacific Industries, Inc. (SPI) for th eir Anderson facility is incomplete, and that additional information was needed to determine that the application is complete. ENVIRON submitted a letter on July 1, 2010 that containe d additional information intended to address the issues raised in the May 11 letter. A second letter from USEPA was issued on August 16, 2010 requesting additional information beyond that requested in the May 11 letter. This letter intends to provide the information requested in the August 16 letter, as well as during the August 19, 2010 conference call between USEPA, SPI, and ENVIRON, and enable USEPA to deem the permit application complete. Responses are organized in the same order as that of the enclosure to your letter, and the information requests are summarized as an italicized introduction to the response.

Best Available Control T echnology (BACT) Analysis: Outline energy and environmental impacts for ea ch pollutant for which a BACT analysis was provided, and economic impacts for each BACT a nalysis that does not re sult in selection of the most stringent control technology. Energy and Environmental Impacts:

NO X No additional significant environmental or energy impacts from employing either SNCR or SCR technology are anticipated. Both SNCR and SCR systems use ammonia in some form as a reagent: anhydrous ammonia, aqueous a mmonia, or urea mixe d with water (which hydrolyzes in the hot exhaust to form ammonia) . In the case of aqueous ammonia or urea mixed with water, additional fuel must be com busted to evaporate the water associated with the reagent. The proposed SNCR system will us e anhydrous ammonia. Energy is required to operate the injectors used by e ither technology to introduce the r eagent to the exhaust. With either technology, the exhaust leaving the boiler stack will contain some quantity of unreacted ammonia.CO No additional significant environmental or energy impacts from employing proper combustion techniques or an oxidation catalyst would be anticipated. An oxidation catalysts may slightly increase the pressure drop, and require some additional energy, but this effect is assumed to be minimal. The control system s associated with prope r combustion techniques use some energy, but the savi ngs in achieving more complete combustion undoubtedly outweighs the costs.

PM/PM 10 /PM 2.5 A wet scrubber is the most energy intensive of the feasible control tech nologies, and creates a liquid waste stream. A baghouse requires ad ditional energy to overcome the increased pressure drop. An electrostatic precipitator (ESP) system uses elec tricity to create an electric field, but has the lowest overall energy us e of the three feasible technologies. Reassess the technical feasibility of EMx for control of NO X

and CO.

EMx is considered the most effective a mmonia-free reduction t echnology available for combustion turbines, reciprocating engines, and industrial or utility bo ilers firing gaseous or liquid fuels. EMx has never been utilized with a biomass-fired boiler. Similar to SCR, the potential for poisoning and plugging of the cat alyst from trace elements and ash in the exhaust makes EMx not technically feasible for use with a biomass-fired boiler. Consider a baghouse or fabric filter in combina tion with a multiclone or ESP for control of PM/PM 10

/PM 2.5 . The BACT analysis provided with the permit a pplication indicated that the ESP considered as a control alternat ive would be preceded by a multiclo ne. The analysis should have indicated that the baghouse considered as a co ntrol alternative would also be preceded by a multiclone. Multiclones are a low-cost way to re move larger particulates and reduce the cost associated with operating higher cost contro l systems such as an ESP or baghouse. Baghouses and ESPs are considered to be equally effective at reducing PM/PM 10 /PM 2.5 from biomass-fired boilers. ESPs are typically pref erred because they are less prone to catching fire. ESPs tend to have higher initial costs, but lower operating costs when compared to a baghouse. Combining an ESP and a baghouse in series would result in in creased removal of PM/PM 10 /PM 2.5 from the exhaust, but the incremental cost effectiveness would be extremely high. Assuming that a baghouse would cost ap proximately $500,000 per year to operate, and would remove an additional 35 tons per year of PM/PM 10 /PM 2.5 from the exhaust (this assumes that the baghouse would remove 96 percent of the PM/PM 10 /PM 2.5 from the exhaust even though the majority of the remaining PM/PM 10 /PM 2.5 would be PM 2.5 and condensable PM, which is most likely a generous assumpti on), the incremental cost effectiveness would be over $14,000 per additional ton of PM/PM 10 /PM 2.5 removed. This is clearly outside the envelope of reasonable cost effectiveness. Address BACT during startup and shutdown periods.During startup and shutdown, CO and VOC concen trations in the flue gas will exceed those experienced under normal operation. This is a characteristic of all biomass-fueled combustion devices because the temperature re quired for optimum combustion conditions is not achieved immediately after startup commen ces, or as shutdown proceeds. Similarly, SNCR systems require an exhaust gas temper ature above approximately 1,500°F before asdesigned NO X emission abatement will occur. During startup and shutdown it is not technologically feasible to meet CO, VOC, or NO X BACT limits that are specified on the basis of normal boiler operation. SPI proposes that, during startup and shutdown periods, BACT for CO, VOCs, and NO X is to limit the frequency and duration of startups, shutdowns and periods of upset through the implementa tion of best practices and training. Provide averaging periods for the proposed NO X

and CO BACT limits. SPI proposes that the bases for the BACT limits presented in the permit application be block 24-hour averages. A block average is define d as the arithmetic av erage of the hourly emission rates of a unit as measured over 24 one-hour periods, daily, from 12:00 AM to 11:59 PM, excluding periods of system calibration. Proposal to Revise 40 CFR Part 63, Subpart DDDDD: SPI acknowledges that the emission limits propos ed in the submitted PSD permit application may not be less than the limits in the Na tional Emissions Standard for Hazardous Air Pollutants (NESHAP) for Industrial/Commercia l/Institutional Boilers and Process Heaters proposed by USEPA on June 4, 2010 (a.k.a. “Boile r MACT”). SPI would like to point out that the submitted permit application was intended to address the requirements of the PSD program, and not proposed NESHAP requirement s. SPI intends to operate the proposed boiler in a manner that complies with all applicable Boiler MACT requirements at the appropriate times, following pr omulgation of the final rule. Nitrogen Dioxide (NO 2 ) Air Quality Impact Analysis Include all competing industrial sources of NO X

50 kilometers beyond the Significant Impact Area, as defined by the USEPA-recommended interim Significant Impact Level (SIL).

The ambient 1-hour NO 2 standard compliance assessment th at was provided in the July 1 letter included competi ng industrial sources of NO X within 50 kilometers (km) of the Anderson facility. On June 28, 2010, three da ys before that letter was finalized, a memorandum from Anna Marie Wood, Acting Di rector of USEPA’s Air Quality Policy Division indicated that USEPA recommende d that an interim 1-hour average NO 2 SIL of 4 parts per billion (ppb). Revisiting the 1-hour NO 2 standard compliance analysis, and using the interim SIL to determine the Significant Impact Area (SIA), the most distant receptor that equals or exceeds the interim SIL is approxi mately 6.1 km from the Anderson facility. ENVIRON contacted John Waldrop of the Shasta County Air Quality Management District (SCAQMD), Joe Sunday of the Tehama County Air Pollution Control District (TCAPCD), and Brian Wilson of the North Coast Unified Air Quality Management District (NCUAQMD – which includes Trinity County) to request emission rates and release parameters for industrial sources of NO X within 56.1 km, but beyond 50 km of SPI’s Anderson facility. SCAQMD and TCAPCD reported that no additiona l sources were located in those areas.NCUAQMD reported that a singl e source in Trinity County wa s within 56.1 km of the facility: a 102 horsepower dies el engine associated with an emergency generator owned by Pacific Bell in Lewist on, California. The Pacifc Bell generator in Lewiston was s ubjected to the same air dispersion modeling simulation methodology described in the July 1 lett er that was used to determine whether or not sources of NO X were significant within the SIA. Using the location (516992.25 m easting, 4506091.85 m northing, UTM Zone 10) and maximum 1-hour average NO X emission rate provided by NCUAQMD (3.162 pounds per hour) and representative stack parameters for a diesel engine of similar size (stack height – 6.6 ft a bove grade, stack exhaust temperature – 972 °F, stack exhaust flow rate -663 cubic feet per minute, and an inside stack diameter of 4 inches). Based on these mode l inputs, the source was predicted by the model to have a maximum concentration within the SIA of 1.45 μ g/m 3 , which is less than the interim 1-hour average NO 2 SIL. As a result, the 1-hour average NO 2 compliance analysis, as provided in the July 1 letter, does not need to be changed or amended to reflect the impact of sources within 56.1 km of the Anderson facility. Provide a rationale for using dat a collected by the ambient NO 2 monitor in Chico, California to determine the NO 2 background concentration.

Monitor locations for which recent ambient NO 2 data were available included Yuba City – Almond Street, Ukiah – E. Gobbi Street, Willits – S. Main Street, and Chico – Manzantia Avenue. The Willits and Ukiah monitors were rejected because they are located west of the Coastal Range, and therefore in an entirely di fferent airshed from that of the Anderson facility. The Yuba City and Ch ico monitors are both located in the foothills that make up the east side of the Sacramento Valley, and are th erefore in the same airshed as the Anderson facility. Both Yuba City and Chico have c onsiderably larger popul ations, and are more urban, than Anderson; the Chico monitor was chosen because it is physically closer to Anderson. Provide clarification that 1-hour NO 2 impact analysis included shor t-term emission limits for the competing industrial sources of NO X . ENVIRON requested that SCAQMD, TCAPCD, and NC UAQMD provide maximum allowable hourly emission rates for each s ource within 56.1 kilometers of the Anderson facility. SCAQMD provided a spreadsheet with permitted short-term NO X limits for each source, and TCAPCD provided a similar spreadsheet with hourl y maximum emission rates. NCUAQMD provided the maximum hourly NO X emission rate for the single source within its jurisdiction. Provide a discussion of whether startup or s hut-down emission rates associated with the proposed boiler were included in the 1-hour NO 2 impact analysis. The 1-hour average NO 2 compliance analysis was repeat ed, changing only the proposed boiler emission rate and stack pa rameters to reflect startup co nditions. The stack parameters were the same as those used for the 1- and 8- hour average CO startup analysis described in the submitted PSD permit application. The worst-case NO X startup emission rate was estimated to be 55 percent hi gher than the maximum expect ed during normal operation (94.3 pounds per hour). The maximum model-predicted 1-hour NO 2 concentration (assuming 100percent conversion of NO to NO 2 ) from the cumulative analysis was 89.9 μ g/m 3 , and the five-year average of the 98 th percentile of the annual distribution of the daily maximum 1- hour average NO 2 concentrations was 69.5 μ g/m 3 . Combining the 98 th percentile concentration with the representative bac kground concentration used in the submitted PSD permit application (80.9 μ g/m 3 ) results in a total concentration of 170.8 μ g/m 3 , which is less than the ambient standard (188 μ g/m 3 ), indicating that the propos ed project would neither cause nor contribute to an exceedan ce of the Federal 1-hour average NO 2 standard, even during startup. It should be noted that the cumulative impact mo deling is conservative in that, in addition to assuming that all NO X is converted to NO 2 , the analyses of recepto rs exceeding the interim SIL were not restricted to onl y the time periods in which the proposed source was predicted to have a significant impact at each recepto r. The less conservative, but more accurate, approach, which is to develop individual mode ling runs for each receptor and time period combination for which the proposed source was pr edicted to be significant, is much more resource intensive. The results of the easier, but more conservative analysis are presented because they indicate compliance with the ambien t standard in question, but it should be kept in mind that the more labor-intensive methodology would most likely predict lower concentrations. Provide justification that the meteorologica l data used in the dispersion modeling is representative of conditions at the Anderson facility. The Redding Municipal Airport, where the meteor ological tower from which the data used in the air dispersion modeling analyses is locate d, is approximately 4.5 km (2.8 miles) northnorthwest of SPI’s Anderson facility. Both th e station and the facility lie in the broad Sacramento Valley, and, considering the proxim ity of the facility and the station, it is unlikely that the wind and weathe r patterns experienced by one diffe r greatly from that of the other. For your consideration, a table is attach ed to this letter that presents the seasonal surface parameters calculated by AERSURFACE for the area surrounding the meteorological tower at the airport (which were used by AERM ET to create the meteorological dataset used by AERMOD), and, for comparison, the surf ace parameters surrounding the Anderson facility. Biological Resources Practices Provide current and proposed best management practices. The enclosed National Pollutant Discharge El imination System (NPDES) permit and Storm Water Pollution Prevention Plan (SWPPP) identif y specific Best Management Practices that are currently being implemented for mill operations. Many of the erosion control and spill prevention measures identified in the existi ng SWPPP will be implemented for the proposed project. Discharge points identified in the existing SWPPP will not change for the proposed project, and all storm water runoff will be contained on the mill site. Specify the distance from construction activities and the elderberry shrubs. The valley elderberry longhorn beetle will not be directly or indirectly affected, as SPI has confirmed that construction activ ities would not occur within 100 feet of elderberry shrubsthat are in the Pacific Gas and Electric power line Right of Way. The nearest construction activity to the existing elderberry plants w ill be the erection power poles at the existing electrical sub-station. As show n in the attached site map, the erection of the electrical power poles will be approximately 137 feet from the nearest elderberry shrub. This construction will be limited to the auguring three holes adeq uately sized holes for the erection of these power poles, stringing the necessary power cable s and miscellaneous tasks associated with making the intertie complete. The main constr uction area, where the boiler, turbine building, fuel shed, electrical substation, cooling tower, and ESP will be built, is approximately 800 feet further north from these three power poles. Specify changes in fuel c onsumption, handling, and storage , and resulting construction activities. The majority of fuel will be stored in a new fuel storage shed to be built on land that has previously been developed for use in support of mill operations. All fuel storage will be confined to the existing mill site, and will not result in the loss of natural communities. Although more fuel will be stored on site, chan ges to the fuel handling system will include a hydraulic truck dump and fuel reclaimers used to feed the boiler, both of which will increase work efficiencies and reduce emissions from transport and fuel handling vehicles. Provide a description of proposed traffic in creases and transportation-related construction activities. The proposed project would utiliz e existing roads and infrastructu re. No additional roads or transportation infrastructure are proposed to be built. Daily traffic volume is expected to increase as a result of the propos ed project, but is not expected to adversely affect biological resources in the project vicinity.

We believe that the information provided in this letter addresses the issues raised by USEPA, and should be considered to amend the submitted PSD permit application. Please let me know if USEPA requires any additional info rmation to deem the permit application complete. If you or your staff has any additi onal questions or need additional information, please do not hesitate to contact me at 425.412.1804. Sincerely yours, ENVIRON INTERNATIONAL, INC.

Eric Albright Senior Manager

Enclosures cc: Omer Shalev, USEPA, Region 9 Shane Young, Sierra Pacific Industries Dave Brown, Sierra Pacific Industries Cedric Twight, Sierra Pacific IndustriesTable 1. Comparison of Surface Characteristics Surrounding SPI’s Anderson Facility and Redding Airport SPI’s Anderson Facility Redding Airport Season Sector Albedo Bowen Ratio Z o (m) Albedo Bowen Ratio Z o (m) 1 0.51 0.48 0.043 0.52 0.48 0.37 2 0.51 0.48 0.043 0.52 0.48 0.205 3 0.51 0.48 0.037 0.52 0.48 0.205 4 0.51 0.48 0.034 0.52 0.48 0.052 5 0.51 0.48 0.026 0.52 0.48 0.027 6 0.51 0.48 0.024 0.52 0.48 0.019 7 0.51 0.48 0.09 0.52 0.48 0.008 8 0.51 0.48 0.166 0.52 0.48 0.008 9 0.51 0.48 0.017 0.52 0.48 0.008 10 0.51 0.48 0.01 0.52 0.48 0.007 11 0.51 0.48 0.015 0.52 0.48 0.006 Winter

12 0.51 0.48 0.009 0.52 0.48 0.094 1 0.16 0.52 0.113 0.16 0.51 0.64 2 0.16 0.52 0.097 0.16 0.51 0.452 3 0.16 0.52 0.092 0.16 0.51 0.456 4 0.16 0.52 0.081 0.16 0.51 0.17 5 0.16 0.52 0.101 0.16 0.51 0.112 6 0.16 0.52 0.105 0.16 0.51 0.101 7 0.16 0.52 0.22 0.16 0.51 0.047 8 0.16 0.52 0.282 0.16 0.51 0.035 9 0.16 0.52 0.064 0.16 0.51 0.037 10 0.16 0.52 0.052 0.16 0.51 0.048 11 0.16 0.52 0.045 0.16 0.51 0.05 Spring

12 0.16 0.52 0.046 0.16 0.51 0.242 1 0.17 0.55 0.154 0.17 0.61 0.776 2 0.17 0.55 0.128 0.17 0.61 0.62 3 0.17 0.55 0.123 0.17 0.61 0.592 4 0.17 0.55 0.112 0.17 0.61 0.303 5 0.17 0.55 0.171 0.17 0.61 0.22 6 0.17 0.55 0.168 0.17 0.61 0.184 7 0.17 0.55 0.295 0.17 0.61 0.127 Summer

8 0.17 0.55 0.393 0.17 0.61 0.134SPI’s Anderson Facility Redding Airport Season Sector Albedo Bowen Ratio Z o (m) Albedo Bowen Ratio Z o (m) 9 0.17 0.55 0.139 0.17 0.61 0.128 10 0.17 0.55 0.116 0.17 0.61 0.12 11 0.17 0.55 0.143 0.17 0.61 0.109 Summer

12 0.17 0.55 0.1 0.17 0.61 0.401 1 0.17 0.89 0.154 0.17 0.9 0.776 2 0.17 0.89 0.128 0.17 0.9 0.62 3 0.17 0.89 0.123 0.17 0.9 0.592 4 0.17 0.89 0.112 0.17 0.9 0.303 5 0.17 0.89 0.171 0.17 0.9 0.22 6 0.17 0.89 0.168 0.17 0.9 0.184 7 0.17 0.89 0.295 0.17 0.9 0.127 8 0.17 0.89 0.393 0.17 0.9 0.134 9 0.17 0.89 0.139 0.17 0.9 0.128 10 0.17 0.89 0.116 0.17 0.9 0.12 11 0.17 0.89 0.143 0.17 0.9 0.109 Fall

12 0.17 0.89 0.1 0.17 0.9 0.401

## Figure 1 SPI-Anderson Site Plan Showing Location of Elderberry Shrubs in Relation to Proposed New Structures

## Enclosures