Kurt R. Wiese, General Counsel

Barbara Baird, District Counsel

Lauren Nevitt, Deputy District Counsel

South Coast Air Quality Management District

21865 Copley DriveDiamond Bar, CA 91765

Telephone:• (909) 396-3202Fax: (909) 396-2961

bbairdagmd.gov

STATE OF CALIFORNIA

ENERGY RESOURCES CONSERVATION AND DEVELOPMENT

- COMMISSION

In the Matter of: )

)

Application for Certification for the ) Docket No. 07-AFC-03 CPV SENTINEL ENERGY PROJECT ) Legal Argument of South Coast Air By CPV Sentinel, LLC ) Quality Management District in

) Response Tointervenors’) Testimony

)

I/I

III

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I/I - -.

III

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TABLE OF CONTENTS

INTRODUCTION 1

BACKGROUD 1

A. Applicable New Source Review Requirements 1

B. Offsets Being Provided to CPV Sentinel by the District 3

C. The Proposed CPV Sentinel SIP Revision 4

D. This Commission’s Decision Relative to Offsets 5

II. ARGUMENT 6

A. Summary of Argument 6B. The Offsets to be Provided to CPV Sentinel Are Currently

Federally Enforceable 7

C. EPA Allows Issuance ofNew Source Review Permits

Before EPA Approval ofthe SIP Amendment Associated

with Transfer ofthe Offtets to CPV Sentinel 8

D. There is No Requirement That the Offsets Be Reduced to

Levels Equivalent to Current “Best Available ControlTechnology” 9

E. There is No Legal Basis for Discarding Offsets Generated

From the Lawful Operations of a Source That at Times

Exceeded Its Permitted Levels 10

IlL CONCLUSION 11
iNTRODUCTION

Intervenor California Communities Against Toxics (CCAT) has filed the proposed

testimony ofMichael Harris in this matter. The South Coast Air Quality Management

District (District) has moved to exclude Mr. Harris’ testimony on the ground that the

rules of legal professional responsibility preclude him from testifying by reason of his

prior attorney-client relationship with the District. The District also moved to exclude his

testimony on the further ground that his purported expert testimony is nothing ofthe sort

and, instead, is merely legal argument on which expert testimony is not proper. The

Commission should exclude the Harris testimony for both ofthese reasons.

Nevertheless, the District anticipates CCAT will make these same arguments in its legal

brief. In addition, the testimony ofJulia May filed on behalf of Communities for a BetterEnvironment (CBE) is susceptible to the same objection regarding impermissible legal

argument. The District hereby objects to.the legal conclusions contained in the May

testimony, namely that the offsets in issue need to be discounted to Best Available

Control Technology (BACT), and that offsets are not available from a source that hasexceeded its permit limit. As a result, the District addresses why the arguments made by

Mr. Harris and Ms. May are mistaken as a matter of law. In addition, the District sets

forth below a background section which explains the essential requirements for new

source review under the Clean Air Act and describes the offsets being provided to CPV

Sentinel by the District pursuant to AB 1318. This section also describes the revision to

the State Implementation Plan (SIP) currently being processed, and sets forth how that

SIP revision relates to this Commission’s decision.

As detailed below, even ifthe Commission were to consider the improper legal opinions

of Mr. Harris and Ms. May’s testimony, which it should not,the Commission should

nonetheless conclude that AB 13 18 properly authorizes the transfer ofthe emission

offsets to the Sentinel project and that these offsets meet the Commission’s legal

requirements for issuance ofthe certification. Contrary to their testimony, the credits are

fully enforceable and there need not be any amendment to the SIP for them to be fully

enforceable. Similarly, regardless of whether a SIP amendment may be needed in the

future, this Commission is free to certify the CPV Sentinel project, and should do so.

I. BACKGROUND

A. Applicable New Source Reviów Requirements

The federal Clean Air Act (CAA), 42 U.S.C. § 7401 et seq., requires EPA to establish
after it is approved by the United States Environmental Protection Agency (EPA). Safe

Airfor Everyone v. US.EPA,488 F.3d 1088, 109697 (9thCir. 2007).

The CAA also includes “new source review” (NSR) requirements for new and modifiedmajor sources of pollutants for which an area has not yet attained the national ambient air

quality standards, and the precursors to such pollutants. At issue in these proceedings is

the requirement forsuch new and modified sources to “offset” their emissions increases

with reductions from within the same source.or from another source. This requirement

derives from CAA § 173 (42 U.S.C. § 7503(a)(1)), which provides in pertinent part that

“by the time the source is to commence operation, sufficient offsetting emission

reductions have been obtained.. .so as to represent (when considered together with the

plan provisions required under section 7502 ofthis title) reasonable further progress....”

An offset is an accounting of

a reduction in

a pollutant that must be equal to or greater

than the emissions increase ofthat pollutant from the new or modified source. Offsets

are generally created when a company shuts down equipment or installs control

equipment to reduce emissions where that reduction is not otherwise required. Emission

reductions may not generate offsets ifthey are otherwise required by any provision ofthe

Clean Air Act, including state and local rules implementing the SIP. 42 U.S.C.

§ 7503(c)(2). This is generally referred to as

a requirement that the emission reductions

represented by an offset must be “surplus.” EPA has adopted regulations governing statenew source review programs, which require that offsets be “surplus, permanent,

quantifiable, and federally enforceable.” 40 C.F.R. 51.1 65(a)(3)(ii)(C)(l Xii).

As set forth in the March 2, 2010 “Addendum to the Determination ofCompliance” for

the Sentinel project, Appendix N, the project is providing necessary offsets ofvolatile

organic compounds (VOCs) in the form of emission reductipn credits obtained from the

open market. It is obtaining nitrogen oxide (NOx) RTCs (RECLAIM Trading Credits)

for its NOx emissions. It is not required to obtain offsets for particulate matter less than

2.5 microns in diameter (PM2.5) because the area ofthe Salton Sea Air BasIn where it is

to be located is not classified as “nonattainment” for PM2.5. Appendix N, p. 3. It is obtaining offsets for PMIO and its precursor sulfur oxides (SOx) from the District as

required by AB 1318.

The CPV Sentinel project is not a federal major source for PM 10, and thus does not

require offsets for particulate matter smaller than 10 microns in diameter (PM10) or its

precursors under federal law. Appendix N, page 4. However, CPV Sentinel and the

District are providing offsets for PM 10,

a nonattainment pollutant and its precursor SOx,

pursuant to AB 1318

Moreover

both federal law and District r

les 

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ff

t
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EPA, offsets would no longer be required for any source (major or non-major) located in

this area. However, it is anticipated that the facility will want to receive its certification

from this Commission before EPA decides on the redesignation request.

B. Offsets Being Provided to CPV Sentinei by the District

As discussed above, a facility eligible to obtain emission reduction credits (ERCs) as a

result of equipment shutdown or overcontrol may create offsets which it may sell on the

open market to new or modified facilities.needing offsets. In the District, this is done by

following District Rule 1309 and Rule 1306. In addition, the District maintains an

“internal account” of offsets for each pollutant which it obtains from equipment

shutdowns or overcontrol where the facility is either ineligible for ERCs (because it

originally obtained its offsets from the District) or fails to claim ERCs in a timely

manner. The District refers to these offsets as “orphan shutdowns” or “orphan

reductions.” District Rule I 303(b)(2) provides that “unless exempt from offsets

requirements pursuant to Rule 1304, emission increases shall be offset by either Emission

Reduction Credits approved pursuant to Rule 1309, or by allocations from the Priority

Reserve in accordance with the provisions ofRule 1309.1.” The District has used its

internal accounts to provide offsets for federal major sources that are exempt under Rule

1304 or eligible for Priority Reserve offsets under Rule 1309.1 (principally essential

public services).

Due to the electricity shortfall in southern California projected by state agencies and the

scarcity and high price of offsets, particularly PM10, the District decided in 2006 to

amend its Priority Reserve Rule to allow power plants for

a limited period oftime to

obtain offsets from the Priority Reserve. Unlike essential public services, power plants

were required to pay substantial mitigation fees to the District to use the offsets; the

District was to spend the money to reduce emissions in areas impacted by the power

plants. At the same time, the District codified its tracking system for internal offsets,

including making improvements to the system, in Rule 1315. The Natural Resources

Defense Council (NRDC) and others brought state-court litigation challenging these

actions, which resulted in

a ruling that the District had not adequately complied with the

• California Environmental Quality Act (CEQA) in adopting and amending the rules. As

a

result, the District could not supply offsets from its internal accounts for power plants or V any other sources receiving offsets from the internal accounts. As

a result, the District

• declared

a permit moratorium.

V V In 2009 the legislature responded by adopting two bills, SB 827 and AB 13 18. The first

bill allowed the District to issue permits pursuant to Rule 1304 and Rule 1309:1 as it V
Sentinel is the only known eligible facility under this bill. AB 1318 created a CEQA exemption for the crediting and transfer ofthe offsets it requires to be provided. Pub. Res. Code 21080(b)(16).

The AB 1318 Tracking System submitted as Appendix

N to the March 2, 2010 Addendum to the Determination ofCompliance relies on specific offsets from the District’s internal accounts and quantifies the amount of offsets being provided by each shutdown source. “The amounts of emission offsets are based on actual PM1O and SOx emissions reported to AQMD under AQMD’s Annual Emissions Reporting Program. In addition, for each source of credit, the equipment has bean shutdown and the permits have been inactivated by AQMD.” Appendix N, p. 7. Further, “[t]hese offsets are all [the] result of emission reductions from permitted equipment that permanently ceased operation in AQMD and the AQMD has not issued any ERCs to the companies who operated the equipment as

a result ofthe reductions. These PM1O and SOx offsets have beenremoved from the AQMD’s internal offset accounts and have not been used by any other source permitted by AQMD.” Appendix N, pp. 6-7.

A point that will be relevant in the discussion below is that these credits are not subject to the same legal requirements as emission reduction credits purchased and sold in the open markets.’

The District initially filed with the Conimission a list of offsets to be provided underAB 1318 on March 2, 2010. Appendix

N to the Addendum, Tables

A

& B. On May 12, 20 10, it filed a revised list that replaced the initial list. The primary difference between Tables

A and

B in the March 2nd version and the May 12th revised Addendum is that the revised list makes more conservative assumptions about the offsets associated with the emission reductions from equipment which have ceased operation. In particular, in the May 12th Revised Addendum the District used the average ofthe emissions from the last

two years of operation ofthe equipment, rather than the highest two out ofthe last five yóars of operation used in the March 2nd Addendum, to calculate offsets. Because this

more conservative assumption used in the May 12th Revised Addendum resulted in

a smaller amount of emission offsets from the shutdown sources, it was necessary to include additional offsets in the AB 1318 Tracking System to ensure there would be• adequate offsets available to meet CPV Sentinel’s offset needs.

C. The Proposed CPV Sentinel SIP Revision

In order to implement AB 1318, the District has proposed a SIP revision for the CPV Sentinel offset. The purpose ofthe SIP revision is to “provide a mechanism for the transfer of credits to CPV Sentinel, and [to] establish the AB 1318 tracking system used
4

to account for such credits.” (SIP Revision, Attachment A; Preamble, p. 1.) The text of

the SIP revision includes the following: “Notwithstanding District Rule 1303, this SIPrevision provides a federally-enforceable mechanism for transferring offsets from the

AQMD’s internal accounts to the CPV Sentinel Project.” The importance ofthe

language “notwithstanding District Rule 1303” is two-fold.

First, this language makes clear that the transfer ofoffsets may occur in spite oflanguage

in Rule 1303(bX2)(A) which says “Unless exempt from offsets requirements pursuant to

Rule 1303, emission increases shall be offset by either Emission Reduction Credits

approved pursuant to Rule 1309, or by allocations from the Priority Reserve in

accordance with the provisions ofRule 1309.1....” The CPV Sentinel project is notexempt from offsets, it is not providing private market ERCs for PM or SOx, and is not

eligible for Priority Reserve allocations under the version of Rule 1309.1 currently ineffect (i.e., without the latest power plant amendments). Nevertheless, and

“notwithstanding” Rule 1303, the AQMD is directed by AB 1318 to provide offsets from

its internal accounts for the Sentinel project’s SOx and PM requirements. The text ofthe

SIP revision further provides that the AQMD Executive Officer “shall transfer sulfuroxides and particulate emission credits from the CPV Sentinel AB 1318 Tracking

System, attached. . .[to] the CPV Sentinel Power Plant. . .in the full amounts needed to

issue permits to construct and to meet requirements for sulfur oxides and particulate

matter emissions” (SIP Revision, Attachment

A hereto, pp. 2_3.)2

• Second, Rule 1303 requiresthat emiSsion offsets be obtained before a Permit to Construct

is issued. (District Rule 1303(b) (2)(A).) However, under federal law, offsets must be

obtained only before the beginning of operation. Section 173(a)(l.)(A) provides that the

permitting agency must assure that “by the time the source is to commence operation,

sufficient offsetting emission reductions have been obtained....”. 42 U.S.C.

7503(a)(I )(A). Therefore, the reference to “Notwithstanding Rule 1303” in the SIP

Revision allows CPV Sentinel to obtain offsets prior to the commencement of operation,

rather than prior to issuance ofthe permit to construct.

The SIP revision for the CPV Sentinel offsets is scheduled to be heard before the

District’s Governing Board on July 9. Once approved by the District Governing Board,

the SIP revision will be forwarded through the California Air Resources Board (CARB)

to EPA. The CARB Executive Officer is delegated the ability to forward this SIP

revision to EPA for its approval.. Health

& Safety Code § 39516.

D. This Commission’s Decision Relative to Offsets
3,

commission may not find that the proposed facility conforms with applicable air quality standards pursuant to paragraph (1) unless the applicable air pollution control district or air quality management district certifies, prior to the licensing ofthe project by the commission, that complete emissions offsets for the proposed facility have been• identified and will be obtained by the time required by the district’s rules....” Pub. Res. Code § 25523(d)(2). However, as discussed above, the District rule relative to the timing of offset requirements is not applicable to this project for PM1O and SOx offsets. Instead, the project is governed by the federal requirement that offsets be obtained prior to operation. Section 25523(d)(2) further provides: “The commission shall require as a condition of certification that the applicant obtain any required emission offsets within the time required by the.applicable district rules, consistent with any applicable federal and state laws and regulations, and prior to the commencement ofthe operation ofthe proposed facility.” The PM1O and SOx offsets at. issue here haye all been identified in the AB 1318 Tracking System filed with this Commission. Therefore, this Commission

may certi1’ the proposed project on the condition that the project must actually obtain the offsets prior to commencement of operation.

II. ARGUMENT

A. Summary of Argument

Mr. Harris argues that the District’s Final Determination ofCompliance (FDOC) was “invalid” because the offsets proposed to be provided to the CPV Sentinel project are not yet federally enforceable. The District’s response is two-fold; first, the offsets are indeed already federally enforceable, as the permit system which ensures their enforceability has been SIP approved and nothing about AB 1318 altered that fact. Second, to the extent Mr. Harris is suggesting the FDOC is not valid until an amendment incorporating the AB 1318 Tracking System into the SIP is adopted by EPA, ifthat is even necessary, EPA guidance makes plain that a permit to construct may be issued prior to the offsets being madefederally enforceable where: 1) the offsets have been identified and quantified; 2) they have been adopted as a matter ofstate law; and 3) they have been submitted to EPA for adoption into the SIP and the administrative process to approve the measure will be completed by the time the source seeks to commence operation. In such cases, the construction permit needs to include

a federally-enforceable condition that expressly prohibits the commencement of actual operations until EPA has approved the SIP

measure.

Ms. May contends that the offsets provided to CPV Sentinel need to be adjusted to reflect today’s BACT. However, there is no federal requirement for offsets to be discounted to 
since this issue has been raised, the District will perform the appropriate surplus

adjustment prior to the evidentiary hearing in this matter.

B. The Offsets to be Provided to CPV Sentinel Are Currently Federally

Enforceable -

Mr. Harris takes the position that the offsets to be transferred to CPV Sentinel are not

federally enforceable because the EPA-approved SIP does not include any provision to

authàrize the use of internal offset accounts for the CPV Sentinel project. (Harris Decl.,

page 3; page 10.) He is wrong. His legal argument completely misses the important

distinction between federal enforceability of offsets and the ability to transfer such

federally-enforceable offsets. As discussed below, the offsets were federally enforceable

both before and since enactment of AB 1318. The absence of

a SIP-approved mechanism

to transfer the offsets to CPV Sentinel -- assuming one is necessary at all --says nothing

about the enforceability ofthose credits. These are two distinct issues.

As stated in the Addendum to the Determination ofCompliance (March 2,2010) for the

CPV Sentinel project, (Appendix N, p.7), “The amounts of emission offsets are based on

actual PM 10 and SOx emissions reported to AQMD under AQMD’s Annual EmissionsReporting Program. In addition, for each source of credit, the equipment has been shut

down and the permits have been inactivated by AQMD.” Because the permits are

inactivated, no one can operate the equipment. District Rules 201 and 203 prevent the

construction or operation of equipment without

a permit from the District. These rules

have been approved into the SIP, 64 Fed. Reg. 25828 (July 12, 1999).

The SIP-approved version ofRule 201 provides in pertinent part “A person shall not

build, erect; install, alter or replace any equipment, the use of which may cause the

issuance of air contaminants or the use of which may eliminate, reduce or control the

issuance of air contaminants without first obtaining written authorization for such

construction from the Executive Officer.” (See Attachment

B hereto, taken from EPA’s

website listing of SIP rules.) The SIP-approved version ofRule 203 provides in pertinent

part: “A person shall not operate or use any equipment, the use ofwhich may cause the

issuance of air contaminants, or the use of which may reduce or control the issuance ofair contaminants, without first obtaining

a written permit to operate from the Executive

Officer....” (See Attachment

C hereto, from EPA’s website listing of SIP rules.) 3

Violation ofthese rules bring with them severe penalties.

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nt here for equipment that already has a permit to
These rules assure that the equipment from which the offsets are generated cannot be operated without

a permit, and the permits for all the listed equipment have been inactivated. Therefore, there is a federally-enforceable (i.e., SIP-approved) rule assuring that the shutdowns remain in effect. Accordingly, the offsets to be provided to CPV Sentinel are already federally enforceable.

The situation in the present case is therefore very different from the situation cited in Mr. Harris’ argument. The Baumán Memo, October 11, 1985, cited by Mr. Harris, deals with the situation where “neither the operating permit program nor the specific operating permits, or conditions to the permits in question, have been approved by EPA as part of the applicable SIPs.” (Bauman Memo, p. 1, Attachment

D hereto.) In the present case, the permit program has been approved by EPA into the SIP; the permit program guarantees enforceability, and hence the offsets are federally enforceable. Mr. Harris further argues, based on the Bauman Memo, that “the federally-enforceable requirement is not met where enforceability ofreduction credits depends on use ofstate banking regulations that are not part ofthe currently-approved SIP.” (Harris Deci., p. 10.) However, in the present case, the federal enforceability ofthe offsets does NOT depend on any unapproved banking regulation. Instead, enforceability is already ensured by Rules 201 and 203.

C. EPA Allows Issuance ofNew Source Review Permits Before EPA Approval of the SIP Amendment Associated with Transfer ofthe Offsets to CPV Sentinel

As discussed above, the offsets are already federally enforceable. Moreover, even ifthey were not, EPA has made it clear that offsets need not be made federally enforceable prior to operation. As

a preliminary matter, however, Mr. Harris’ mistaken assertion regarding federal enforceability is really not about federal enforceability at all. Rather, he attempts to use the fact that currently there is not

a provision in the SIP allowing the offsets to be transferred to CPV Sentinel as somehow defining enforceability. However, this issue is distinct from whether the credits are federally enforceable. Moreover, as noted above, the District is submitting

a SIP revision to EPA, which will be heard by the District’s Governing Board on July 9, 2010, which directly addresses this issue—by providing a federally-approvable mechanism for transferring the offsets. Thus, to the extent

a SIP amendment is needed, it is underway and the Commission can condition the license for the Sentinel project on EPA approval ofthe amendment.

Mr. Harris would appear to disagree with this proposition, but even beyond the above distinction, his legal arguments with respect to enforceability miss the mark. He relies on

an EPA memorandum signed by John Seitz (June 14, 1994)(Seitz Memo; Attachment

E 
In such cases, “a construction permit may be issued on the basis of

a federallyenforceable commitment that the source may not commence operation until the offsets

are made federally-enforceable by EPA approval ofthe SIP measure.” (Seitz Memo, pp.5-6)(emphasis added).

Furthermore, the Seitz Memo states: “The EPA recognizes that there may be

circumstances other than SIP measures awaiting EPA approval where sufficient

creditable offsets have been identified and certain administrative obstacles remain to

making the offsets federally enforceable. The EPA believes that it may be appropriate,

on a case-by-case basis, to extend similar treatment to these sources, allowing them toobtain a construction permit that contains an explicit condition prohibiting operations

until the offsets are made federally enforceable.” (Seitz Memo, p. 6.)

Mr. Harris ignores these portions ofthe Seitz Memo, both of which make clear that to theextent

a SIP amendment is required, the Commission has authority to issue

a license to

CPV Sentinel even before the AB 1318 Tracking System used to account for the emissionoffsets has been adopted into the SIP. In this case that would mean imposing

a condition

requiring EPA adoption ofthe AB 1318 Tracking System before the Sentinel Project

commences operation. District Rule 204 allows such conditions to be imposed on

permits to constructto ensure compliance with applicable requirements. Such conditions

are federally-enforceable because Rule 204 is approved in the SIP. 64 Fed. Reg. 25828.

The CPV Sentinel project could therefore be subject to

a condition prohibiting operation

until all of its offsets are federaJly enforceable and obtained by CPV Sentinel.Accordingly, Mr. Harris’ legal arguments are notwell taken and should be rejected to the

extent his testimony is considered at all.

• D. There is No Requirement That the Offsets Be Reduced to Levels Equivalent to

Current “Best Available Control Technology”

CBE has presented the testimony ofJulia May, which devotes a substantial amount of

effort to arguing the offsets to be provided to CPV Sentinel have not been reduced tolevels equivalent to current “BACT. As with the testimony ofMr. Harris, this is legal

argument that is not the proper subject of “expert” testimony and should not beconsidered as testimony. in any event, the argument is not well taken because there is no

requirement for such

a discount.

There is a requirement for

a “BACT discount” when the District issues tradable ERCs to

private individuals for reductions at their facility, but this requirement is not required by
3

federal law and does not apply to offsets from the District’s internal accounts of the sort

at issue here.Thus, the District Rule that requires that when “ERCs” are issued to a private partyapplicant, the applicant must establish that the reductions are “not greater than theequipment would have achieved if operating with current ‘Best Available Control

Technology (BACT).” District Rule 13 09(b)(4)(E)) simply does not apply here.

Similarly, the reference in Rule 1306(c) to “BACT adjusted annual emissions” is not

applicable. This point was made clear by the U.S. District Court in litigation brought by

CBE and others. “[I]n calculating the amount of offsets to be issued, emission reductionsfor ERCs are discounted to BACT levels, while emission reductions for internal offsets

are not discounted to BACT levels.” Natural Resources Defense Council et al. v. South

Coast Air Quality Management District, et at., 2010 U.S. Dist. LEXIS 35865, page 13

(Attachment F hereto).

There is, however, a federal requirement that offsets be “surplus.” 40 C.F.R.

§ 51.1 65(a)(3)(11XC)( 1 )(i). EPA interprets this requirement to mean that the offsets must

be “surplusat the time of use,” and generally has required that offsets be shown to be“surplus” at the time they are issued to the permit holder. The District had been planningto discount the offsetsto be provided to CPV Sentinel, if necessary to assure they remainsurplus, prior to issuing the District’s Title V permit to Sentinel. However, since the

issue has been raised here, the District now plans to adjust the offsets to assure that they

remain surplus on or before the date ofthe District Governing Boaid adoption ofthe SIP

revision for CPV Sentinel (July 9, 2010). The District will adjust each offset to reflectany control requirements that have become applicable for that source category since the

time ofshutdown. This requires a review of rules that would have become applicable tothat source had it stayed in operation. (In contrast, the requirement for BACT applies tonew sources, not existing sources. Health & Safety Code § 40440(b)( 1).) The. Districtstaff has taken a preliminary look at the discounts that would be required, and isconfident that the discounts will not result in reducing total available offsets below theamounts required by CPV Sentinel.

E. There is No Legal Basis for Discarding Offsets Generated From the Lawful

Operations of a Source That at Times Exceeded Its Permitted Levels

Ms. May focuses on the emission credits associated with one facility, KMC Wheel Co.,

which allegedly operated at above its permitted levels for 200 1-2002 before shutting

• down. (May Deel., para. 41.) Based on this assertion, Ms. May asserts: “Rather than

allowing KMC Wheel’s permitted emissions to retire to compensate for its large
required by law. In this case, the shutdown of KMC Wheel was not required by law. The

District proposes to issue offsets for only that amount of reductions that were lawful and

authorized by the permit. Reductions that exceeded the permit limits would not be“surplus,” because their elimination is required by law, and as a result the District has not

proposed to issue offsets for such portion ofreductions. To the extent Ms. May arguesotherwise, she misunderstands the District’s analysis. Simply put, the District conducted

its analysis in a professional and responsible manner consistent with its state and federal

obligations. 6.

III. CONCLUSION

The Commission should exclude Mr. Harris’ testimony and those portions of Ms. May’s

testimony containing improper legal opinion. Even ifthe Commission considers the

improper legal opinions contained therein, the Commission should find that AB 1318

properly authorizes the transfer of emission credits to the CPV Sentinel project and those

credits meet the Commission’s legal requirements for certification ofthe project.

June 30, 2010 Respectfully submitted,

Kurt R. Wiese, General Counsel

Barbara Baird, District Counsel

Lauren Nevitt, Deputy District Counsel

South Coast Air Quality Management District

6 in her declaration, Ms. May also attempts to cast doubt on the offsets as a whole by claiming that “there

are many instances where District staff had to estimate or guess about missing information...” (May

D

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10) yet she does not provide examples of alleged “guesses

” and where she does she supports