1150690.4 Jane E. Luckhard t jluckhardt@downeybrand.com 916/520-5348 Direct 916/520-5748 Fax 621 Capitol Mall, 18 th Floor Sacramento, CA 95814 916/444-1000 Main 916/444-2100 Fax downeybrand.com

April 12, 2011

Shirley Rivera (AIR-3) U.S. EPA Region 9
75 Hawthorne Street San Francisco, CA 94105-3901 Phone: (415) 972-3966

Re: Avenal Power Center, LLC Comments on Supplement al Statement of Basis Relating to a Prevention of Significant Deterioration Permit fo r the Emission of Air Pollutants

Dear Ms. Rivera:

Avenal Power Center, LLC (Avenal) hereby presents i ts comments on the U.S. Environmental Protection Agency’s (EPA) March 2011 Supplemental S tatement of Basis. EPA drafted this Supplemental Statement of Basis in support of issui ng a Prevention of Significant Deterioration (PSD) Permit for the Avenal Energy Project (Project ).

In the public notice accompanying the Supplemental Statement of Basis, EPA requested comment on only three issues. In light of this fac t, Avenal has organized its comments to address the three issues identified by EPA: (1) EPA ’s proposal to approve Avenal’s PSD Permit application for the Project without requiring a dem onstration that this source will not cause or
contribute to a violation of the new 1-hour Nationa l Ambient Air Quality Standard (NAAQS) for

NO 2 (the “hourly NO 2 standard”); (2) EPA’s proposal not to require this source to meet emissions limitations for greenhouse gases (GHGs) o r to demonstrate that the proposed source
will not cause or contribute to a violation of the NAAQS for hourly concentrations of sulfur dioxide (“hourly SO 2 standard”); and (3) EPA’s environmental justice an alysis for its proposed PSD Permit action for the Project.

I. Comments regarding EPA’s proposal to approve Avenal ’s PSD Permit application for the Project without requiring a demonstration t hat this source will not cause or contribute to a violation of the hourly NO 2 standard.

As acknowledged by EPA in the Supplemental Statemen t of Basis, the implementation of the hourly NO 2 standard has caused unforeseen delay in issuing th e PSD Permit. Given the timeline of the Project’s PSD permitting process, EPA proper ly concludes that the PSD Permit application should be grandfathered from demonstrat ing compliance with the hourly NO 2 standard. Nevertheless, EPA’s record in this proce eding already indicates that the Project will
not cause or contribute to a violation of the hourl y NO 2 standard.Shirley Rivera (AIR-3) April 12, 2011 Page 2

1150690.4 A. EPA Clearly Has Authority to Issue Avenal’s PSD Per mit Without Considering

the Hourly NO 2 Standard.

As EPA’s record shows, Avenal first approached Regi on 9 permitting officials in 2007 to discuss the substantive and procedural requirements for obt aining a PSD Permit for the Project. It submitted an Application for Certification of the P roject to the California Energy Commission (“Energy Commission”) on February 13, 2008, and the n submitted its formal PSD Permit application to EPA on February 15, 2008.

Under 40 C.F.R. § 124.3, EPA is required to review such a permit application and then, within 30 days of receiving it, notify the permit applican t whether the application is complete. “If the application is incomplete, the Regional Administrat or shall list the information necessary to make the application complete.” (40 C.F.R. § 124.3 [c].) Importantly, EPA cannot process a PSD permit application “until the applicant has ful ly complied with the application requirements for that permit.” (40 C.F.R. § 124.3[a][2].)

In accordance with the requirements of the Clean Ai r Act (CAA) and EPA's implementing regulations, EPA formally notified Avenal that its PSD Permit application was complete as of March 19, 2008 . This “completeness determination” is important b ecause, under Section 165(c) of the CAA, “Any completed permit application under [the PSD program] . . . shall be granted or denied not later than one year after the date of filing of such completed application.” (See 42 U.S.C. § 7475[c].) Thus, EPA had a legal obligatio n to make a final decision on Avenal's PSD Permit by March 19, 2009.

Avenal does not believe that EPA has authority to r equire a permit applicant to retroactively meet new requirements that become effective after t he applicant has submitted a complete and valid application. Otherwise, section 165(c) would essentially become a nullity. Moreover, the Supreme Court has clearly stated that “‘Retroactivi ty is not favored in the law,’ and . . . that ‘congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result.’ ” ( Landgraf v. USI Film Prods ., 511 U.S. 244, 264 [1994].) Nothing in the CAA or in any EPA regu lations allows the retroactive application of new requirements after a complete permit applicatio n has been submitted. In fact, EPA's regulations clarify that, once the completeness det ermination has been made, “the Regional Administrator [or delegated authority] may request additional information from an applicant but only when necessary to clarify, modify, or suppleme nt previously submitted material. Requests for such information will not render an application incomplete .” (40 C.F.R. § 124.3[c] [emphasis added].)

If EPA had complied with its obligation under Secti on 165(c), there would be no question regarding the relevance of the hourly NO 2 standard. EPA was required to make a final decisi on on Avenal's PSD Permit by March 19, 2009, and EPA d id not even propose the hourly NO 2 standard until June 2009. This standard was not fi nalized until February 9, 2010 – almost a yearShirley Rivera (AIR-3) April 12, 2011 Page 3

1150690.4 after the statutory deadline for issuing the PSD Pe rmit – and did not become effective until April 9, 2010.

Requiring a permit applicant to meet a new permitti ng requirement that was adopted after the submittal of a complete permit application is incon sistent with Section 165(c) and potentially creates a permitting process that could continue in perpetuity without resolution. Congress included Section 165(c) as part of the 1977 Amendme nts to the CAA to address its concern that the PSD program could fall prey to unreasonable bur eaucratic delays. (See S. Rep. No. 94-717, at 23 [1976].) The purpose of this section is spec ifically discussed in the Senate Committee on Public Works Report regarding the 1977 Amendments, which states:

Inherent in any review-and-permit process is the op portunity for delay. The Committee does not intend that the permit process t o prevent significant
deterioration should become a vehicle for inaction and delay. To the contrary, the States and Federal agencies must do all that is fea sible to move quickly and responsibly on permit applications and those studie s necessary to judge the impact of an application. Nothing could be more detrimental to the intent of this section and the integrity of this Act than to have the proc ess encumbered by bureaucratic delay.

( Id . [emphasis added].) The plain language of Section 165(c) confirms Congress's expressed intent that PSD permitting procedures should not delay construction projects. If Congress had intended to allow EPA to apply new requirements ret roactively, then it would not have explicitly set an end date for EPA's permitting decisions —one year after the receipt of a complete application. (See 42 U.S.C. § 7475[c].)

The federal courts have also made it clear that new permitting requirements should not be applied retroactively. “Those regulated by an admi nistrative agency are entitled to know the rules by which the game will be played.” ( Alaska Prof'l Hunters Ass'n, Inc. v. FAA , 177 F.3d 1030, 1035 [D.C. Cir. 1999].) “[O]ngoing proceedin gs should not be interrupted when proposed regulations become final. A contrary rule would cr eate havoc in EPA's permit development procedures.” (

Alabama v. EPA , 557 F.2d. 1101, 1110 [5th Cir. 1977].)

Even if EPA is not prohibited from applying new req uirements to pending permit applications, it clearly has authority to "grandfather" pending appl ications and thus exempt them from new requirements. In other words, EPA can clearly do w hat it has proposed to do in this case and issue a valid permit without requiring Avenal to de monstrate that it will meet the new hourly

NO 2 standard or any other permitting requirements that came into effect after Avenal submitted its permit application.

This is clear from a number of EPA actions, as summ arized in the Memorandum from Stephen D. Page, EPA Office of Air Quality Planning and Sta ndards, Applicability of the Federal Prevention of Significant Deterioration Permit Requ irements to New and Revised NationalShirley Rivera (AIR-3) April 12, 2011 Page 4

1150690.4 Ambient Air Quality Standards (Apr. 1, 2010) (“Page Memo”). The Page Memo makes it clear that EPA may exercise its discretion on this matter and that it has routinely decided not to require pending permit applications to meet new permitting requirements:

EPA has previously allowed proposed new major sourc es and major modifications that have submitted a complete PSD pe rmit application before the effective date of new requirements under the PSD re gulations, but have not yet received a final and effective PSD permit, to conti nue relying on information already in the application rather than immediately having to amend applications to demonstrate compliance with the new PSD requirement s.

(Page Memo at 3.) The Page Memo then cites example s of instances where EPA has actually issued regulations to clarify that pending permit a pplications were not covered by new PSD requirements. ( Id . [citing 40 C.F.R. § 52.21[i][1][x] and 40 C.F.R. § 52.21[i][9]-[10]. 1 ) Thus, it is clear that EPA can move forward as it has propos ed and issue a final PSD Permit to Avenal without considering the hourly NO 2 standard.

B. The San Joaquin Valley Air Pollution Control Distri ct Has Modeled the Project’s Emissions Relative to the New Federal Hourly NO 2 Standard.

Although EPA has decided to grandfather the Project from the new hourly NO 2 standard, Avenal notes the San Joaquin Valley Air Pollution Control District (District) has evaluated the Project’s emissions in light of this new federal standard in connection with its issuance of a revised Final Determination of Compliance (FDOC) for the Project. (See San Joaquin Valley Air Pollution Control District, Final Determination of Compliance C-1100751 [“Revised FDOC”] at Attachment G.) This Revised FDOC is included as At tachment 1 to these comments. Avenal understands EPA may provide future guidance on how projects must show compliance with the new hourly NO 2 standard that may be different than the analysis c onducted by the District. EPA recognized at page 27 of the Supplemental Statement of Basis the District’s application of the District’s guidance and modeling of the Project to address the new hourly NO 2 standard. Avenal
further notes the District evaluated the same maxim um hourly NO 2 emissions that were in the application for the PSD Permit, and found the maxim um hourly NO 2 emissions will comply with the new hourly NO 2 standard. (Supplemental Statement of Basis at 27. ) Therefore, even when operating as contemplated in the PSD Permit applica tion, the District’s analysis shows the Project’s emissions will not cause or contribute si gnificantly to a violation of the State and

1 According to the Page Memo, EPA now believes that it must go through notice-and-comment in order to a dopt a “grandfathering provision” that exempts pending per mit applications from new requirements. (See Page Memo at 3.) As far as Avenal has been able to determine, t his assertion—that new requirements automatically a pply to pending permit applications unless EPA goes through a notice-and-comment process to adopt a grandfathe ring provision—is made for the first time in the Page Me mo. However, the issue is not relevant in this cas e because EPA is providing notice-and-comment on this question fo r Avenal. Thus, even if EPA must go through notice -andcomment to provide for "grandfathering," this requi rement is satisfied in this case.Shirley Rivera (AIR-3) April 12, 2011 Page 5

1150690.4 National Ambient Air Quality Standards, including t he new 1-hour average NO 2 standard. (Revised FDOC, Attachment G at 2-3.)

The District’s analysis was conducted in response t o a request for revisions to the existing
FDOC. The revisions to the FDOC would limit the Pr oject’s emissions to below the major source thresholds but would not limit or change the 1 hour emissions/short term limits for the Project from what had been previously approved or e valuated. However, as mentioned above the District’s analysis is the same regardless of wheth er the Project is built and operated as a major or minor source. The analysis is based on maximum hourly emissions, and the maximum hourly emissions rate would remain the same regardless of whether the Project is operated as a major or minor source. (Revised FDOC, Attachment G at 2 and Attachment J at 4-5.)

Although EPA has not yet completed its attainment r eview for the hourly NO 2 standard, the
available information does not indicate that the Sa n Joaquin Valley Air Basin is likely to violate the new standard. The data indicate that backgroun d levels at the monitors closest to the facility “are on par with measured levels of NO 2 statewide, and that background levels of 1-hour NO 2 in the general area surrounding the facility are not d isproportionately high as compared with communities elsewhere in the State.” (Supplemental Statement of Basis at 26-27.) Furthermore, EPA notes that the Project’s impacts will be well b elow (in all cases, less than 6% of) the applicable NAAQS for the PSD pollutants regulated u nder the PSD Permit, including the annual

NO 2 standard. (Supplemental Statement of Basis at 26. ) The District’s modeled NO 2 impact for the annual averaging period is less than 1% of the NAAQS of 100 μg/m 3

.

Avenal is concerned that some commenters may use a calculation method specified under the California hourly NO 2 standard and compare the results of that calculatio n to the federal hourly

NO 2 standard. As EPA is well aware, the statistical f orm of the federal hourly average NO 2 standard is substantially different from the form o f the California hourly average NO 2 standard. As a result, comparisons to the new federal hourly standard that are based on analyses of the California hourly standard are inapt and should not be considered.

II. Comments regarding EPA’s proposal not to require th e Project to meet emissions limitations for greenhouse gases or to demonstrate that the proposed source will not cause or contribute to a violation of the NAAQS for hourly concentrations of sulfur
dioxide.

A. EPA Clearly Has Authority to Issue Avenal’s PSD Per mit Without Considering Either the Hourly SO 2 Standard or EPA’s New Greenhouse Gas Requirements.

As discussed above (in Section I.A), Avenal does no t believe that EPA has authority to require a permit applicant to meet new requirements that are not adopted until after the applicant has submitted a complete and valid application. It wou ld be fundamentally contrary to Section 165(c) for EPA to impose new permitting requirement s to pending applications that have been found to be complete. Avenal believes that would a lso be contrary to numerous court cases,Shirley Rivera (AIR-3) April 12, 2011 Page 6

1150690.4 including cases from the Supreme Court, which has m ade it clear that “‘Retroactivity is not favored in the law,’ and...that ‘congressional enactm ents and administrative rules will not be
construed to have retroactive effect unless their l anguage requires this result.’” ( Landgraf v. USI
Film Prods ., 511 U.S. 244, 264 [1994].)

Again, if EPA had complied with its obligation unde r Section 165(c), there would be no question regarding the relevance of the hourly SO 2 standard or EPA's new permitting requirements for GHGs. Under Section 165(c), EPA was required to ma ke a final decision on Avenal's permit by March 19, 2009, and EPA did not even propose the ho urly SO 2 standard or the new GHG permitting requirements until well after this date.

Even if EPA is not prohibited from applying its new SO 2 and GHG requirements to Avenal, the Agency clearly has authority to “grandfather” the A venal application and thus exempt Avenal from these requirements. In other words, EPA can c learly do what it has proposed to do in this case and issue a valid permit without requiring a p ermit limit on GHG emissions and without requiring Avenal to demonstrate that it will meet t he new hourly SO 2 standard.

As discussed above, EPA may exercise its discretion on how to apply new requirements to pending permits and has often decided not to require pending permit applications to meet new permitting requirements. EPA has raised the questi on of whether it must go through a noticeand-comment proceeding in order to “grandfather” pe nding permit applications from new requirements. In this case, EPA has issued a publi c notice proposing to exempt Avenal from its

new NO 2 , SO 2 , and GHG permitting requirements and has explained the reasoning for this exemption. Because this notice addressed the Avena l situation specifically, it may or may not apply to other pending permit applications. There can be no question, however, that EPA has gone through any notice-and-comment process that ma y be necessary to exempt Avenal from the new permitting requirements related to NO 2 , SO 2 , and GHGs. Thus, it is clear that EPA can move forward as it has proposed and issue a final P SD Permit to Avenal without considering the hourly NO 2 standard, the hourly SO 2 standard, and the new permitting requirements for GHGs.

B. The Project Complies With the New Hourly SO 2 Standard.

Because of the low SO 2 emissions from the Project, the Supplemental State ment of Basis correctly concludes that EPA regulations do not req uire additional analysis to demonstrate that
this source will not cause a violation of the hourl y SO 2 standard. (Supplemental Statement of Basis at 9.) Regardless of whether the Project ope rates as a major or minor source, its SO 2 emissions will be well below the 40 tons per year s ignificant emissions rate for SO 2. (See 40 C.F.R. § 52.21[b][23][i]; see also Final Energy Com mission Decision for the Avenal Energy Project [December 2009] [“Final Decision”; included below as Attachment 2] at 126 [Air Quality Table 6].) Therefore, additional SO 2 analysis is not required for the Project. (See 40 C.F.R. §§ 52.21[m][1] and 52.21[b][23][i].)Shirley Rivera (AIR-3) April 12, 2011 Page 7

1150690.4 C. The California Energy Commission Evaluated the Proj ect’s GHG Emissions.

Although EPA has decided to grandfather the Project from PSD review of the Project’s GHG emissions, Avenal notes the Energy Commission has s tudied and adopted a policy on how GHG
emissions should be addressed under the California Environmental Quality Act (Cal. Publ. Res. Code §§ 21000 et. seq. [CEQA]) in its power plant s iting process. Although not a best available control technology analysis, Avenal believes it is important to acknowledge and include the extensive GHG analysis conducted by the Energy Comm ission for this Project. The Energy Commission instituted an entire informational proce eding on this issue. (See Energy Commission Docket # 08-GHG OII-01.) This informati onal proceeding culminated in an independent consultant report, commissioned by Ener gy Commission staff and prepared by MRW and Associates. (See MRW and Associates, Frame work for Evaluating Greenhouse Gas Implications of Natural Gas-Fired Power Plants in C alifornia [May 2009] [the “MRW Report”] [included below as Attachment 3].)

The MRW Report concludes that “when assessing the i mpacts of an additional resource seeking to supply power to the integrated system, that reso urce must be considered in the context of the system as a whole.” (MRW Report at 33.) The MRW R eport demonstrates that new, efficient natural gas generation designed to meet specified s ystem needs, such as the Project, will cause a net reduction in GHG emissions systemwide. (See id. at 98-99.) Therefore, new natural gasfired generation is required in the near term to fa cilitate the integration of renewable generation facilities. (See id .) Avenal also notes California is very close to a dopting the most aggressive renewable portfolio standard in the country. (S.B. X1-2 [2011].)

In processing the Project’s Application for Certifi cation, the Energy Commission evaluated the Project’s GHG impacts in light of the MRW Report’s conclusions. (Final Decision at 103-111.) The Final Decision found the Project will displace older less-efficient power plants in the dispatch order and thereby reduce overall GHG emiss ions from California’s electrical system. (Final Decision at 112-113.) Due to this finding, the Final Decision found “The Avenal Energy Project’s operational GHG emissions will not cause a significant adverse environmental impact.” (Final Decision at 113.)

The circumstances in this case strongly support EPA ’s decision not to subject the Project’s GHG
emissions to PSD review. EPA did not finalize the Tailoring Rule until well after the Energy Commission issued its Final Decision for the Projec t, and after the PSD Permit application was determined complete by EPA. (See 75 F.R. 31514 [Ju ne 3, 2010].) Under the Tailoring Rule, PSD permits issued after January 2, 2011 for new ma jor sources with GHG emissions over 75,000 tpy must address GHG emissions. Given that the PSD Permit application was deemed complete over two years prior to the publication of the final Tailoring Rule, both Avenal and EPA expected the PSD Permit would be issued well be fore the effective date of GHG regulation under the PSD program. (Supplemental Statement of Basis at 8.)Shirley Rivera (AIR-3) April 12, 2011 Page 8

1150690.4 III. Comments on EPA’s environmental justice analysis fo r its proposed PSD permit action for the Project.

Avenal generally supports the environmental justice analysis in the Supplemental Statement of Basis. It is clear that sufficient analysis has al ready been done to demonstrate that the Project will not create any disproportionately high and adv erse human health or environmental effects on

any population, including minority and low-income popu lations. Indeed, Avenal has already
introduced this evidence into EPA’s record for this proceeding, including evidence regarding the GHG analysis completed by the Energy Commission. ( See Avenal Power Center LLC, Documents for EPA PSD Permit Record, Docket ID EPA- R09-OAR-2009-0438-0029.1 [October 14, 2009] [see in particular Section A (En vironmental Justice) and Section E (containing Final Staff Assessment pp. 4.1-71 throu gh 4.1-90)].) In addition, the hourly NO 2 analysis performed by the District is included as A ttachment 1 to this comment letter. (See Revised FDOC at Attachment G.) This evidence provi des additional insight into the two areas EPA proposes to grandfather for this Project. Ther efore, there is sufficient evidence in EPA’s record to demonstrate that EPA has complied with Ex ecutive Order 12898.

It is important to recall the location proposed for this Project. The Project will be located in the industrial zoned area of the City of Avenal. The C ity carefully selected this area for industrial development because it is surrounded by agricultura l lands, six miles from the urban center of the City, and separated from the urban area by a lo w range of hills and interstate 5, a major north south highway. Furthermore, the City of Huron is l ocated approximately 8 miles north and Kettleman City is located approximately 10 miles so utheast of the proposed site. ( See Supplemental Statement of Basis at 16.)

Avenal provides the following information to supple ment EPA’s discussion of environmental justice issues with other evidence already in EPA’s record.

A. The Project’s Environmental Justice Analysis Is Alr eady Sufficient.

It is crucial to recall that EPA has concluded the new hourly federal NO 2 standard does not apply to the Project in the first place. However, even i f the new hourly NO 2 standard did apply to the Project, the analysis already conducted by the Dist rict is sufficient to demonstrate that the Project’s short-term NO 2 emissions will not cause any disproportionate envi ronmental impacts to environmental justice communities.

The analysis conducted by the Energy Commission une quivocally demonstrates that the Project will not cause or contribute to air quality levels in excess of any applicable health standard that by rule cannot be less stringent than those require d by the Clean Air Act and administered by EPA. (Final Decision at 122-132.) The District al so concluded that the Project will not cause or contribute significantly to a violation of the stat e and federal ambient air quality standards, including the new federal hourly NO 2 standard. (Revised FDOC at Attachment G, p. 2-3.) Furthermore, the analyses already completed demonst rate that the Project’s emissions of theseShirley Rivera (AIR-3) April 12, 2011 Page 9

1150690.4 pollutants will not cause any disproportionately hi gh and adverse human health or environmental effects on any population, including minority or low-income popul ations. (Supplemental Statement of Basis at 29; Final Decision at 327-332 .) Further, as noted by EPA the hourly SO 2 standard that was promulgated set a significance le vel below which no additional analysis is required since emissions below that standard do not subject any sensitive population and therefore, any minority or disadvantaged population to a significant health risk.

Although barely mentioned in the Supplemental State ment of Basis, the Energy Commission conducted a full environmental justice screening an alysis for the Project. The Energy Commission concluded that the Project as mitigated will not have a disproportionate impact on low-income or minority populations. (See Final Dec ision at 328-334.) This screening analysis was conducted specifically to address environmental justice policies in federal Executive Order 12898, as well as additional California policies. (Final Decision at 329.) This analysis was also included in the Energy Commission Staff Assessment for the Project, which was already introduced into EPA’s record. (See Avenal Energy P roject, Documents for EPA PSD Permit Record, Docket ID EPA-R09-OAR-2009-0438-0029.1 [Oct ober 14, 2009] at Section A, Environmental Justice.)

The Energy Commission’s thorough review of this iss ue should be highly probative. The Energy Commission is the California agency charged with ev aluating all aspects of proposed power plants. The Energy Commission has “the exclusive p ower to certify all sites and related facilities in the state, whether a new site and related facili ty or a change or addition to an existing facility.” (Cal. Pub. Res. Code § 25500.) The is suance of a power plant license by the Energy Commission is “in lieu of any permit, certificate, or similar document required by any state, local or regional agency, or federal agency to the extent permitted by federal law, for such use of the site and related facilities, and shall supersede an y applicable statute, ordinance, or regulation of any state, local, or regional agency, or federal ag ency to the extent permitted by federal law.” ( Id. ) Therefore, the Energy Commission’s analysis and conclusions on this topic are highly relevant to EPA’s review of the PSD Permit.

Avenal also evaluated the Project’s impacts to pote ntial environmental justice populations in its Application for Certification submitted to the Ener gy Commission. This analysis is also included in EPA’s record for this proceeding (see D ocket ID EPA-R09-OAR-2009-0438-0012).

B. EPA Does Not Need Further Analysis to Conclude the Project Will Not Cause Any Adverse Disproportionate Impacts to Environment al Justice Communities.

EPA does not need further analysis to conclude that the Project will not have any adverse disproportionate impacts on environmental justice c ommunities. A recent Environmental Appeals Board (EAB) decision held that “[c]omplianc e with a NAAQS standard that the Agency has already deemed inadequate to protect the public health cannot by itself satisfy a permit issuer’s responsibility to comply with [Executive O rder 12898].” ( In re: Shell Gulf of Mexico, Inc. and Shell Offshore, Inc. , OCS Appeal Nos. 10-1 to 10-4, Slip Op. at 75 [Dec ember 30,Shirley Rivera (AIR-3) April 12, 2011 Page 10

1150690.4 2010] [“ Shell II

”].) However, in this case EPA is not simply relyi ng on compliance with the
annual NO 2 standard to demonstrate compliance with Executive Order 12898.

In Shell II , EPA Region 10 issued two PSD permits. In approvi ng these permits, Region 10 provided only a single paragraph of substantive env ironmental justice analysis. ( Shell II at 76 [fn. 83].) Region 10 relied entirely on compliance with the applicable annual NO 2 standard in concluding the proposed projects would not cause an y disproportionately high and adverse human health or environmental impacts. The new hou rly NO 2 standard had been proposed prior to the issuance of the draft permits in that case. Therefore, the EAB concluded that Region 10 had improperly based its entire environmental justi ce analysis on a standard that was no longer adequate in itself to ensure no impacts to environm ental justice populations. ( Shell II at 81.)

Several key distinctions from the Shell II case demonstrate that EPA can properly issue Avena l’s PSD Permit based on the existing analysis. First a nd foremost, in Shell II , Region 10 relied on nothing more than the annual NO 2 standard for its environmental justice analysis. In this case, there is already extensive environmental justice an alysis in EPA’s record, in addition to the analysis provided in the Supplemental Statement of Basis. (See Avenal Power Center LLC, Documents for EPA PSD Permit Record, Docket ID EPA- R09-OAR-2009-0438-0029.1 [October 14, 2009] at Part A; see also Final Decisi on at 328-332.)

Second, in Shell II , Region 10 did not even address the hourly NO 2 standard, despite the fact that it had already been proposed at the time Region 10 issued the draft permits. In this case, the District has analyzed the Project’s impacts in ligh t of the new hourly NO 2 standard and concluded that the Project’s emissions will not cau se or contribute significantly to a violation of the State and National Ambient Air Quality Standard s, including the new hourly NO 2 standard. Although EPA may provide guidance in the future for a different modeling analysis or protocol, at this time the District’s analysis provides an in dependent assessment of the Project’s impacts on the new hourly NO 2 standard.

Finally, the Supplemental Statement of Basis devote s a great deal of analysis to the hourly NO 2 standard and to the environmental justice implicati ons of the new standard. Therefore, EPA’s record in this proceeding is entirely different fro m the Shell II case, and is more than sufficient to support the issuance of the PSD Permit.

C. Greenhouse Gas and CoPollutant Emissions Have Been Addressed.

GHGs are emitted at specific locations but combine to create a global impact. The global impact is what allows GHGs to be mitigated on a regional ( and in some cases national and even international) level. Nonetheless, where an enviro nmental justice community could be impacted by the emissions from a facility, the regulatory ag encies need to consider the local impacts of GHG emissions to ensure co-pollutants are not dispr oportionately impacting environmental justice communities. It is important to keep in mi nd the Project is fired on natural gas and hasShirley Rivera (AIR-3) April 12, 2011 Page 11

1150690.4 the inherent reduction in GHG emissions based upon fuel choice when compared to power plants
fired with coal.

The Energy Commission has evaluated how to address GHG impacts in its siting process. As discussed above in Section II(C), the Energy Commis sion conducted an informational proceeding on how best to address GHG impacts from the facilities it permits. This proceeding resulted in a report concluding that “when assessin g the impacts of an additional resource seeking to supply power to the integrated system, t hat resource must be considered in the context of the system as a whole.” (MRW Report at 33.) Th erefore, after extensive study, the Energy Commission has determined the GHG impacts of power plants cannot be considered in isolation.

Of course, the co-pollutants generated along with a project’s GHG emissions must be addressed, and in the Project’s case the impacts of co-polluta nts on the public and environmental justice communities has been extensively evaluated by multi ple agencies. Taken together, the Energy Commission, the District, and EPA have demonstrated that the Project will not result in any significant direct, indirect, or cumulative impacts to air quality. (Final Decision at 132; Revised FDOC, Attachment G at 2-3; EPA Statement of Basis a nd Ambient Air Quality Impact Report for a Clean Air Act PSD Permit [Permit No. SJ 08-01 ; June 2009] at 30.)

D. Comments Regarding Potential Ambient NO 2 Monitoring in the Project Vicinity

The Supplemental Statement of Basis seeks comment r egarding the potential placement of an
ambient NO 2 monitor in the Project vicinity. (Supplemental St atement of Basis at 29-30.) Given the Project’s proximity to Interstate 5, Avenal has doubts as to whether such a monitor would prove useful for measuring impacts from the Project

.

The Supplemental Statement of Basis notes that 91% of NO

x emissions in Kings County derive from mobile sources. (Supplemental Statement of Ba sis at 19.) Furthermore, near-roadway concentrations have been measured at approximately 30 to 100% higher than those measured away from major roads. ( Id. ) In this case, Interstate 5 (I-5) is the dominant source of NO

x emissions in the Project vicinity. The Project is located just two miles from I-5. (Final Decision at 1.) I-5 is a north-south four-lane freeway that connects the Central Valley with northern and southern California. The Energy Commission’s Final Decision indicates that traffic volume on I5 in the Project area averages 35,400 vehicles per day, 30 percent of which is truck traffic. (Final Decision at 314.)

Given the substantial NO 2 levels attributable to I-5, it seems unlikely that a monitor installed in the Project vicinity would be helpful to evaluate t he Project’s comparatively small NO 2 impacts.Shirley Rivera (AIR-3) April 12, 2011 Page 12

1150690.4 IV. Conclusion

Avenal thanks EPA for the opportunity to comment on the Supplemental Statement of Basis for the Project’s PSD Permit.

Very truly yours,

DOWNEY BRAND LLP

/S/

Jane E. Luckhardt
Nicholas H. Rabinowitsh

JEL:NHR

Attachments:

1. San Joaquin Valley Air Pollution Control District, Final Determination of Compliance C1100751 (December 17, 2010)

2. California Energy Commission, Final Commission Deci sion for Avenal Energy Project (Application for Certification No. 08-AFC-1) (Decem ber 2009)

3. MRW and Associates, Framework for Evaluating Greenh ouse Gas Implications of Natural Gas-Fired Power Plants in California (May 2 009)