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NORTHWEST ROCKY MOUNTAIN WASHINGTON, DC INTERNATIONAL

426 17TH STREET 5TH FLOOR OAKLAND, CA 94612

T: 510.550.6725 F: 510.550.6749 E: caoffi ce@earthjustice.org W: www.earthjustice.org VIA ELECTRONIC MAIL

April 12, 2011

Ms. Shirley Rivera

U.S. EPA Region 9 (AIR

‐ 3)

75 Hawthorne Street

Sa Francisco, CA 94105

‐ 3901

Re: Supplemental Statement of Basis: PSD Permit Application for Avenal Energy Project

(March 2011)

Dear Ms. Rivera:

These comments are submitted on behalf of the Si erra Club, Center for Biological

Diversity, and Center on Race, Poverty & the Environment. Commenters urge EPA to deny

Avenal Energy Center’s (“Avenal”) Prevention of Significant Deterioration (“PSD”) permit

application and abandon the proposed illegal attempt to waive the plain statutory requirements

of the Clean Air Act (“CAA”). EPA’s Supplemental Statement of Basis seeks to rewr ite the rules

in order to permit the construction of this major new power plant in one of the most polluted,

environmental justice communities in the country. EPA’s proposed action would be in plain

violation of the Clean Air Act, would undermine clear Congressional intent in adopti ng the PSD

program, has no rational factual basis, ignores multiple other flaws with this application, and

would be in violation of multiple procedural requirements.

EPA’s tortured legal position is an attempt to resolve the on

‐ going litigation brought by

Avenal. Rather than resolve the matter, however, EPA’s contortions have made a mes s of this

permitting process. At this point, there appears little possibility that these issues can be

resolved in any meaningful way short of denying the permit outright and allowing Avenal to

re

‐ apply if it so desires.

I. EPA does not have authority to waive statutory requirements.

A. EPA’s prop osal to waive statutory requirements for Avenal would be a plain

violation of the Clean Air Act.

EPA has no statutory authority to waive the requirements of section 165. Sources must

demonstrate that they “will not cause, or contribute to, air pollution in excess of any

. . . nation al

ambient air quality standard,” and that they are “subject to the best available control technology

for each pollutant subject to regulation

. . . .” CAA §§ 165(a)(3) and (4). EPA’s proposedComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 2 of 24

decision for Avenal plainly waives th ese statutory requirements. If the permit issues as EPA

proposes, Avenal will be able to construct its power plant without demonstrating that it will not

cause or contribute to violations of the NO 2 and SO 2 national ambient air quality standards

(“NAAQS”). Avenal will also be relieved of its obligation to demonstrate that it is subject to

best available control technology for the regulated pollutant CO 2

. EPA, however, can point to

nothing in the statute that empowers the Agency to waive these statutory requirements.

The plain language of section 165 defines the applicability of these requirements based

on when construction commences, not when the permit application is deemed complete. See

CAA § 165(a) (prohibiting the constructi on of major emitting facilities that do not comply with

the applicable permitting requirements where “construction is commenced after the date of the

enactment of this part

. . . .”). Indeed, when Congress adopted the PSD program, it understood

that certain sources might get caught by changing permit requirements and it offered specific

“grandfath ering” relief only to those sources on which “construction had commenced” before

the enactment of the 1977 Clean Air Act Amendments. See CAA § 168(b). There is no authority

for EPA to require compliance only with requirements that applied at the time the permit

application was deemed complete or on the on e

‐ year anniversary of that completion

determination. Where, as here, Congress has provided an express grandfathering exemptions

and not others, EPA is not free to invent new authority to waive otherwise applicable statutory

requirements. See Andrus v. Glover Constr. Co.

, 446 U.S. 608, 616

‐ 17 (1980) (“Where Congress

expli citly enumerates certain exceptions to a general prohibition, additional exceptions are not

to be implied, in the absence of evidence of a contrary legislative intent.”); see also NRDC v. EPA

,

489 F.3d 1250, 1259 (D.C. Cir. 2007).

EPA’s argument appears to be based on some contrived notion of confli cting statutory

obligations

– i.e.

, the obligation to issue a permit within one year and the obligation to ensure

that the permitting requirements of section 165 are fulfilled. See Supplemental Statement of

Basis at 10 (“EPA must consider how to reconcile what have now become conflicting statutory

obligations

. . . .”). This fa ulty line of reasoning was considered and rejected by the Supreme

Court in General Motors Corp. v. United States

, 496 U.S. 530 (1990). In that case, industry argued

that EPA’s failure to act on a SIP revision within the statutory period for review precluded EPA

from enforcing the existing provisio ns approved into the SIP. Id. at 535. As is the case here, the

Court held that delay on the part of EPA does not affect the ability or obligation of EPA to

enforce the other requirements of the Act. Unless Congress provided some express authority or

direction for EPA to ignore otherwise applicable requirements when EPA misses its deadline

for acting on the permit, EPA has no such authority or direction. The Court held that “because

the st atute does not reveal any congressional intent to bar enforcement of an existing SIP if EPA

delays unreasonably in acting on a proposed SIP revision,

. . . such an e nforcement action is not

barred.” Id. at 540. The Court further noted that “other statutory remedies are available when

EPA delays action

. . . . Although these statutory remedies may not appear to be so strong a

deterrent to EPA delay as would an enforcement bar, these are the remedies that Congress ha s

provided in the statute.” Id at 541.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 3 of 24

Admittedly, EPA has mi ssed the statutory deadline for acting on the Avenal permit.

That, however, does not create a conflict with, or affect the obligation to ensure that the new

source will not cause or contribute to air pollution problems and will be subject to best available

controls. Avenal’s remedy for delay is a deadli ne action under section 304(a)(2); it is not some

entitlement to cutting off the obligation to comply with the statute. 1 If the Avenal permit

application is inadequate to meet all applicable statutory requirements and EPA is compelled to

act on the permit, the permit must be denied. Avenal will of course be free to submit a new

application that includes all of the required demonstrations.

The statutory language is plain

– a new source cannot cause or contrib ute to a violation

of any NAAQS and must be subject to best available controls for all regulated pollutants.

Unless the source can meet these criteria, it may not be built. The statute provides no authority

for EPA to waive these requirements except in li mited circumstances related to the transition

allowed around the 1977 Clean Air Act Amendments. Nor does the failure to comply with the

one

‐ year statutory deadline for acting on a permit application bar the obligation to comply with

these otherwise applicable statutory requirements. But even if one could ignore this plain

language of the st atute, EPA’s proposed decision for Avenal would still be rejected as an

unreasonable interpretation of the statute because it is counter to Congress’s clear intent in

adopting the PSD program.

B. EPA’s proposed interpretation of the Act is unreasonable.

At the outset, EPA’s decision is motivated by purposes that have no grounding in the

Act (i.e., perceived pro cedural fairness, streamlined processing of permits, economic

development over environmental protection). The purposes of the PSD program are expressly

outlined in section 160 of the Act:

(1) to protect health and welfare from any actual or potential adverse effect which ma y

be reasonably anticipate[d] to occur from air pollution

. . . notwithstanding attainment

and maintenance of all national ambient air quality standards;

(2) to preserve, protect, and enhance air quality in national parks

. . . and other areas of

special

. . . value;

(3) to insure that economic growth will occur in a manner consistent wit h the

preservation of existing clean air resources;

. . .and

(5) to assure that any decision to permit increased air pollution

. . . is made only after

careful evaluation of all the consequences of such a decision and after ad equate

procedural opportunities for informed public participation in the decisionmaking

process.

1 Moreover, EPA’s proposed grandfathering scheme cannot remedy EPA’s failure to meet the one

‐ year

deadline in any event; instead, it simply violates other statutory obligations.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 4 of 24

CAA § 160. EPA’s decision to waive Avenal’s obligation to de monstrate that it will not violate

any NAAQS cannot be reconciled with any of the stated purposes of the PSD program. It does

not protect health or welfare; it does not preserve air quality; it does not insure growth will be

consistent wit h preservation of air resources; and it deliberately precludes careful

decisionmaking and informed public participation. There is nothing in the Act that suggests

that Congress intended that these purposes could be waived or trumped by some artificial

notion of fairness or expedited permitting that would elevate procedure over substance.

What make s EPA’s proposal for Avenal so particularly absurd is that EPA long ago

rejected similar requests for grandfather exemptions based on these same clearly stated

purposes of the PSD program. In the final rulemaking adopting the PSD regulations following

the 1977 Clean Air Act Amendments, a commenter urged EPA “to promulgate a g randfather

provision that would use the date of complete application instead of the date of permit

issuance.” 45 Fed. Reg. 52676, 52683 (Aug. 7, 1980). EPA rejected the idea, reasoning that “[u]se

of such date, however, might exempt more projects from review. Hence, in EPA’s view, it

would fail to give adequate expression to the interests behi nd section 165, especially the goal of

protecting air quality.” Id.

EPA’s proposed approach also undermines the fundamental policy choices that

Congress made in adopting the PSD program: (1) that it is preferable to prevent air pollution

from becoming a problem in the first place; and (2) that controls should be installed when new

sources are being constructed rather than as retr ofits on existing sources. See S. R EP

. N O

. 95

‐ 127,

at 11 (1977) (“This legislation defines ‘significant deterioration’ in all clean air areas as a

specified amount of additional pollution.

. . . This definition is intended to prevent any major

decline in air quality currently existing in clean air areas and will provide a margin of safety for

the future.”); H.R. REP. NO. 94

‐ 1175, at 101 (1976) (noting “’an ounce of prevention is worth a

pound of cure.’ Permitting unrestricted deterioration of air quality up to ambient standards

involves trying to cure a condition after it has developed rather than using practical and

currently available means to prevent or minimize the condition in the first place.”); id. at 10 8

(“Common sense dictates that it is substantially less expensive to prevent air pollution problems

– and health problems

– before they develop than it is to abate dangerous pollution levels

. . . . This approach will allow us to avoid future massive air pollution concentrations wh ich

endanger public health and restrict further economic growth, require expensive retrofitting of

pollution control technology and produce demands for economically and socially disruptive

restrictions on the use of automobiles and on indirect sources.”).

EPA’s proposed approach for Avenal would defeat both of these policy goals. EPA will

allow Aven al to be built even though there has been no demonstration that Avenal will not

cause or contribute to a violation of the 1

‐ hour standard for NO 2

. Should the plant be built and

it is subsequently determined that in fact violations are occurring as a result of the massive NO

x

emissions from this plant, the State and the local air district will be responsible for developing aComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 5 of 24

plan for controlling emissions to meet the sta ndard. Such a plan will require adoption of

reasonably available control technology requirements for existing major sources. At that point,

Avenal could be required to address these emissions in a much less cost

‐ effective manner

through the retrofit of the facility. Commenters recognize that this future is unknown, but this

is a key reason why th e modeling is required at the outset under section 165 in order to avoid

these undesirable potential outcomes that could significantly harm public health and welfare.

Waiving these requirements and pretending that there will be no problems undermines the

“prevention” purpose of the PSD program and the policy choi ces made by Congress. It is

simply not reasonable to believe that Congress could have intended EPA to adopt the stance of

deliberate ignorance (by allowing the source and EPA to ignore foreseeable problems that the

Clean Air Act is specifically designed to avoid) that EPA her e proposes for Avenal.

C. EPA’s attempt to invent equitable authority based on case law is

fundamentally flawed.

Having no statutory authority to waive Avenal’s requirement to comply with the plain

statutory requirements of the Clean Air Act, EPA attempts to invent new “equitable” authority

based on shoddy legal a nalysis of a single federal district court case from 50 years ago. In so

doing, EPA attempts to set aside a long line of decisions that have addressed this very issue

including decisions by EPA’s own Environmental Appeals Board. EPA’s analysis is based on a

faulty understanding of th e fundamental powers of the various branches of government and

cannot be sustained.

Courts have consistently recognized that an agency is required to apply the law in effect

at the time it renders a decision on a permit application. See Ziffrin v. United States, 318 U.S.

73,78 (1943) (where governing statut e is amended after applicant submits his permit application

but before agency renders its decision, agency is “required to act under the law as it existed” at

the time of its decision rather than at the time of application); see State of Alabama v

. EPA

, 557

F.2d 1101, 1 110 (5th Cir. 1977) (appropriate standards to be applied to a permit are those in

effect at time of initial permit issuance). Ziffrin involved a challenge to an order issued by the

Interstate Commerce Commission denying a company’s permit application. Ziffrin

, 318 U.S. at

74. After the company submitted its application but before the age ncy issued its decision,

Congress amended a provision of the statute governing such permits. Id. Noting that the

permit “was effective for the future,” the Court held that, even where the law changes after an

applicant files a permit application, the Commission “was required to act under the law as it

existed” when it ent ered its decision on the application. Id. at 78. Otherwise, reasoned the

Court, “the administrative body would issue orders contrary to the existing legislation.” Id.

EPA’s own Environmental Appeals Board has also recognized this basic rule. See In re:

Dominion Energy Bravton Point, LLC, 12 E.A.D. 4 90, 614

‐ 616 (EAB 2006); In re Phelps Dodge Corp.,

10 E.A.D. 460,478 n. 10 (EAB 2002) (holding that the permit issuer is obligated “ to apply the

. . .

statute and implementing regulations in effect at the time the final permit decision is made” orComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 6 of 24

the st andards “in effect at the time of initial permit issuance.”); 2 see also Shell Gulf of Mexico, Inc.,

OCS Appeal Nos. 10

‐ 01 through 10

‐ 04, Slip Op. at 9 and 67 n.76 (EAB, Dec. 30, 2010) (permit

must meet emission limitation standards in effect when EPA issues its final permit decision

under 40 C.F.R. § 124.15(a) upon conclusion of remand proceedings).

The Supple mental Statement of Basis also recognizes this clearly held maxim but then,

without any attempt to explain why these cases are wrong or open to being ignored, simply

announces that “some other courts have recognized an exception

. . . .” Supplemental

Statement of Basis at 9. EPA claims that th e Latin maxim actus curiae neminem gravabit

, as

applied in the Supreme Court’s 1880 decision Mitchell v. Overman

, 103 U.S. 62 (1880), provides

judicial support for this supposed exception. See Supplemental Statement of Basis at 10.

Translated to ʺ an act of the court shall prejudice no one, ʺ this Latin maxim stands for the principle

that a court has th e power to enter a judgment retrospectively when the court is responsible for

creating a delay in rendering the judgment. See Mitchell

, 103 U.S. at 64

‐ 65. EPA argues that this

principle applies equally to courts and administrative agencies and “supports the view that an

administrative agency ha s the power in limited and compelling circumstances to issue a permit

decision based on the legal requirements that were applicable at the time the Agency should

have taken action.” See Supplemental Statement of Basis at 10.

EPA’s attempt to rely on Mitchell, an d the principle for which it stands, represents a

basic misunderstanding of the inherent powers of the government branches. Mitchell speaks

only to the powers of the judicial branch. See Mitchell

, 103 U.S. at 64 (noting that because no

statute applies, the case “must

. . . be determined by the rules of practice which obtain in courts

of justice in virt ue of the inherent power they possess”). Article III of the United States

Constitution vests the judicial branch with certain inherent powers and duties, including the

duty “to say what the law is.” Marbury v. Madison

, 5 U.S. 13 7, 177 (1803); U.S. Const. art. III, § 1

(“The judicial Power of the United States, shall be vested in one supreme Court, and in such

inferior Courts as the Congress may from time to time ordain and establish.”). It has long been

understood that “[c]ertain implied powers must necessarily result to our Courts of justice from

the na ture of their institution.” United States v. Hudson

, 11 U.S. 32, 34 (1812). Courts are

“universally acknowledged to be vested, by their very creation,” with certain inherent powers.

See Anderson v. Dunn

, 19 U.S. 204, 227 (1821). These powers are “governed not by rule or statute

but by the control necessarily vested in courts to manage their own affairs.” Link v. Wabash R.

Co.

, 370 U.S. 626, 63 0

‐ 31 (1962). The concept of actus curiae neminem gravabit is itself founded on

this inherent judicial authority to administer justice. See Mitchell

, 103 U.S. at 65

.

Administrative agencies, however, have no such inherent equitable powers. Courts

have long held that administrative agencies do not possess the same powers or authority as

Article III courts. See N. Pipeline Const. Co. v. Marathon Pipe Line Co.

, 458 U.S. 50, 59 (1982). (“The

2 The Guidance that EPA now seeks to overturn cites all of this same authority. See Memo from Stephen

D. Page, Director, OAQPS, EPA, to EPA Regional Air Division Directors (April 1, 2010)

.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 7 of 24

judicial power of the United States mus t be exercised by courts having the attributes prescribed

in Art. III.”). An administrative agency is “a creature of statute.” Soriano v. United States

, 494

F.2d 681, 683 (9th Cir. 1974). An agency “has no constitutional or common law existence or

authority, but only those authorities conferred upon it by Congress.” Mi chigan v. E.P.A.

, 268

F.3d 1075, 1081 (D.C. Cir. 2001); see also Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988)

(“It is axiomatic that an administrative agency ʹ s power to promulgate legislative regulations is

limited to the authority delegated by Congress.”). Thus, “if there is no sta tute conferring

authority, a federal agency has none.” Michigan

, 268 F.3d at 1081; see also Louisiana Pub. Serv.

Comm ʹ n v. F.C.C.

, 476 U.S. 355, 374

‐ 75 (1986) (“An agency may not confer power upon itself.”).

EPA ignores this important distinction in its attempt to an alogize a court’s inherent

authority to retroactively render a judgment to an agency’s purported authority to waive

statutory requirements in violation of existing law. EPA cannot compensate for its lack of

statutory authority by relying on a Latin maxim or a judicial opinion discussing inherent

judicial powers.

EPA cites only one case for the proposition that actus curia e neminem gravabit might be

available to an administrative agency. See Supplemental Statement of Basis at 10 (citing

Application of Martini

, 184 F.Supp. 395, 401

‐ 02 (S.D.N.Y. 1960)). EPA’s reliance on this single

district court case is weak and misplaced. Martini involved an application for naturalization in

accordance with Public Law 11 4. See id. at 398. The petitioner submitted his application but,

because of a delay by the Immigration and Natural Service (“INS”), was issued a warrant of

arrest and ordered deported. Id. The INS examiner concluded that naturalization was barred by

section 318 of the Immi gration and Nationality Act, which automatically denies naturalization

to applicants against whom a deportation order has been issued. Id. at 398

‐ 99. The court

ultimately held, however, that section 318 did not apply to applicants under Public Law 114 and

that Congress could not have intended the applicant to lose it s rights under 114 as a result of

agency delay. Id. at 399 and 401.

By allowing the applicant to take the necessary steps to attain naturalization, the court in

Martini in no way permitted the agency to violate any statutory mandates. See id. at 399

‐ 400.

The court re conciled its decision based on an analysis of what Congress intended. Even if EPA

did possess powers available only to the judiciary, EPA could make no such claims here.

Congress’s intent and purposes are clear. A source cannot be built if it fails to apply best

available controls for all regulated pollutants an d if it fails to demonstrate that it will not cause

or contribute to a violation of any NAAQS. Nothing in Martini suggests that equitable

considerations can be used to frustrate these requirements.

The remaining portion of the opinion, on which EPA’s proposal relies, is dicta suggesting

that th e applicant would be entitled to take the oath of allegiance nunc pro tunc

. This discussion,

however, does not stand for the proposition that an agency may remedy its own prejudicial

delay by ignoring other statutory requirements. Even in this dicta discussing the principle ofComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 8 of 24

actus curia e neminem gravabit

, the court never insinuated that an agency has the power to apply

this principle or the authority to remedy its own delay. Instead, the court applied actus curiae

neminem gravabit to the agency delay. See Martini

, 184 F.Supp. at 402; see also Bradley v. Sch. Bd. of

City of Richmond

, 416 U.S. 696, 711 (“ a court is to apply the law in effect at the time it renders its

decision, unless doing so would result in manifest injustice or there is statutory direction or

legislative history to the contrary”). As noted above, administrative agencies have no inherent

authority to fashion such equitable relief. Because the Clean Air Act does not give EPA the

authority to issue permits “now as if it were then, ” EPA has no such authority.

EPA’s final thin reed of support is based on dicta from the Court of Appeals for the

Second Circuit, which EPA contends confirms “the viability of the principle applied in the

Martini case where there has been a si gnificant delay by an administrative agency.” See

Supplemental Statement of Basis at 10 (citing Fassilis v. Esperdy

, 301 F.2d 429 (2d Cir. 1962)).

EPA incorrectly characterizes the earlier cases, which “the Second Circuit case did not

ques tion,” in the same way it mischaracterizes Martini

. 3 None of the cases referenced in Fassilis

recognizes the power of an agency to violate statutory mandates, nor do any of these cases

speak to the power of an agency to remedy its own delay. The cases referenced in Fassilis

simply do not stand for the principle that “an administrative agency has the power

. . . to issue a

permit decision based on the legal requirements that we re applicable at the time the agency

should have taken action.” See Supplemental Statement of Basis at 10. Indeed, as EPA argued in

response to Avenal’s deadline challenge, the case law, starting with Ziffr in

, says the exact

opposite

– that the agency is to comply with the law in effect at the time of the final decision.

See also Def’s Reply to P’s Opp. To Def’s Cross

‐ Motion for Summ. J., Case No. 1:10

‐ cv

‐ 00383

(RJL), at 15 (filed Oct. 22, 2010) (“Thus, Alabama s upports EPA’s conclusion that it must apply

the law in effect at the time the Region makes a decision on the permit, rather than the law in

effect at the time the permit application is deemed complete.”) (emphasis added).

EPA fails to provide any judicial support for its pu rported authority to exempt Avenal’s

permit application from the statutory requirements of the Clean Air Act. As EPA previously

recognized not only in the Guidance it seeks to disavow but also in the pleadings in the ongoing

litigation and in sworn declarations submitted in court, it has no choice but to apply the law in

effect at the time it renders its final decision on Avenal’s permit applica tion. EPA has failed to

demonstrate an exception to this requirement because no such exception exists.

3 Indeed, Mitchell and Application of Martini are two of the six cases referenced in Fassilis

. See Fassilis

, 301

F.2d at 434. All but Mitchell are district court opinions involving immigration law. See id.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 9 of 24

II. Even if EPA had equitable powers, the facts in this case do not justify the ex emptions.

A. There were “no substantial delays on the part of the administrative agency

which operated to deprive the applicants of any right to which any of them

was entitled.”

Relying on Martini and Fassilis

, EPA attempt s to craft an equitable test which would

empower it to waive the statutory requirements of the Clean Air Act where EPA has

substantially delayed a permit application decision and allegedly deprived an applicant of a

procedural right. 4 See Supplemental Statement of Basis at 10. After describing this new and

purportedly equitable test, however, the Supplemental Statement of Basis fails to apply it, and

never shows that the facts in this case support application of the newly contrived test.

First, the Supplemental Statement of Basis never establishes that “th ere were substantial

delays on the part of the administrative agency

. . . .” See Fassilis

, 301 F.2d at 434. EPA, in

briefing supported by declarations made under penalty of perjury in the Avenal deadline

litigation, explained:

As the Jordan Declaration and Joint Stipulation make clear, EPA Region 9 worked

tirelessly to review materials submitted by the ap plicant before and after Region 9

deemed the application complete. See Joint Stipulation ¶ 6; Jordan Decl. ¶¶ 9

‐ 11.

Region 9 also regularly contacted the U.S. Fish and Wildlife Service regarding the status

of the Biological Opinion, which identified measures necessary to be incorporated into

the permit to ensure the protection of the San Joaqu in kit fox, an endangered species

under the Endangered Species Act. Id.

Additionally, both Region 9 and Headquarters expended significant effort in an

attempt to help [Avenal] identify what it needed to do to show compliance with the

revised NO 2 NAAQS. See Joint Stipulation ¶ 6; Jordan Decl. ¶¶13

‐ 17; McCarthy Decl.

¶¶5

‐ 7.

4 Whether considerations of equity should play any part in PSD permitting is a highly dubious

proposition. EPA’s mandate under the Clean Air Act is to protect the public’s health and welfare from air

pollution and fulfill the other objectives specified in CAA section 160. EPA has no discretion to elevate

the int erests of a single permit applicant over those of the public based on EPA’s own notion of “fair

play” or “equity.” Moreover, at least as to its obligation to comply with BACT for CO2, neither EPA nor

Avenal can mount a credible case of surprise. In response to comments seeking g randfathering for

precisely the case at issue here

– where a permit application has been completed before the date CO2

BACT requirements go into effect

– EPA itself twice expressly denied the availability of any

grandfathering provisions for CO2. See 75 Fed. Reg. 17004, 17018

‐ 21 (Apr. 2, 2010); 75 Fed. Reg. 3 1514,

31527 (June 3, 2010). Avenal has had ample notice of the fact that it must comply with these requirements

and could have opted to do so, as EPA explicitly pointed out when it rejected the request for a

grandfathering provision. See 75 Fed. Reg. at 17021.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 10 of 24

Def’s Resp. to P’s Supp. Br. Regardi ng Remedy, Case No. 1:10

‐ cv

‐ 00383 (RJL), at 18 (filed March

1, 2011). Indeed, the record demonstrates that the bulk of the delay was the result of the section

7 consultation required under the Endangered Species Act. This consultation was not

completed until August 9, 20 10. See Letter from Susan K. Moore, U.S. Fish and Wildlife Service,

to Gerardo C. Rios, EPA (Aug. 9, 2010). Thus the delay that held the permitting beyond the

promulgation date of the new 1

‐ hour NO 2 NAAQS was not within the control of EPA and there

is no basis for treating it in the same way as the delay in Martini

. See Def’s Cross

‐ Motion for

Summ. J., Case No. 1:10

‐ cv

‐ 00383 (RJL) (filed Sept. 17, 2010) (“[W]hile EPA regularly contacted

FWS about the status of the Biological Opinion, EPA does not control the timing of FWS’s

issuance of its Biological Opinions.”). This delay alone was en ough to push the permit

application process beyond the one

‐ year mark EPA purportedly seeks to protect.

Nor can EPA claim that the delay has “operated to deprive the applicants of an y right to

which any of them was entitled.” See Fassilis

, 301 F.2d at 434. As EPA has itself recognized,

Avenal has no right to comply with less protective air quality requirements based on the date of

its application. See Def’s Cross

‐ Motion for Summ. J., Case No. 1:10

‐ cv

‐ 0038 3 (RJL) (filed Sept.

17, 2010) (“[Avenal] has not established that it acquired any rights by virtue of the submission

of its permit application or the determination by EPA that its application was complete. In fact,

nothing in CAA section 165, or elsewhere in the Act, establishes that [Avenal] is ent itled to a

decision on its permit application on the basis of the laws and regulations in effect at the time

the permit application was submitted or deemed complete, or indeed that [Avenal] is

necessarily entitled to have EPA grant, rather than deny, its application.”); see also American

Corn G rower Ass’n v. EPA

, 291 F.3d 1, 12 (D.C. Cir. 2002) (agreeing that “nothing in the CAA

provides for issuance of a PSD permit as a matter of right”). Avenal’s ability to pursue a permit

has not been denied in any way. 5 It is still free to submit the required demonstrations and

attempt to show how the project will comply with the requirements of the Clean Air Act. Cf.

Martini

, 184 F. Supp. at 400

‐ 01 (“The filing of the preliminary form

. . . was all that petitioner

was able or entitled to do. After that petitioner could only wai t to be called to take the oath of

allegiance and this was entirely dependent on the speed of the administrative processes of the

Naturalization Service.”). EPA cannot reasonably claim that the test in Martini has been met

where no rights have been denied as a result of a delay.

5 To the contrary, the delay has largely been to Avenal’s benefit. EPA through this delay has allowed

Avenal to supplement its application to support compliance with the Clean Air Act and the Endangered

Species Act. See, e.g.

, Letter from Gary Rubenstein, Sierra Research, to Gerardo Rios, EPA (May 11, 2010)

(outlining Av enal’s responses to outstanding BACT and other issues identified by EPA). Had EPA

aggressively applied the one

‐ year deadline in section 165(c), EPA would have been forced to deny

Avenal’s permit application.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 11 of 24

B. Modeling of NO 2 was not a problem that could reasonably justify an

exemption.

EPA tries to justify the proposed exemptions for Avenal based on “complications” with

the implementation of the hourly NO 2 NAAQS. EPA’s careful wording of this discussion in the

Supplemental Statement of Basis belies this phony justification. EPA first states in general

language that “some applicants” seeking PSD permits have experienced unforeseen challenges

and that “many permit applicants” need to conduct a cumulative air quality impact assessment

where additional refinements in bac kground concentrations “may also be necessary.”

Supplemental Statement of Basis at 7

‐ 8. Without explaining how any of these concerns relate to

Avenal, the Supplemental Statement of Basis asserts that [d]ue in part to these complications, ”

Avenal’s modeling efforts “produced unanticipated delays in the review of the permit

application

. . . .” Id. at 8.

Even if such complicatio ns could justify waiving statutory requirements, which they

cannot, EPA has not made its case here. While “some applicants” have faced problems, others

have been able to model 1

‐ hour NO 2 concentrations in their PSD permit applications including

Sunflower Electric Holcomb Station in Kansas, We Energies

– Biomass Fueled Cogeneration

Facility in Wisconsin, Mississippi Lime Kiln in Illinois, and Detroit Edison in Michigan. The

Supplemental Statement of Basis provides no record basis for the conclusion that Avenal could

not have completed its modeling demonstration or even what “part” of the delay wa s due to

inherent modeling complications and what “part” was due to foot

‐ dragging and ineptitude on

the part of Avenal.

Indeed, before this Supplemental Statement of Basis invented the justification for this

new exemption, Assistant Administrator Gina McCarthy and Region 9’s Air Division Director

Deborah Jordan filed de clarations under penalty of perjury claiming “both Region 9 and

Headquarters expended significant effort in an attempt to help [Avenal] identify what it needed

to do to show compliance with the revised NO 2 NAAQS. See Joint Stipulation ¶ 6; Jordan Decl.

¶¶13

‐ 17; McCarthy Decl. ¶¶5

‐ 7.” Def’s Resp. to P’s Supp. Br. Regarding Remedy, Case No.

1:10

‐ cv

‐ 00383 (RJL), at 18 (filed March 1, 2011). EPA’s post hoc attempt to now excuse the 1

‐ hour

NO 2 modeling that it had pushed Avenal to conduct is without record support. To invent new

unspecified “complications” as a reason for waiving statutory requirements is not only illegal

but disingenuous.

C. Even assuming arguendo that Avenal’s permit must comply only with

emission limitations in effect as of March 18, 2009, Aven al must nonetheless

apply BACT to limit carbon dioxide emissions.

Even if EPA were to apply only those emission standards in effect on March 18, 2009

(one year after EPA declared Avenal’s permit application to be complete), Avenal’s final permit

must still demonstrate the use of BACT to limit CO 2 emissions. This is the case because CO 2 wasComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 12 of 24

a pollutant “s ubject to regulation” through the PSD permitting program as of March 18, 2009

–

and indeed since 1993, when CO 2 monitoring and reporting regulations under the Act became

effective.

The PSD permitting program requires the use of BACT to limit emissions “ for each

pollutant subject to regulation under [the Act].” CAA §§ 165(a)(4), 169(3) (emphasis added). EPA

itself provided a “final” interpretation of the phrase “subject to regulation” as used in sections

165(a)( 4) and 169(3) as early as 1978 when it stated that “subject to regulation under this Act”

means any pollutant regulated in Subchapter C of Title 40 of the Code of Federal Regulations

for any source type. 43 Fed. Reg. 26388, 26397 (June 19, 1978). As the Environmental Appeals

Board found in In re De seret Power Electric Cooperative

, PSD Appeal No 07

‐ 03, Slip Op. at 41,

(EAB, Nov. 13, 2008) (“ Deseret”)

, this pronouncement does not support EPA’s later contention

that BACT applies only to pollutants that are “‘subject to a statutory or regulatory provision

that requires actual control of emissions of that pollutant.’ Instead, the 19 78 Federal Register

notice augers in favor of a finding that, in 1978, the Agency interpreted ‘subject to regulation

under this Act’ to mean ‘any pollutant regulated in Subchapter C of Title 40 of the Code of

Federal Regulations for any source type.”

Monitoring and reporting regulations for polluta nts are among the regulations in

Subchapter C of Title 40 of the Code of Federal Regulations, and in 1993

– long before March 18,

2009

– EPA issued such regulations specifically for CO 2

. See 58 Fed. Reg. 3590, 3650 (Jan. 11,

1993). These CO 2 regulations are found in 40 C.F.R. Part 75 ( see 40 C.F.R. §§ 75.1, 75.10(a)(3),

75.57, 75.60

‐ 64) and were promulgated pursuant to Section 821 of the Act at the express

direction of Congress, s ee 42 U.S.C. § 7651k note 3; Pub. L. 101

‐ 549; 104 Stat. 2699 (1990). That

CO 2 monitoring and reporting regulations render this pollutant “subject to regulation” under

the Act is underscored by the fact that Part 75 itself proclaims that a violation of any Part 75

requirement is a violation of the Act. 40 C.F.R. § 75.5(a). Plainly, CO 2 has been “subject to

regulation” within the meaning of Sections 165(a)(4) and 169(3) since 1993, and certainly as of

March 18, 2009.

EPA bases its contention that CO 2 emission limitations instead did not become effective

until January 2, 2011 (and that Avenal therefore can avoid them as a result of the proposed

grandfathering) on its rulemaking in Reconsideration of Interpretation of Regulations That Determine

Pollutants Covered by Clean Air Act Permitting Programs; Final Rule (the “Reconsideration”), 75

Fed. Reg. 17 004 (April 2, 2010). In the proposed rulemaking preceding the Reconsideration,

EPA had claimed that a pollutant does not become “subject to regulation” through monitoring

and reporting regulations, but only through some other regulation under the Act, promulgated

by EPA on a nationally applicable basis, that actually controls or restricts the pollutant’s

emissions. 74 Fed. Reg. 515 35 (Oct. 7, 2009) (“Proposed Reconsideration”). EPA then changed

its definition once more by adding that, even after the promulgation of its rulemaking limiting

CO 2 emissions from passenger vehicles and light duty trucks (the “Vehicle Rule”) in April 2010,

CO 2 would still not be “subject to regulation” until the Vehicle Rule had “taken effect” byComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 13 of 24

affecting the “regulated activity” (rather than upon the Vehic le Rule’s promulgation or its

effective date). 75 Fed. Reg. at 17016. EPA applied this otherwise incomprehensible definition

to CO 2 emissions by announcing that the Vehicle Rule would “take effect” only when the

regulated activity (allegedly only the sale of compliant vehicles but not their manufacture)

would be affected: on January 2, 2011, the first day when yet another regulation permits

vehicles built in compliance with the Vehicle Rule the year before to be sold in commerce. Id. at

1702 0.

EPA has crafted its ever more arbitrary statutory interpretations under intense political

pressure to abandon or at least further postpone GHG regulations for stationary sources. These

strenuous contortions do obvious violence to straightforward statutory language. The

Reconsideration’s arbitrary and capricious nature is underscored by EPA’s own contradictions

along the wa y. 6 It should not now be used to avoid the application of BACT to limit CO 2

emissions from Avenal’s planned facility.

III. Even if EPA could ignore NO 2 , SO 2 , and CO 2 problems, it must still deny Avenal’s

PSD permit application.

A. Environmental justice concerns justify rejection of the proposed project.

The Supplemental Statement of Basis attempts to address the failure of the previous

Statement of Basis to consider environmental justice issues. See in re: Shell Gulf of Mexico, Inc.

, OCS Appeal Nos. 10

‐ 01 th rough 10

‐ 04, Slip Op. at 63 (“The Board has held that environmental

justice issues must be considered in connection with the issuance of PSD permits.”). The

analysis offered in the Supplemental Statement of Basis, however, is inadequate in substance

and effect. Even in its incomplete state, th e analysis shows that there will be disproportionate

impacts on surrounding environmental justice communities. As such, EPA should deny

Avenal’s PSD permit application.

The Avenal Energy Project is proposed to be built and operated in Avenal, California,

just a few miles from the environmental justice communities of Avenal, Huron, and Kettleman

City. EPA adm its that all three of these communities include “populations of interest” for the

purposes of analyzing the impacts of the project on overburdened communities. As EPA

explains in its environmental justice analysis, these communities have a very high (more than 85

6 See, e.g., 74 Fed. Reg. at 51543 (pronouncing that pollutants subject to regulation means “those pollutants

subject to a nationwide standard, binding in all states, that EPA promulgates on the basis of its CAA

rulemaking authority”); id. at 51547 (explaining that CO 2 would become subject to regulation “upon final

promulgation of the GHG light duty Vehicle Rule”); 74 Fed Reg. 55292 (Oct. 27, 2009) (adding that “new

pollutants become subject to PSD and title V when a rule controlling those pollutants is promulgated

(and even before that rule takes effect)”); 75 Fed. Reg. at 552 99.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 14 of 24

percent) minority population, are hi ghly linguistically isolated, and are predominately low

‐

income. They are also disproportionately impacted by pollution sources.

Even without a new 600

‐ megawatt fossil fuel power plant, these communities are

burdened by multiple environmental harms. The San Joaquin Valley is one of the worst

‐ polluted air basins in the nation an d suffers from “some of the highest PM 2.5 levels in the

country.” Supplemental Statement of Basis at 18. Drinking water in these rural communities is

contaminated with high levels of arsenic, benzene and other toxins. Toxic pesticides and other

agricultural chemicals applied to surrounding agricultural fields can drift into the homes and

yards of local residents, many of whom also work in the fields. Additionally, as EPA points

out, Kettleman City is located adjace nt to the Interstate 5 freeway, defunct oil and natural gas

extraction operations, and the state’s largest hazardous waste landfill, which was recently fined

$300,000 for violations of its PCB handling permit. Together, these impacts contribute to,

among ma ny other harms, higher

‐ than

‐ average asthma prevalence, asthma

‐ related

hospitalizations and emergency room visits. In these communities, which are also plagued by

high unemployment and lack of access to health care, adding another major source of pollution

would be the very definition of environmental injustice.

In its en vironmental justice analysis, EPA limits its examination of the impacts of the

facility’s projected emissions to the effect they will have on the applicable NAAQS. Also,

though it has decided to grandfather the facility from demonstrating compliance with the newly

adopted 1

‐ hour NO 2 standard, EPA does recognize that in promulgating the new standard, the

agency found the existing annual NO 2 standard alone was not sufficient to protect public health

against adverse respiratory effects associated with short

‐ term NO 2 exposure, and so attempts to

examine whether short

‐ term NO 2 exposure from the proposed plant will disproportionately

impact local communities. Ultimately, EPA determines that because the modeled results for the

facility’s projected air emissions are well below the actual NAAQS for these pollutants, there

will be no adverse impacts and it has satisfied its environmental justice obligations under

Executive Order 12898. For the reasons set out below, commenters disag ree and call upon EPA

to do a real analysis of how pollution from the proposed plant would impact the health and

well

‐ being of the neighboring communities that are already environmentally

‐ overburdened.

For the analysis of 1

‐ hour NO 2 impacts, EPA identifies limited data indicating that

background levels of 1

‐ hour NO 2 concentrations “in the general area” are not

disproportionately high as compared with the rest of the state. This information comes from

monitors in Hanford (50 ppb) and Visalia (61 ppb), approximately 28 and 46 miles away

(respectively) from the area where the plant will be located. EPA also examines an assessment

conducted by the San Jo aquin Valley Air Pollution Control District, which shows the maximum

hourly NO 2 impact expected from the plant would be 44 ppb.

Even assuming the concentrations of NO 2 in Hanford or Visalia adequately represent the

background NO 2 levels in the project vicinity, the added burden of the project would exceed orComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 15 of 24

very nearly exceed the new 1

‐ hour NO 2 standard adopted by EPA. However, it is not

reasonable to assume that these background levels are representative of levels in the project

vicinity. As EPA points out, the largest source of NO 2 is mobile sources and “NO 2

concentrations on or near major roads are appreciably higher than those measured at monitors

in the current network....and near

‐ roadway concentrations have been measured to be

approximately 30 to 100% higher than those measure away from major roads.” Supplemental

Statement of Basis at 19. Kettleman City is directly adjacent to Interstate 5

– one of the State’s

main commerce freeways

– an d therefore should reasonably be expected to have background

levels of NO 2 of at least 65 ppb (30 percent greater than Hanford’s 50 ppb background level). In

a “worst case” scenario, background levels in Kettleman City could be 130 ppb (100 percent

greater than Visalia’s 65 ppb). Based on even the very limited information EPA provides in its

environmental justice analysis, there is no reason able basis for believing that Kettleman City or

the other communities in the vicinity of the proposed project would not be disproportionately

impacted by NO 2 emissions from the plant.

For its analysis of the other NAAQS, EPA’s environmental justice analysis misses the

point entirely as it fails to take into account not only the local impacts of increased air emissions,

but also how these added emissions will contribute to the cumulative impact of all the

environmental and socia l stressors with which these communities are already burdened. Most

notably, the analysis admits that it does not address whether there will be disproportionate

impacts on the surrounding communities due to elevated ozone and fine particulate matter

impacts. Instead of providing any of its own analysis, EPA “presents a s ummary of the State’s

environmental justice analysis,” which the Supplemental Statement of Basis notes is the subject

of a civil rights investigation. Supplemental Statement of Basis at 14. Greenaction for Health

and Environmental Justice has filed a Title VI Civil Rights Act complaint alleging, inter alia

,

“that operation of the proposed Avenal power plant will result in advers e health impacts on the

residents of color of Avenal and Kettleman City, who are already impacted by multiple sources

of pollution.” Id. at 14. EPA’s Office of Civil Rights has accepted this allegation for

investigation. Id. Relying on this flawed State analysis as the basis for EPA’s environmental

justice analysis is unreas onable on its face.

Even setting aside the fact that this analysis is clouded by the pending investigation,

EPA’s reliance on the State’s analysis is misplaced because of its obvious flaws. For example,

the State claims that PM 2.5 impacts will be insignificant compared to applicable ambient air

quality standards and current levels. See Supplemental Statement of Basis at 28. Commenters

have already advised EPA that this modeling analysis is flawed because the modeling results

do not account for the contribution of secondary PM 2.5 formation as a result of the significant

NO

x emissions from the source. There is no basis for refusing to include secondarily formed

PM 2.5 in the assessment of ambient impacts. As EPA explained in its rulemaking proposing the

increments of deterioration that it will allow, the Agency compared “the marginal pollutant

concentration increases allowed by the safe harbor increment levels against the pollutant

concentrations at which various environmental responses occur.” 72 Fed. Reg. at 54133. InComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 16 of 24

determining the scope of environmental effects, EPA “evaluated the he alth and welfare effects

of both direct PM 2.5 and secondarily

‐ formed PM 2.5 that may result from the transformation of

other pollutants such as SO 2 and NO

x .” Id. at 54127. It would be irrational to suggest that

notwithstanding the fact that the increments are based on an assessment of the impacts of both

direct and secondary PM 2.5

, the modeling to determine if such increments are violated or

significantly impacted need only consider the directly emitted PM 2.5

.

This approach is especially irrational here, where the District has already acknowledged

that secondary PM 2.5 in the form of ammonium nitrate is a major component of ambient PM 2.5

concentrations in the San Joaquin Valley. See San Joaquin Valley Unified Air Pollution Control

District, “2008 PM 2.5 Plan,” at 3

‐ 7 (April 30, 2008) (adding that “ammonium nitrate formation is

limited by the availability of nitric acid”); see also id. at 6

‐ 6 (noting District’s strategy is to “giv[e]

priority to NO

x controls.”). The analysis of Avenal’s impact on ambient PM 2.5 concentrations

simply cannot ignore the addition of 144 tons per year of NO

x emissions in assessing whether

the contribution to PM 2.5 nonattainment in the Valley will be significant.

The State’s environmental justice analysis of particulate matter impacts is also flawed in

that it “relies[s] on compliance with outdated science

. . . [and] fail[s] to account for the updated

scientific and technical reviews

. . . .” In re: Shell Gulf of Mexico, Inc.

, OCS Appeal Nos. 10

‐ 01

through 10

‐ 04, Slip Op. at 79

‐ 80. Both the 

### PM 2.5 and the PM 10 standards are undergoing review

and have been called into question by EPA’s Clean Air Scientific Advisory Committee

(“CASAC”). See CASAC Review of Policy Assessment for the Review of the PM NAAQS

– Second

External Review Draft (June 2010), Letter from Jonathan M. Samet, CASAC, to Lisa Jackson

(dated Sept. 10, 2010) (available at yosemite.epa.g ov/sab/sabproduct.nsf/

264cb1227d55e02c85257402007446a4/CCF9F4C0500C500F8525779D0073C593/$File/EPA

‐

CASAC

‐ 10

‐ 015

‐ unsigned.pdf). To the State’s credit, it does look at a lower annual 

### PM 2.5

standard of 12 μ g/m3, but it continues to rely on the 24

‐ hour standard of 35 μ g/m3, which

CASAC has recommended tightening in conjunction with the annual standard. See id. at ii.

More significantly, EPA’s analysis includes virtually no discussion of disproportionate PM 10

health impacts, including impacts resulting from the secondary formation due to the large NO

x

emissions from the proposed plant, based on new available health data. See Supplemental

Statement of Basis at 26. “CASAC supports a lower level [for the 24

‐ hour PM 10 standard] to

provide enhanced protection, somewhere in the range of 75

– 65 μ g/m3.” See Letter from

Jonathan M. Samet at ii (explaining that current standard of 150 μ g/m3 translated into a 98 th

percentile form equates to a level of 75 to 80 μ g/m3).

At a minimum, EPA needs to redo its defective and incomplete environmental justice

analysis. Even with the flawed analysis prepared to date, however, it is clear that the Avenal

project will have disproportionate health impacts on surrounding environmental justice

communities. As such, EPA should deny Avenal’s applicati on for a PSD permit. See CAA

§ 160(1) (noting purpose of PSD program is to protect public health and welfare

. . . notwithstanding attainment and maintenance of all national ambient air quality standards).Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 17 of 24

B. Avenal has failed to demonstrate that it will not contribute to violatio ns of the

ozone and PM 2.5 NAAQS in the Valley.

Clean Air Act section 165(a)(3) provides that a PSD permit may not be issued unless the

facility proponent “ demonstrates

. . . that emissions from the construction or operation of such

facility will not cause, or contribute to, air pollution in excess of any

. . . n ational ambient air

quality standard in any air quality control region

. . . .” (emphasis added); see also 40 CFR

§ 52.21(k)(1). The federal regulations require that the application for a PSD permit contain an

analysis of ambient air quality in the area that the major source would affect for each pollutant

emitted from the source in significant amounts

. Id. § 52.21(m)(1)(a). The thresholds for

determining whether emissions will be “significant” are provided in section 52.21(b)(23)(i) of

the federal regulations. The threshold for PM 2.5 emissions is 10 tons per year and for NO

x , as a

precursor to both PM 2.5 and ozone, is 40 tons per year. Id. § 52.21(b)(23)(i).

The proposed Avenal project will result in emissions of 80.7 tons per year of PM 2.5 and

144.3 tons per year of NO

x

. See “Avenal Energy Application for Certification,” at 6.2

‐ 45, Table

6.2

‐ 24. Yet nowhere in the proposed PSD permit nor the facility’s air quality analysis of its

Application for Certification, is there any analysis of the impact the facility will have on ambient

concentrations of ozone or PM 2.5

.

Commenters are aware of the exemption provided in 40 CFR 52.21(i)(2), which waives

regulatory source impact analysis and air quality analysis requirements with respect to

pollutants for which the area is designated nonattainment. This exemption, however, does not

excuse the failures here. While the regulatory requirements as to how to make th e required

demonstration may be waived, this exemption cannot waive the statutory requirement to make

the demonstration at all. Such an application of this regulatory requirement would be a clear

violation of the statute. Thus, even if, as a result of this exemption, EPA’s rules are silent as to

how this de monstration must be made, the Act still requires a demonstration that the source will

not cause or contribute to a violation of “any” NAAQS. Moreover, with respect to the

regulatory requirements, EPA has only just designated the San Joaquin Valley with respect to

the 24

‐ hour 35 μ g/m 3 standard for PM 2.5 and has not yet designated the Valley for the 75 parts

per billion (“ppb”) standard for ozone. Thus to the extent there is any rationale behind the

regulatory exemption, it is not present here because the area does not have plans for meeting

these new standards that will assure that any gr owth in emissions is consistent with attainment.

Nor, as will be discussed in more detail below, can EPA rely on the San Joaquin Valley Unified

Air Pollution Control District’s dysfunctional nonattainment new source review program to

fully offset these emissions. EPA cannot ignore the air pollution disaster in the San Joaquin

Valley and approve this major new source without ensuring that it will not exacerbate the

problems in the area.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 18 of 24

With respect to PM 2.5 impacts, as commenters noted above, the modeling analysis is

insufficient in that it fails to address secondary formation of fine particulate matter. The

analysis of Avenal’s impact on ambient PM 2.5 concentrations simply cannot ignore the addition

of 144 tons per year of NO

x emissions in assessing whether the contribution to PM 2.5

nonattainment in the Valley will be significant.

For ozone, there is no discussion of ambient impacts whatsoever. Avenal’s air quality

analysis reports that 3

‐ year average 8

‐ hour ozone concentrations measured at the nearby

Hanford monitoring site consistently exceed the 75 ppb standard. See “Avenal Energy

Application for Certification” at 6.2

‐ 8 (reporting average concentrations of 95 ppb for 2004, 88

ppb for 2005 and 86 ppb for 2006). Th e analysis states that “ambient air quality measurements

recorded at the monitoring stations are believed to represent area

‐ wide ambient conditions

rather than the localized impacts of any particular facility.” Id. at 6.2

‐ 7. Th e analysis includes

no other relevant discussion as to how the significant NO

x emissions from the Avenal plant will

or will not contribute to the ozone problem in the area. EPA’s proposed Statement of Basis

offers nothing more. The analysis does not claim that the impact will be insignificant or

completely offset; the analysis is simply silent with respect to ozone impacts. Commenters

cannot meaningfully comment on how this proposed project fulfi lls the requirement of section

165(a)(3) when there is no demonstration to review.

Neither EPA nor Avenal has suggested that the impacts on ambient concentrations of

PM 2.5 and ozone will be offset, nor could they based on the current record. As noted above, the

impacts on ambient ozone have never been assessed and the analysis of the impacts on ambient

PM 2.5 concentrations is defective. More importantly, neither EPA nor Avenal has provided any

record for showing how the offsets obtained for this project will compensate for the impacts of

this source. To the contrary, based on the record to date, it is clear that the emission reduction

credits described by Avenal will pro vide no compensating benefit whatsoever to offset the new

ambient impacts the Avenal plant will create.

The first problem with relying of the District’s nonattainment new source review

program to satisfy the requirement of section 165(a)(3) is that the nonattainment new source

review program and the PSD program are fundamentally different when it comes to o ffsets.

The nonattainment new source review program looks at the balancing of emissions increases

and decreases as a kind of accounting problem based on tons of emissions. See CAA § 173(a)

(focusing on “total tonnage” of emissions). This is particularly true for the District’s new source

review prog ram. EPA has recognized that the District’s program fails to comply with the

requirements of the Clean Air Act by, among other things, allowing sources to offset only to

preset thresholds rather than down to zero, failing to apply the ratios specified in the Act, and

refusing to ensure that e mission reductions are surplus at the time of use. See 66 Fed. Reg.

37587 (July 19, 2001). EPA has waived these statutory violations by allowing the District to

demonstrate overall equivalency of the District’s offset requirements to the requirements of the

Clean Air Act. See 69 Fed. Reg. 27837 (May 17. 2 004). This accounting approach has no relationComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 19 of 24

to what is actually happening in the am bient air. Moreover, while the equivalency approach

relied upon in the District might have been theoretically viable at the time EPA approved it, the

approach has become bankrupt with the District’s bump up to extreme nonattainment for ozone

in 2004. Since then, the federal rules should have been requi ring offsets for sources with NO

x or

VOC emissions over 10 tons per year, but the District has not been applying these lower

thresholds in its annual equivalency demonstration. At this point, there is no rational basis for

believing that the District is achieving all of the emission reductions needed even to meet the

accounting requirement of Clean Air Act section 173(a).

The requi rements in section 165(a)(3) and 51.165(b)(3), by contrast, focus on “air

pollution” and the “impact” on “air quality” as opposed to merely the tons of emissions. This

difference is often used to the advantage of sources seeking a PSD permit by allowing them to

claim that their significa nt impacts can be mitigated through less than complete offset of their

emissions. Here, however, because the District allows sources to use offsets that are worthless

in their benefit to air quality, the requirements of section 165(a)(3) cannot be met through the

bankrupt accounting games approved for the n onattainment new source review program in the

San Joaquin Valley.

In its original Final Determination of Compliance (“FDOC”) document for Avenal, the

District calculated what it asserts are acceptable offset targets for the project’s NO

x , VOC, and

PM 10 emissions. The District established these offset targets as the project’s total emissions,

minus any emissions from exempt equipment, minus an ‘offset threshold’ for each pollutant,

times a distance offset ratio of 1.5:1 (because the reductions used as offsets took place more than

15 miles from the Avenal project). Additionally, the District allowed the substitution of SO

x

emission reduction credits to offset PM

‐ 10 emissions at a 1:1 ratio.

As noted above, this calculation of the emission reduction credits (“ERCs”) needed to

offset the tons of emission increases that will be generated by Avenal includes no analysis of the

actual impact the proposed project will have on air qua lity or the mitigation of that impact that

will be provided by the ERCs. As explained by the CEC in a letter dated August 12, 2008, the

applicant’s proposed mitigation includes the use of ERCs issued between 1991 and 2002. While

the District may allow the use of these very old ERCs to sati sfy the accounting requirements of

its defective nonattainment new source review program, for PSD purposes, the reductions

represented by these ERCs are already reflected in the current ambient air quality

concentrations used to assess Avenal’s projected impact. Neither EPA nor the District has

demonstrated how emissions reductions that are already reflected in curre nt air quality levels,

which continue to violate the national standards, can be used to show that the new emissions

from the proposed project will not cause or contribute to a violation of any NAAQS in the

project impact area.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 20 of 24

In addition, as the District has pointed out, the re ductions being used as offsets took

place well outside the proposed project site. In fact, as far as commenters can tell 7

, a majority of

the reductions took place more than 75 miles away from the proposed project location. Without

performing modeling or other technical analysis to show how these distant reductions can

possibly offset the impact of the new emissions on the project impact area, EPA cannot conclude

that the ERCs identified by the app licant adequately prevent the project from causing or

contributing to a violation of any NAAQS.

Finally, even if the temporal and spatial defects of these offsets could be ignored, the

emission reductions suffer from the further defect that the District relies on inter

‐ pollutant

trading that has no ra tional basis. The District has allowed Avenal to comply with the

nonattainment new source review requirements for PM 2.5 offsets by substituting SO

x emission

reductions on a 1 to 1 basis (this ratio becomes 1.5 to 1 when factoring in the distance offset

ratio). This ratio is entirely unsupported by the record. EPA, in its new source review

rulemaking for PM 2.5

, determined a nationwide preferred ratio of 40 to 1 for trading SO

x

emission reductions for PM 2.5 emission reductions, unless a demonstration can be made,

substantiated “by modeling and/or other technical demonstrations of the net air quality benefit

for PM 2.5 ambient concentrations,” that another ratio is locally appropriate. 73 Fed. Reg. 28321,

28339 (May 16, 2008). According to EPA, these local determinations must address a number of

local factors, including but not limited to: 1) the relative magnitude of emissions of direct PM 2.5

and precursor gases within the geographic area, 2) the relative contribution to local PM 2.5

nonattainment of directly emitted PM 2.5 and individual precursors from the various sources or

source categories under consideration as part of a potential inter

‐ pollutant trade, and 3) the

meteorological conditions and topography of the area, which result in different source

‐ receptor

relationships across pollutants within the local area. Id

. The District has never made any such

demonstrati on to justify the lower ratio applied here. 8 Given the total absence of analysis

supporting a 1 to 1 benefit ratio for SO

x emission reductions, EPA simply cannot reasonably rely

on the SO

x ERCs required by the District to meet the requirements 165(a)(3) for PM 2.5

.

In the end, the analysis conducted to date on the ambient impacts of the Avenal plant is

insufficient to “demonstrate[]” that emissions will not cause or contribute to air pollution in

excess of the ozone or PM 2.5 NAAQS. See CAA § 165(a)(3). Should EPA and Avenal persist in

7 Despite an August 12, 2008 request by the CEC, a full description of the original emission reduction site

and date, and the method of reduction for the ERCs was never provided by the applicant or the District.

In fact, a number of the ERCs listed in the FDOC do not even a ppear on the District’s Emission Reduction

Credits Registry.

8 As EPA pointed out in comments on another San Joaquin Valley power plant project, the District’s

“methodology” for determining appropriate inter

‐ pollutant ratios has never been approved by EPA. See

EPA’s May 21, 2009 Comments on Project Number N

‐ 1083212 (“the underlying methodology to

determine the appropriate ratios for inter

‐ pollutant o ffsets has not been approved by EPA

. . . It is

important to note that modeling is a critical component of an inter

‐ pollutant offset analysis

. . . .”).Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 21 of 24

trying to claim that th is new major source of pollution will contribute only insignificantly to

ongoing violations of the ozone and PM 2.5 NAAQS, EPA must work with Avenal to prepare an

adequate analysis and circulate that analysis for public review and comment. In the meantime,

EPA should deny Avenal’s PSD application for failing to comply with Clean Air Act 165(a)(3)

and 40 C.F.R. section 52.21(k)(1).

C. EPA should reject Avenal’s PSD permit application because less harmful

alternatives to the project are availa ble.

The foregoing descriptions of the failures of Avenal and EPA to adequately assess the

impacts of the proposed project highlight the need to for EPA to explore alternatives to the

proposed project. Section 165(a)(2) provides that the permitting decision should consider “the

air qua lity impact of [the] source, alternatives thereto, control technology requirements, and

other appropriate considerations

. . . .” See also Gregory B. Foote, “Considering Alternatives:

The Case for Limiting CO 2 Emissions From New Power Plants Through New Source Review,”

34 Envtl. Law Rep. 10642, 10650 (2004) (“By expressly providing citizens with the right to call

upon the permitting authority to consider ‘alternatives’ to the proposed source, Congress

clearly intended that the permitting authority could conclude that a source different from the

one proposed by the app licant

– or no new source at all

– should be permitted.”). The analysis

of BACT also requires consideration of alternatives based on “energy, environmental, and

economic impacts.” See CAA § 169(3). As Congress explained:

[W]hen an analysis of energy, economics, or environmental considerations indicates that

the impact of a major fac ility could alter the character of that community, then the

[permitting agency] could, after considering those impacts, reject the application or

condition it within the desires of the State or local community.

S. R EP

. N O

. 95

‐ 127, at 31 (1977).

Not considered or mentioned in any of EPA’s analysis is the fact that Avenal has applied

for and received a permit from the San Joaquin Valley Air District that would limit emissions so

as to avoid the necessity for a major source PSD permit. See SJVUAPCD, “ Final Determination

of Compliance (FDOC), Project Number C

‐ 1100751

– Avenal Power Center LLC (08

‐ AFC

‐ 01)”

(Dec. 17, 2010) (reducing NO

x emissions from 288,618 lb/year to 198,840 lb/year and CO

emissions from 1,205,418 lb/year to 197, 928 lb/year). In other words, a specific

, feasible

alternative to the proposed project has been identified by Avenal itself. EPA cannot claim that it

has fully complied with sections 160(1), 165(a)(2) or 169(3) when it ha s failed to consider this

available alternative that would lower total emissions. EPA should use its authority to consider

the environmental justice and other impacts, and to protect public health and welfare, as a basis

for rejecting Avenal’s PSD application since there is a demonstrated alternative that will lower

the emission s from this project.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 22 of 24

IV. EPA’s prop osed decision suffers from various procedural defects.

A. The Regional Administrator’s responsibility for making the permitting

decision cannot be redelegated without rulemaking.

On March 1, 2011, Administrator Jackson issued a memo temporarily delegating

permitting authority to the Assistant Administrator for Air and Radiation. While the

Administrator may have the ability to modify the Headq uarters Delegation Manual through the

issuance of such a memorandum, she cannot rewrite the applicable regulations governing

issuance of such PSD permits without conducting new notice and comment rulemaking.

Currently 40 C.F.R. § 124.15 provides “After the close of the public comment period under

§124.10 on a draft permit, the Regional Administrat or shall issue a final permit

decision

. . . .” (emphasis added); see also 40 CFR § 124.19(f)(2) (reiterating that the “final permit

decision shall be issued by the Regional Administrator

. . . .”). Unlike other regulatory

provisions that provide for “EPA” action, which is then subject to definition through the

delegation manual, her e the regulations expressly provide that it is the Regional Administrator

who will issue the permit. The plain text of the regulations cannot be changed, and indeed was

not even purported to be changed, by the Administrator’s March 1, 2011 memoran dum.

Without new rulemaking, the Regional Administrator must issue the final permit decision. See

United States v. Nixon

, 418 U.S. 683, 695

‐ 96 (1974) (“So long as [a] regulation is extant it has the

force of law”); see also Am. Fed ʹ n of Gov ʹ t Employees, AFL

‐ CIO, Local 3090 v. Fed. Labor Relation s

Auth., 777 F.2d 751, 759 (D.C. Cir. 1985) (holding that “unless and until [an agency] amends or

repeals a valid legislative rule or regulation, [the] agency is bound by such a rule or

regulation”).

B. The proposed revisions of statutory interpretations require rulemaking

governing implementation of the NAA QS and PSD program, neither of which

can be done through a permitting action approved by the Assistant

Administrator.

The Supplemental Statement of Basis acknowledges that it seeks to reverse various EPA

interpretations of the Clean Air Act and EPA’s regulations announced in prior rulemakings and

guidance documents. See Supplemen tal Statement of Basis at 11. As noted above, these

requirements derive from the plain language of the statute and therefore cannot be changed by

EPA at all. Even assuming these requirements were subject to reinterpretation, EPA’s attempt

to do so in the context of this permitting decision is improper and illegal.

EPA acknowledges that public com ment is necessary to reverse its prior

pronouncements, but EPA asserts that all that is required is an opportunity for public comment

on the proposed Avenal permit decision. This is not the rule from Paralyzed Veterans of America

v. D.C. Arena L.P.

, 117 F. 3d 579 (D.C. Cir. 1997). The court there explained, “Once an agency

gives its regulations an interpretation, it can only change that interpretation as it would modifyComments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 23 of 24

the regulation itself: thr ough notice and comment rulemaking.” Id. at 586; see also id. (“To allow

an agency to make a fundamental change in its interpretation of a substantive regulation

without notice and comment obviously would undermine those APA requirements. That is

surely why the Supreme Court has noted (in dicta) that APA rulemaking is requ ired where an

interpretation ‘adopts a new position inconsistent with

. . . existing regulations.’ Shalala v.

Guernsey Memorial Hosp.

, 514 U.S. 87, 100 (1995).”). EPA’s circulation of a Supplemental

Statement of Basis does not satisfy APA rulemaking requirements and is thus insufficient to

revise the previously an nounced interpretations requiring compliance with NO 2 and SO 2

NAAQS and the application of BACT for greenhouse gas emissions.

EPA’s proposed policy change is not based on the facts before it in this permit, where

limited notice might be sufficient. The authority that EPA claims it possesses to waive statutory

requirements is a legal conclusion, not a factual determination limited to this permit. Like the

adjudication in Shell Offshore Inc. v. Babbitt

, 238 F.3 d 622 (5 th Cir. 2001), where the court found

the agency’s decision “was the result of a departure from previous [agency] practice” and

where the agency “did not apply a general regulation to the specific facts of [the] case” but

instead “established a new policy” and then applied that to the case before it and others, EPA

here has ack nowledged that this new grandfather interpretation will apply to many facilities.

See id. at 628; see also “EPA Plan to ‘Grandfather’ Key Air Permit Raises Major Legal, Policy

Queries,” InsideEPA.Com (March 7, 2011) (available at: http://insideepa.com/Inside

‐

EPA/Inside

‐ EPA

‐ 03/04/2011/epa

‐ plan

‐ to

‐ grandfather

‐ key

‐ air

‐ permit

‐ raises

‐ major

‐ legal

‐ policy

‐ queries/menu

‐ id

‐ 153.html ) (reporting that “[Assistant Administrator] McCarthy noted EPA

would apply the policy to other permits in similar situations but has not yet identified them,

except to say it expects it will affect 10 to 20 permits nationwide.”). These are national policies

that EPA is attempting to reverse. As a result, the APA pro vides that notice of such

rulemakings “shall be published in the Federal Register

. . . .” 5 U.S.C. § 553(b). Moreover, such

rulemaking cannot be conducted by either the Regional Administrator or the Assistant

Administrator for the Office of Air and Radiation. These agency officials have no such

delegated auth ority to adopt or revise national rulemakings governing the implementation of

the PSD program or the new NAAQS. Until national rulemaking is completed in accordance

with the APA, EPA cannot apply its desired new exemptions in this permitting decision.Comments on Avenal Supplemental Statement of Basis

April 12, 2011

Page 24 of 24

V. Conclusion

EPA should have denied the Avenal PSD permit application long ago. It is the wrong

project in the wrong place. Rather than do the damage to the Clean Air Act that EPA has

proposed, commenters urge EPA to end this unfortunate and unseemly process by finally

denying Avenal’s PSD pe rmit application.

Sincerely,

Paul Cort

Staff Attorney