Texas Jeffrey R. Holmstead 

New York Partner 

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BRACEWELL 

&GIULIANI 

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November 16, 2009 

By Overnight and Electronic Mail 

Julie Walters 

U.S. EPA Region 9 

75 Hawthorne Street 

Mail Code: ORC-2 

San Francisco, CA 94105 

Re: Avenal Energy Project; PSD Permit No. SJ 08-01 

Dear Ms. Walters: 

As you know, we have been working with Avenal Power Center, LLC ("Avenal 

Power") in the above-referenced permitting matter. In reviewing the public comments 

submitted on the proposed permit, we noticed that EarthJustice is seeking to reopen an issue 

that was resolved almost 30 years ago when the PSD program was created - arguing that 

PSD permitting requirements should apply not only to PSD pollutants, but to nonattainment 

pollutants as well. See Letter from Paul Cort to Shirley Rivera (October 15, 2009) at 9-18 

("EarthJustice Comments"). Because this issue is well settled in both law and practice, 

Avenal Power did not anticipate the need to address it. Now that it has been raised, however, 

we submit this letter to ensure that Region 9 has all the information it may need to prepare its 

response to comments. 

The proposed Avenal Energy Project will be located in the San Joaquin Valley, which 

has been designated as nonattainment for ozone, PMIO, and PM2.5. As a result, the Clean Air 

Act pennitting requirements related to these pollutants are those set forth in Subchapter I, 

Part D, Requirements for Nonattainment Areas - not those set forth in Subchapter I, Part C, 

Prevention of Significant Deterioration of Air Quality. This means, among other things, that 

the facility must obtain offsets and meet the "lowest achievable emission rate" for its 

emissions ofthese pollutants and their precursors. 

Pursuant to EPA rules, the issues related to these nonattainment pollutants are being 

handled in a separate permitting process that is being carried out by the San Joaquin Valley 

Air Pollution Control District and the California Energy Commission. EarthJustice has had 
Julie Walters 

November 16,2009 

Page 2 

the opportunity to participate in this process, where issues related to nonattainment pollutants 

must be addressed. These issues are not properly raised in the PSD permitting process now 

before EPA Region 9. Because this is a PSD permitting matter, requirements related to 

ozone, PM10. and PM25 are not relevant as a matter of law. 

Earthlustice apparently concedes that this is how the NSR and PSD programs have 

always been implemented, but argues that this approach is inconsistent with section 165(a)(3) 

of the Clean Air Act. To support this position, EarthJustice quotes a portion of section 

165(a)(3) stating that a new major source cannot be constructed unless the proponent of the 

facility "demonstrates . .. that emissions from the construction or operation of such facility 

will not cause, or contribute to, air pollution in excess any . .. national ambient air quality 

standard in any air quality control region ...." Earthlustice Comments at 9 (emphasis in 

original). EarthJustice fails to note, however, that this provision only applies to PSD 

pollutants. The lead-in paragraph makes it clear that the requirements in section 165 apply 

only to proposed facilities "to which this part [Part C] applies." CAA Section 165(a). 

Because an area can be attainment for certain pollutants and nonattainment for others, EPA 

has always recognized that a proposed facility may need to comply with PSD requirements 

(Part C) for some pollutants and NSR requirements (Part D) for others. 

As EarthJustice recognizes, EPNs long-standing position on this issue is codified in 

40 C.F.R. § 52.21 (i)(2), which provides that the PSD permitting process does not apply to a 

"major stationary source or major modification with respect to a particular pollutant if the 

owner or operator demonstrates that, as to the particular pollutant, the source or modification 

is located in an area designated as nonattainment under section 107 ofthe Act." 40 C.F.R. § 

52.21 (1)(2). This interpretation dates back to the beginning of the current PSD program, 

which Congress adopted as part ofthe 1977 Amendments to the Clean Air Act. In 1978, 

when EPA finalized its first set ofregulations to implement the new PSD program, it stated 

as follows: 

PSD applies irrespective of where a source would locate, except 

that it does not apply to any source which with respect to a 

particular pollutant is subject to the nonattainment requirements .. 

" 

43 Fed. Reg. 26388 at 26389 (June 19, 1978). Later in the same Federal Register 

notice, the Agency reiterated this point: 

Any major source subject to nonattainment offset requirements for 

a particular pol1utant which would impact no clean air area is not 

subject to PSD review for that pollutant. Review of such a source