Texas Jeffrey R. Holmstead NewYork Partner Washington, DC Connecticut 202.828.5852 Office 

# BRACEWELL &GIULIANI Dubal 202.857.4812 Fax Kazakhstan London jeff.holrnstead@bgllp.com Bracewell & Giuliani LLP 2000 KStreet NW Suite 500 Washington, DC 20006-1872

November 16, 2009 

### By Overnight and Electronic Mail

Julie Walters U.S. EPA Region 9 75 Hawthorne Street Mail Code: ORC-2 SanFrancisco, CA 94105 Re: Avenal Energy Project; PSD Permit No. SJ 08-01 Dear Ms. Walters: As you know, we have been working with Avenal PowerCenter, LLC ("Avenal Power") in the above-referenced permittingmatter. In reviewing the public comments submitted on the proposed permit, we noticed that EarthJustice is seeking to reopen an issue that was resolved almost 30years 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 Cortto Shirley Rivera (October 15, 2009) at 9-18 ("EarthJustice Comments"). Because this issue is well settled in both law and practice, Avenal Powerdid 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 itmay 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 CleanAir 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, PartC, Prevention ofSignificant Deterioration ofAir Quality. This means, among otherthings, that the facility must obtain offsets and meetthe "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 permittingprocess that is being carried out by the San Joaquin Valley Air Pollution Control District and the California Energy Commission. EarthJustice has hadJulie Walters November 16,2009 Page 2

the opportunity to participate in this process, where issues relatedto nonattainmentpollutants must be addressed. These issues are not properly raised in the PSD permittingprocess now before EPA Region 9. Because this is a PSD permittingmatter, requirements related to ozone, PM 10. and PM25 are not relevant as a matter oflaw. Earthlustice apparently concedes that this is how the NSRand PSD programs have alwaysbeenimplemented,butargues thatthis approach is inconsistent with section 165(a)(3) ofthe Clean Air Act. To support this position, EarthJustice quotes a portion ofsection 165(a)(3) statingthat a new major source cannot 

### be constructed unless the proponent ofthe facility 

### "demonstrates

. .. thatemissions from the construction or operation ofsuch 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 thattherequirements in section 165 apply only to proposed facilities "to which this part [Part C] applies." CAA Section 165(a). Because an area canbe attainment for certainpollutants and nonattainment for others, EPA has always recognized that a proposed facility may need to comply with PSD requirements (Part C) for somepollutants and NSR requirements (Part D) for others. As EarthJustice recognizes, EPNslong-standing position onthis issue is codified in 40 C.F.R. 

### § 52.21 (i)(2), whichprovides that the PSD permitting process does not apply to a "major stationary source ormajormodificationwith respect to a particular pollutant ifthe owner or operator demonstrates that, as to the particular pollutant, the source or modification is located in anarea designated as nonattainment under section 107 oftheAct." 40C.F.R. 

### § 52.21(1)(2). This interpretation dates back to the beginning ofthe current PSD program, which Congress adopted aspart ofthe 1977 Amendments to the Clean Air Act. In 1978, when EPAfinalized its first set ofregulationsto implementthe newPSD program, it stated as follows: PSD applies irrespective ofwhere a source would locate, except that it does not apply to any source which with respectto a particularpollutant is subject to the nonattainment requirements

..



## " 43 Fed. Reg. 26388 at 26389 (June 19, 1978). Later inthe same Federal Register notice, the Agency reiterated this point: Any major source subjectto nonattainment offsetrequirements for a particularpol1utant which would impact no clean air areais not subject to PSD review for that pollutant. Review ofsuch a source