AUTHORITY TO CONSTRUCT / MODIFY

ISSUED PURSUANT TO

PREVENTION OF SIGNIFICANT DETERIORATION (PSD)

REQUIREMENTS AT 40 CFR § 52.21

PSD PERMIT NUMBER: S AC 87

- 01

- A U.S. ENVIRONMENTAL PROTECTION AGENCY, REGION IX

PERMITTEE: Sierra Pacific Industries

– Loya lton (SPI

- Loyalton)

FACILITY LOCATION: Railroad Avenue, Loyalton, CA

This Permit is issued pursuant to the Prevention of Significant Deterioration (PSD) requirements of the Clean Air Act, as amended, 42 U.S.C. §§ 7401

- 7671, et seq. SPI

Loyalton is gra nted approval to construct/modify operation of their existing 20 MW Cogeneration Power Plant located near Loyalton , California, as described herein, in accordance with the permit application and permit amendment dated August 30 , 2010 (and plans submitted w ith the permit application), federal regulations governing the Prevention of Significant Deterioration of air quality (40 CFR § 52.21), and other terms

and conditions set forth in this PSD Permit.

Failure to comply with any condition or term set forth i n this PSD Permit is subject to enforcement action pursuant to Section 113 of the Clean Air Act.

This PSD Permit does not relieve the Permittee from the responsibility to comply with any other applicable provisions of the Clean Air Act (including 40 CFR P arts 51, 52, 60, 61, 63, and 72 through 75), other federal, or Northern Sierra Air Quality Management

District (District) requirements.

This PSD Permit becomes effective at the date of issuance pursuant to 40 CFR § 124.15(b)(3).

original signed by Elizabeth Adams for August 30, 2010

Deborah Jo rdan Date Director, Air Division2 AUTHORITY TO CONSTRUCT / MODIFY

ISSUED PURSUANT TO

PREVENTION OF SIGNIFICANT DETERIORATION (PSD)

REQUIREMENTS AT 40 CFR § 52.21

SIERRA PACIFIC INDUSTRIES , LOYALTON, CA

PSD PERMIT NUMBER : SAC 87

- 01

- A

August 30, 2010

Permi t Conditions

I. Applicant

Sierra Pacific Industries

Railroad Avenue

Post Office Box 208 Loyalton, California 96118

II. Project Location

The project is located on Railroad Avenue, in the town of Loyalton, Sierra County, California. This facility is located i n the Northern Sierra Air Quality Management District and lies within the Mountain Counties Air Basin.

The nearest Federal Class I area is the Desolation Valley Wilderness Area,

located 43.7 miles to the south.

III. Project Description

Sierra Pacific Ind ustries (SPI) is seeking an amendment to the Prevention of Significant Deterioration (PSD) permit issued in 1987 by the U.S. Environmental Protection Agency (EPA). The proposed project is the amendment of permit conditions for the cogeneration facility co ntained in Prevention of Significant Deterioration permit number NSR 4

- 4

- 4, SAC 89

- 01. The Applicant proposes to increase emission limits and averaging times of nitrogen (NO

x ) and carbon monoxide (CO). No change in the construction of the boiler is propo sed.

The cogeneration facility includes a 20 MW, 335.7 MMBTU/hour Riley spreader

stoker boiler for the combustion of wood fuel and production of steam, a turbine generator for converting the energy of steam into electrical energy, a fuel handling and st orage area, and an ash handling facility.

IV. Permit Expiration

This Approval to Modify shall become invalid if construction is not commenced3 (as defined in 40 CFR 52.21(b)(8)) within 18 months after the approval takes effect, (2) if construction is disconti nued for a period of 18 months or more, or (3) if construction is not completed within a reasonable time.

V. Notification of Commencement of Construction and Startup

The Regional Administrator shall be notified in writing of the anticipated date of

initial startup (as defined in 40 CFR 60.2(o)) of each facility of the source not more than sixty (60) days nor less than thirty (30) days prior to such date and shall be notified in writing of the actual date of commencement of construction and startup within fi fteen (15) days after such date.

VI. Facilities Operation

All equipment, facilities, and systems installed or used to achieve compliance with the terms and conditions of this Approval to Modify shall at all times be maintained in good working order and be op erated in a manner consistent with safety and good air pollution control practices for minimizing emissions.

VII. Malfunction Reporting

A. The Regional Administrator shall be notified by telephone, fax or email within 48 hours following any failure of air pollut ion control equipment, process equipment, or of a process to operate in a normal manner which results in an increase in emissions above any allowable emissions limit stated in Section

XII of these conditions.

B. In addition, the Regional Administrator shal l be notified in writing within fifteen (15) days of any such failure. This notification shall include a description of the malfunctioning equipment or abnormal operation, the date of the initial failure, the period of time over which emissions were incre ased due to the failure, the cause of the failure, the estimated resultant emissions in excess of those allowed under Section XII.D of these conditions, and the methods utilized to restore normal operations.

C. Compliance with this malfunction notification provision shall not excuse or otherwise constitute a defense to any violations of this permit or of any law or regulations which such malfunction may cause

.

VIII. Right to Entry

The Regional Administrator, the head of the State Air Pollution Control Agency,

th e head of the responsible local air pollution control agency, and/or their authorized representatives, upon the presentation of credentials, shall be permitted:4 A. to enter the premises where the source is located or in which any records are required to be k ept under the terms and conditions of this PSD permit; and

B. at reasonable times to have access to and copy any records required to be kept under the terms and conditions of this PSD permit; and

C. to inspect any equipment, operation, or method required in t his PSD permit;

and

D. to sample emissions from the source.

IX. Transfer of Ownership

In the event of any changes in control or ownership of facilities to be constructed or modified, this Approval to Construct/Modify shall be binding on all subsequent

owners a nd operators. The applicant shall notify the succeeding owner and operator of the existence of this Approval to Construct/Modify and its conditions by letter, a copy of which shall be forwarded to the Regional Administrator and

the State and local Air Pol lution Control Agency.

X. Severability

The provisions of this Approval to Construct/Modify are severable, and, if any provision of this Approval to Construct/Modify is held invalid, the remainder of this Approval to Construct/Modify shall not be affected th ereby.

XI. Other Applicable Regulations

The owner and operator of the proposed project shall operate the proposed stationary source in compliance with all other applicable provisions of 40 CFR Parts 52, 60 and 61 and all other applicable federal, state and l ocal air quality regulations.

XII. Special Conditions

A. Certification

Sierra Pacific Industries (SPI) shall notify the EPA in writing of compliance at the Loyalton facility with Special Conditions XII.B and XII.C below, and

shall make such notification withi n 15 days of such compliance. This letter must be signed by a responsible representative of SPI.

B. Air Pollution Control Equipment/Operations

SPI shall install, continuously operate, and maintain the following air pollution controls to minimize emissions . Controls listed shall be fully5 operational upon startup of the proposed equipment.

1. The Riley spreader

- stoker boiler shall be equipped with a set of multiclones and an ESP for the control of particulate emissions.

2. The Riley spreader

- stoker boiler s hall be operated with high pressure

over fire air for the control of CO emissions.

3. The Riley spreader

- stoker boiler shall be equipped with a selective non

catalytic reduction system (SNCR) system for the control of NO

x emissions.

4. Good combustion pra ctices.

C. Continuous Emission Monitoring

1. SPI shall install, and maintain and operate the following continuous monitoring systems in the boiler exhaust stack:

2. Continuous monitoring systems to measure stack gas, NO X , CO and CO 2 concentrations. The sy stem shall meet EPA monitoring performance specifications (40 CFR 60.13; 40 CFR 60, Appendix B, Performance Specifications 2, 3, and 4; and, 40 CFR 60, Appendix F).

3. Continuous monitoring systems to measure stack gas, volumetric flow rates. The system shall meet EPA performance specifications (40 CFR Part 60, Appendix B, Performance Specification 6).

4. Prior to the date of startup, SPI shall install, and after completion of the initial performance test, maintain and operate a transmissometer system

fo r continuous measurement of the opacity of stack emissions. The system shall meet EPA monitoring performance specifications (40 CFR 60.13 and 40 CFR 60, Appendix B, Performance Specification 1).

D. Emission Limits

1. Total Riley spreader

- stoker boiler annual emissions shall not exceed the following limits:

a. 222.6 tons of NO

x per rolling 12

- month period.

b. 2420.1 tons of CO per rolling 12

- month period.

2. Emissions from the Riley boiler shall be limited to the more stringent of the following hourly or concentration limits, averaged over rolling

multi

- hour periods, except as provided by Special Condition XII.D3.:6 a. 50.75 lbs/hr of NO

x or 80 ppm of NO

x at 12% CO 2 averaged over a rolling eight

- hour period,

b. 550 lbs/hr of CO or 1443 ppm of CO at 12% CO 2 averaged over a rolling eight

- hour period,

c . Maximum 20% Opacity for any 6

- minute average.

3. Emissions during transient operation shall not exceed:

a. 65 lbs/hr of NO

x or 102 ppm at 12% CO 2, averaged over 8 hours, for periods agg regating to no more than 100 hours per year

,

b. 772 .42 lbs/hr of CO or 1998 ppm, at 12% CO 2 , averaged over 8 hours, for periods aggregating no more than 100 hours per year,

c. The following are t ransient operating c onditions for the Riley boiler :

(1) Excess emiss ions indicated by the CEM system shall be considered violations of the applicable emission limit for the Periods of startup or shutdown typically 8 hours in duration. The average is 6 times per year.

(2) Changing power load on the turbine/generator due to the outside electrical demand. The average is 15 to 30 times per year depending on transmission line maintenance intervals. (3) Changing power load on the turbine/generator due to changing weather and transmission line failures. The average is 15 times

per year.

(4) Cleaning firebox grates. This averages 6 times per day for

about 30 minutes each time.

(5) Changing fuel types. This can occur about three times a week and lasts about 2 hours when tuning on the boiler settings.

(6) Annual source testing when required to operat e at loads above or below the existing daily demands.

E. Revised Emission Limits

EPA may set a new allowable emissions rate or a more appropriate averaging period for any of the above pollutants after reviewing the first four quarters of continuous emission monitoring data required under Special

Condition XII.C.7 If any emission limit is revised, the difference between the emission limit set

forth above and a revised lower emission limit shall not be allowed as an

emission offset for future construction or m odification.

F. Performance Tests

1. Within 60 days after achieving the maximum production rate of the proposed equipment, but no later than 180 days after initial startup of equipment as defined in 40 CFR 60.2, and at such other times as specified by the EPA, SPI shall conduct performance tests for NO

x , CO, and opacity and furnish the Northern Sierra AQMD and the EPA a written report of the results of such tests. The tests for NO

x , and CO shall be conducted on an annual basis and at the maximum operating

capa city of the unit being tested. Upon written request from SPI, EPA may approve the conducting of performance tests at a lower specified production rate. Also, after initial performance tests and upon written request and adequate justification from SPI, EP A may waive a specified annual test for the Riley spreader

- stoker boiler.

2. Performance tests for NO

x , CO, and opacity shall be conducted and the results reported in accordance with the test methods set forth in 40 CFR 60, Part 60.8 and Appendix A. The fol lowing test methods shall be

used:

a. Performance tests for emissions of NO

x shall be conducted using

EPA Methods 1

- 4 and 7 e

.

b. Performance tests for emissions of CO shall be conducted using EPA

Methods 1

- 4 and 10.

c. Performance tests for opacity shall be cond ucted using

EPA Method 9.

d. The EPA shall be notified in writing at least 30 days prior to such tests to allow time for the review and approval of the test plan and to arrange for an observer to be present at the test. Such prior notice

s hall minimize the possibility of EPA rejection of test results for procedural deficiencies. In lieu of the above mentioned test methods, equivalent methods may be used with prior written approval from the EPA.

3. For performance test purposes, sampling port s, platforms, and access shall be provided by SPI on the boiler exhaust system in accordance with 40 CFR 60.8(e).8 G. Recordkeeping and Reporting

1. SPI shall maintain a file of all measurements, including continuous monitoring systems evaluations; all continuo us monitoring systems or monitoring device calibration checks; adjustments and maintenance performed on these systems or devices; performance and all other information required by 40 CFR 60 recorded in a permanent form suitable for inspection. The file sh all be retained for at least two years following the date of such measurement, maintenance, reports and

records.

2. After the first complete four quarters of operation following receipt of the PSD permit, SPI shall submit to EPA all continuous monitoring

sys tem measurements for the last four quarters required by Special Condition XII.C to EPA Region 9, AIR

- 3.

3. SPI shall notify EPA of the date on which demonstration of the continuous monitoring system performance commences (40 CFR 60.13 (c)). This date should correspond to the scheduled source test date.

4. SPI shall submit a written report of all excess emissions to EPA for every calendar quarter in accordance with 40 CFR 60.7(c) and (d). The report shall include the following:

a. When no excess emissions have o ccurred or the continuous monitoring system has not been inoperative, repaired, or adjusted, such information shall be stated in the report.

b. Excess emissions shall be defined as any 8

- hour period during which the average emissions of NO X , CO, or O 2 , as me asured by the CEM, exceeds the maximum emission limits set forth in Special Conditions

XII.C.2 , XII.C.3 and XII.C.4 , above.

. (1) Excess emissions indicated by the CEM system shall be considered violations of the applicable emission limit for the

purposes o f this permit.

. (2) Not less than 90 days prior to the date of startup of the facility, SPI shall submit to the EPA a quality assurance project plan for the certification and operation of the continuous emission monitors. Such a plan shall conform to the EPA document "Guidelines for Developing a Quality Assurance Project Plan" (QAMS 005/80).9 H. New Source Performance Standards

The Riley spreader

- stoker boiler is subject to the Standards of Performance for New Stationary Sources (NSPS) 40 CFR 60, Subpart s A, and Db, including all emission limits and all notification, testing, monitoring, and reporting requirements.

I. Fuel Use

1. The biomass fuel consists of a mixture of agricultural residues, including but not limited to rice hulls, in

- forest residues from l ogging and chipping operations, and urban wood wastes from private and municipal landfills. The wood residue should be non

- chemically treated, free of plastic, non

- wood construction materials and resin binders. Urban woodwaste must be less than 1 % by we ight of plastic, rubber, and other non

- wood combustibles.

2. The annual input of biomass fuel to the Riley boiler shall not exceed 367,044 tons at 55% moisture content.

3. Treated wood, coal or coal byproducts shall not be used as fuel by this facility.

4. Sierr a Pacific Industries shall record and maintain records of the amounts of natural gas and biomass fuel fired each calendar quarter, and the plant hours of operation. All information shall be recorded in a permanent form suitable for inspection. The file s hall be retained for at least two years following the date of such measurements, calculation

and record.10

XIII. Agency Notifications

All correspondence as required by this Authority to Construct shall be forwarded

to:

Director, Air Division

U.S . Environmental Protection Agency

75 Hawthorne Street San Francisco, CA 94105

Chief, Stationary Source Division

California Air Resources Board

P.O. Box 2815 Sacramento, CA 95814

Air Pollution Control Officer Northern Sierra Air Quality Management Distr ict

Air Pollution Control Officer

200 Litton Drive

P.O. Box 2509 Grass Valley, CA 95945