IP has a Federal Operating Permit (No. 5 - 1548 -

00008/00081) issued under the Clean Ai r Act that w as approved by the NY DEC to insure that it operates its paper mill in continuous compliance w ith all the general and special conditions and emissions limitatio ns set out in the permit (111 pages) for the purpose of safeguarding the public health and env ironment. Violations of the Clean Ai r Act are subject to penalties of $32,500 per vi olation per day. IP v iolated multiple conditions of its Title V Federal Operat ing Permit for stack testing of the main pow er boiler. Since the permit v iolations occurred over multiple periods and days during the TDF test burns, IP committed numerous Clean Ai r Ac t vi olations from November 7 - 13, 2006. The Title V permit requires conti nuous compliance w ith EP A Reference Method (EPA RM) 5 to conduct stack testing for particulate matter w henever TDF w as being fed to the main pow er boiler identified as Emission Unit: P

- OWERH in the permit, but IP failed to operate the boiler in continuous compliance since frequent periods occurred when EPA RM 5 samples and measurements w ere not being collected w hen TDF wa s being fed into the boiler for combustion . Continuous compliance wa s also required by the Title V permit w ith the 20% stack opacity limit ation at all times during TDF firing in the boiler, wh ich was to be determined using EPA

Reference Method 9 by a certified observer during daylight hours . As a result, the TDF burning after sunset was in violation of the Title V Federal Operating Permit c onditions since it's not feasible to take stack opacity readings using EPA

RM 9wit hout sunlight, and therefore the stack opacity level could not be observed and measured for continuous compliance as required by the permit. The Title V permit further state s: “ If the opacity exceeds 20%, the facility must stop adding TDF until emissions stabilize and are in compliance.” Without sunlight, EPA RM 9 could not be applied to determine if IP was exceeding the 20% stack opacity limitation.

NY DEC Permit ID: 5 - 1548 - 00008/00081 Facility DEC ID: 5154800008
Page 29 in Title V permit Item 24.1(From Mod 5): The facility

is authorized to perform regulated processes under this permit for: Emission Unit: P

- OWERH Emission Unit Description: The power bo iler is a multi

- fuel boiler that fires no. 6 fueloil, waste fuel type "A", wo od residue consisting of bark,

wood and sawdust, rejected digester wood knots, primary clarifier fiber and dried secondary biomass for the production of steam and electricity via a turbine generator. In addition, the power boiler is used to treat non

condensible gases (ncgs), whi ch are produced in the pulping and chemical recovery processes, through thermal oxidation. For this modification, the boiler w ill fire a combination of oi l, wo od and tire derived fuel during a tw o w eek trial and testing period. It is not an incinerator and incinerator regulations such as 6NYCRR Part 219 and 40CFR61 Subpart E do not apply.

Page 51 Item 37.1(From Mod 5): This permit authorizes the follow ing regulated processes for the cited Emission Unit: Emission Unit: P

- OWERH Process: TDF Source Classification Code: 1

- 02

- 009

- 01 Process Description: During a 14 day trial and testing period, tire

- derived fuel (TDF) w ill be combusted in the boiler along with number 6 fuel oil and wo od. Alternative fuels (rejected digester knots and secondary biosolids) shall not be burned w hile TDF isbeing burned. The TDF loading will not exceed 3 tons per

hour and the total heat input to the boiler wi ll not exceed 748 MMBtu per hour. TDF w ill be added to wood in the woodyard and pneumatically conveyed with the wood to the boiler. During the first w eek, TDF w ill be added in gradually increasing amounts w hile the boiler operators adjust the boiler to achieve optimum combustion conditions. During the second we ek, extensive stack testing will be performed to charactarize emissions. While the trial period is planned to be accomplished during consecutive days, it is understood that unforeseen co nditions may cause delays. If such conditions occur, the trial may be accomplished during 14 days of TDF use over a 21 day period. Whenever TDF is being burned, facility personnel will monitor the SO2 emission rate, NOX emission rate and stack opacity (dur ing daylight hours) . If any

of these indicators exceed permit limits, the facility w ill stop adding TDF until the conditions have stabilized and are in compliance. During the first w eek, PM emissions w ill be measured (using EPA Method 5) at baseline condit ion and while TDF is added at 1 ton per hour (TPH); 2 TPH; and 3 TPH. If PM emissions exceed 0.10 pounds per MMBtu, the facility w ill stop adding TDF.

Page 78The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Regulated Contaminant(s): CAS No: 0NY210

- 00

- 0 OXIDES OF NITROGEN Item 5 - 16.2: Compliance Certification shall include the follow ing monitoring: Monitoring T yp e: CONTINUOUS EMISSION MONITORING (CEM) Monitoring Description: Whenever tire

- derived fuel ( TDF) is being burned in the power boiler, the NOX emission rate must not exceed 0.25 pounds per MMBtu. This indicates that the power boiler is operating properly. If the NOX emission rate exceeds 0.25 pounds per MMBtu, the facility must stop adding TDF unt il NOX emissions stabilize and are in compliance. Manufacturer Name/Model Number: Thermo Environmental Model 42C Parameter Monitored: OXIDES OF NITROGEN Upper Permit Limit: 0.25 pounds per million Btus Reference Test Method: PS

- 2 Monitoring Frequency : CONTINUOUS Averaging Method: 3

- HOUR BLOCK AVERAGE Reporting Requirements: ONCE / BATCH OR MONITORING OCCURRENCEPage 79

Item 5 - 17.1: The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Item 5 - 17.2: Compliance Certification shall include the follow ing monitoring: Monitoring T yp e: WORK PRACTICE INVOLVING SPECIFIC OPERATIONS Monitoring Description: Tire

- derived fuel (TDF) may be burned in the power boiler for a trial period of up to 14 days over a period not to exceed 21 consecutive days. The TDF fuel rate shall not exceed 3 tons per hour and the total heat input to the boiler shall not exceed 748 MMBtu per hour. In addition, the only other fuels that may be burned wh ile TDF is being burned are oil, wood and non

- condensible gases. Work Practice Ty pe: PROCESS MATERIAL THRUPUT Process Material: MATERIAL Upper Permit Limit: 3 tons per hour Monitoring Frequency: CONTINUOUS Averaging Method: 1 HOUR M AX IMUM - NOT TO BE EXCEEDED AT AN Y TIME Reporting Requirements: SEMI

-ANNUALLY (CALENDAR) Reports due 30 days after the reporting period. The initial report is due 10/30/2006. Subsequent reports are due every 6 calendar month(s).Condition 5 - 18: Compliance Certification

Effecti ve betw een the dat es of 09/20/2006 and 06/19/2006 Ap plicable Federal Requirement: 6NYCRR 200.6 Item 5 - 18.1: The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Item 5 - 18.2: Compliance Certification shall include the follow ing mon itoring: Air Pollution Control Permit Conditions Mod 5/Active Page 71 of 103 FINAL

Page 80 Monitoring T yp e: MONITORING OF PROCESS OR CONTROL DEVICE PARAMETERS AS SURROGATE Monitoring Description: Whenever tire

- derived fuel (TDF) is being burned in t he power boiler, the opacity must not exceed 20%

. The facility shall have a certified method 9 opacity observer available during daylight hours to make hourly readings and additional readings as directed by the permitting authority

. If the opacity exceeds 20%, the facility must stop adding TDF until emissions stabilize and are in compliance.Parameter Monitored: OPACITY

Upper Permit Limit: 20 percent Monitoring Frequency : AS REQUIRED

- SEE PERMIT MONITORING DESCRIPTION Averaging Method: 6

- MINUTE AVERAGE (METHOD 9) Reporting Requirements: ONCE / BATCH OR MONITORING OCCURRENCE

Page 80 Condition 5 - 19: Compliance Certification Effecti ve betw een the dates of 09/20/2006 and 06/19/2006 Ap plicable Federal Requirement: 6NY CRR 200.6 Item 5 - 19.1: The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Regulated Contaminant(s): CAS No: 007446

- 09

- 5 SULFUR DIOXIDE Item 5 - 19.2:Compliance Certification shall include the follow ing

monit oring: Monitoring T yp e: CONTINUOUS EMISSION MONITORING (CEM) Monitoring Description: Whenever tire

- derived fuel (TDF) is being burned in the power boiler, the SO2 emission rate must not exceed 309 pounds per hour. This indicates that the power boiler scrubber is operating properly. If the SO2 emission rate exceeds 309 pounds per hour, the facility must stop adding TDF until SO2 emissions stabilize and are in compliance. Manufacturer Name/Model Number: Thermo Environmental 43 CHL Parameter Monitored: SULFUR DIOXIDE Upper Permit Limit: 309 pounds per hour Reference Test Method: PS

- 2

Page 81 Condition 5 -20: Compliance Certification Effecti ve betw een the dates of 09/20/2006 and 06/19/2006 Ap plicable Federal Requirement: 6NYCRR 200.6 Item 5 -20.1:The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Item 5 -2 0.2: Compliance Certification shall include the follow ing monitoring: Monitoring T yp e: RECORD KEEPING/MAINTENANCE PROCEDURES Monitoring Description: For a trial period, tire

- derived fuel (TDF) may be combusted in the power boiler alon g with number 6 fuel oil and wo od. During the trial, extensive stack testing will be performed under an approved stack test protocol. Testing will measure emissions of the follow ing: Filterable and condensible particulate matter Dioxins and Furans Polycyc lic Aromatic Hydrocarbons (PAHs) Polychlorinated Biphenyls (PCBs) Hydrogen Chloride Heavy metals including Zinc, Lead, Mercury and others Hexavalent Chrome Carbon Monoxide Total Hydrocarbons At the conclusion of the trial period, the samecontaminants wil l be measured wh ile operating the boiler

at comparable heat input, but without TDF, for comparison of emissions. A stack test report w ill be submitted to the permitting authority wit hin 60 days of the completion of testing. Monitoring Frequency : AS REQUIR ED

- SEE PERMIT MONITORING DESCRIPTION Reporting Requirements: ONCE / BATCH OR MONITORING OCCURRENCE

Page 82 Item 5 -21.1: The Compliance Certification activity w ill be performed for: Emission Unit: P

- OWERH Process: TDF Item 5 -21.2: Compliance Certification shall include the follow ing monitoring: Monitoring T yp e: WORK PRACTICE INVOLVING SPECIFIC OPERATIONSMonitoring Description:

Tire

- derived fuel (TDF) may be burned in the power boiler for a trial period of up to 14 days over a per iod not to exceed 21 consecutive days. The TDF fuel rate shall not exceed 3 tons per hour and the total heat input to the boiler shall not exceed 748 MMBtu per hour. In addition, the only other fuels that may be burned wh ile TDF is being burned are oil, wo od and non

- condensible gases. Work Practice Ty pe: PARAMETER OF PROCESS MATERIAL Process Material: FUEL Parameter Monitored: HEAT INPUT Upper Permit Limit: 748 million Btu per hour Monitoring Frequency : CONTINUOUS Averaging Method: 1 HOUR MAXIMUM

- NOT TO BE EXCEEDED AT ANY TIME Reporting Requirements: SEMI

-ANNUALLY (CALENDAR) Reports due 30 days after the reporting period. The initial report is due 10/30/2006. Subsequent reports are due every 6 calendar month(s).

Page