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Kevin P. Bundy • Senior Attorney • 351 California St., Suite 600 • San Francisco, CA 94104
Phone: 415-436-9682 x313 • Fax: 415-436-9683 • kbundy@biologicaldiversity.org October 17, 2012

Via e-mail: R9airpermits@epa.gov Hard copy to follow via U.S. Mail

Omer Shalev (AIR-3) U.S. EPA Region 9
75 Hawthorne Street San Francisco, CA 94105-3901 Phone: (415) 972-3538

Re: Proposed PSD Permit Modifica tion (Application No. SAC 12-01) Sierra Pacific Industries, Anderson Division

Dear Mr. Shalev:

The Center for Biological Diversity (“Ce nter”) submits the following comments on the Proposed PSD Permit Modification (“Draft Permit”) and the accompanying Statement of Basis and Ambient Air Quality Impact Report (“SOB”) for the Sierra Pacific Industries (“SPI”) Anderson biomass po wer plant (“facility” or “project”). The Center is a non-profit environm ental organization dedicated to the protection of imperiled species, their habitats, and the environment through scienc e, policy, and environmental law. The Center has more than 470,000 members and online activists throughout the United States. The goal of the Center’s Climate Law Institute is to reduce U.S. greenhouse gas emissions and other air polluti on to protect biological diversity, the environment, and public health. Specific objectives include secu ring protections for species threatened by the impacts of global warming, ensuring compliance with applicable law in order to reduce greenhous e gas emissions and other air pollution, and educating and mobilizing the public on global warming and air quality issues.

A stationary source of air po llution in areas that attain applicable national ambient air quality standards (“NAAQS”) (or ar eas not classified) may not commence construction without first obtaining a preven tion of significant de terioration (“PSD”) permit. See 42 U.S.C. §§ 7470-7479; 40 C.F.R. § 52.21. The permit must provide that “the proposed facility is s ubject to the best available control technology [“BACT”] for each pollutant subject to regulation under [the Clean Air Act] emitted from, or which results from, such facility.” 42 U.S.C. § 7475(a)(4); 40 C.F.R. § 52.21(j). The facility’s owner or operator also must demonstrate that emissions from the facility will not cause or contribute to air pollution in excess of any maximum allowa ble increase or concentration of air pollutants, any applicable NAAQS, or “any other applicable emission standard or standard of performance” under the Clean Ai r Act. 42 U.S.C. § 7475(a)(3)(A)-(C); 40 C.F.R. § 52.21(k)-(m). The permit must be s ubject to a review process where the public has an opportunity to provide input on “the air quality impact of such source, alternatives CENTER for BIOLOGICAL DIVERSITYMr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 2 of 14 thereto, control technology requirements, a nd other appropriate considerations.” 42 U.S.C. § 7475(a)(2); see generally 40 C.F.R. Part 124.

As set forth below, the Draft Permit and SOB prepared by EPA for the facility do
not meet the standards set forth in the Cl ean Air Act, EPA’s implementing regulations, and the decisions of the Environmental Appeal s Board (“EAB”). EPA must either revise the Draft Permit and SOB to comply with these standards or deny the application.

I. EPA’s Proposed Emission Limits for the Facility Do Not Properly Reflect
BACT.

BACT determinations “are one of the most critical elements in the PSD permitting process and thus ‘should be well documented in the record, and any decision to eliminate a control option should be adequately explained and justified.’” In re Russell City Energy Ctr. , 15 E.A.D. __, PSD Appeal Nos. 10-01 to 10-05, slip op. at 58 (EAB Nov. 18, 2010); see also In re Indeck-Elwood LLC , 13 E.A.D. 126, 134 (EAB 2006); In re Knauf Fiber Glass, GmbH , 8 E.A.D. 121, 131 (EAB 1999) (“ Knauf I ”); In re Newmont Nev. Energy Inv., LLC , 12 E.A.D. 429, 442 (EAB 2005)). A BACT determination thus must reflect “considered judgment on the part of the permitting authority, as documented
in the record.” Russell City , slip op. at 58 (internal quotations omitted). The Environmental Appeals Board has remanded pe rmits “where the permit issuer’s BACT analyses were incomplete or the rationale was unclear.” Id. at 58 n.47.

The SOB employs a version of the fi ve-step, “top-down” BACT analysis
described in EPA’s Draft New Source Review Workshop Manual. 1 “[I]n evaluating the rationality and defensibility of BACT de terminations by permitting authorities, the [EAB] has required an analysis that reflects a level of detail in the BACT analysis comparable to the methodology in the NSR Manual.” In re General Motors, Inc. , 10 E.A.D. 360, 366 (EAB 2002) (citing In re Steel Dynamics, Inc. , 9 E.A.D. 165, 183 (“This top-down analysis is not a mandatory methodology, but it is frequently used by permitting authorities to ensure that a defensible BACT determination, involving consideration of all requis ite statutory and regulatory criteria, is reached.”); Knauf I , 8 E.A.D. at 134 n. 25 (“A strict applicati on of the methodology described in the NSR Manual is not mandatory, but we expect an analys is that is as sufficiently detailed as the model in the NSR Manual.”); id. at 129-30 n.14 (“We woul d not reject a BACT determination simply because the permitting authority deviated from the Draft NSR Manual, but we would scrutini ze such a determination carefully to ensure that all regulatory criteria were consider ed and applied a ppropriately.”)).

1 U.S. EPA, Draft New Source Review Wo rkshop Manual: Prevention of Significant
Deterioration and Nonattainment Area Perm itting (Oct. 1990) (hereaf ter “NSR Manual”).Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 3 of 14 A. EPA Has Not Demonstrated that the Draft Permit Reflects BACT for
NOx.

1. EPA Improperly Rejected Flui dized-Bed Boiler Designs as Technologically Infeasible.

The SOB rejected fluidized-bed boile r designs for both NOx and CO as technologically infeasible at Step 2 of th e BACT analysis. SOB at 12-13, 17. The SOB and the record do not suppor t this determination.

As a threshold matter, EPA relied on faulty assumptions in rejecting these
alternatives. The SOB claims “SPI ha s not entered a bindi ng power purchasing agreement with consistent base load ener gy demand.” SOB at 12. This statement does not provide a complete or accurate account of the relevant agreement. Although final state regulatory approva l is still pending, SPI has entered into a power purchase agreement (“PPA”) with Pacific Gas & Electr ic Company (“PG&E”), as reflected in an Advice Letter PG&E recently filed with th e California Public Utilities Commission. 2
Prior to 2017, deliveries from the faciliti es covered by the PPA will not increase substantially, but rather will co ntinue to be governed by current contracts due to expire in late 2016 and early 2017; afte r 2017, however, the Advice Lette r suggests that the PPA
will obligate SPI to serve “consistent base lo ad energy demand,” particularly from the proposed Anderson facility. See Advice Letter at 1-2, 4, 10, 15.

SPI’s primary reason for rejecting fluidized bed boiler alternatives is its claim that such boilers cannot be operated in “turndown” mode. SPI claims that because PG&E has more renewable energy than it needs through 2017, and because the PPA will allow PG&E to “vary the power production to suit thei r needs,” SPI must be able to vary steam production between 20% and 100%. 3 Although the SOB’s explanation is not entirely clear, EPA appears to have accepted this rati onale and concluded that when “electricity demand decreases,” the boiler w ill still need to supply a smaller amount of steam for the
lumber kilns. SOB at 12-13. 4

The PPA described in the Advice Letter, however, undercuts this rationale. Indeed, to the extent there is any feasib ility problem, it appears to be exclusively contractual, not technical. It also appears to be tempor ary. Again, the Advice Letter

2 Pacific Gas & Elec. Co., Advice Letter 4102-E (Sept. 7, 2012) (hereafter “Advice Letter”) (attached as Ex. A).

3 Eric Albright, Environ Int’l Corp., Le tter to Gerardo Rios, EPA Region 9, Re: Supplemental Control Technology Analysis at 2 (Jan. 23, 2012) (h ereafter “Environ 1/23/12 Letter”).

4 The SOB also considers the need to pr ovide lower amounts of process steam during periods of turbine and generator malfunction. SOB at 12. However, it appears that the existing, smaller boiler at SPI’s facility—which would rema in operational under the Draft Permit—could provide adequate process steam to the lumber drying kilns at times when the new, larger boile r is unavailable.Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 4 of 14 states that PG&E’s power purchase obliga tion from the Anderson f acility will be limited to the amounts specified under current contr acts until those contract s expire in 2016 and 2017. Advice Letter at 10. SPI apparently pr oposes to begin operations at the proposed facility in 2014, but to sell only some limited amount of power for the next three years prior to ramping up to full power production in 2017. Thus the operational flexibility SPI seeks—along with permission to forgo t echnically feasible technology that would potentially reduce emissions—will be necessary only for three years, and only as a result of apparent contractual lim itations that SPI itself participated in negotiating.

Moreover, it is not clear that the ope rational flexibility SPI seeks is even necessary. Even if the PPA were to contai n a clause allowing PG&E to “vary power production”—which is impossible to conf irm because the text of the PPA is confidential—PG&E’s purported oversupply of renewable energy prior to 2017 would not necessarily be an impediment to consiste nt steam (and baseload energy) production at the Anderson facility beginning in 2014. This is because “any deliveries in excess of PG&E’s RPS compliance obligation will be bankable and available for use to satisfy future compliance period or year needs.” Advice Letter at 17-18. PG&E expects a tremendous need for renewable generation to satisfy its obligations under California’s
Renewable Portfolio Standard in the third a nd subsequent compliance periods (i.e., after 2017). Advice Letter at 15. It appears unlikel y that PG&E would re quire SPI simply not to generate excess power that PG&E could eas ily bank in order to meet an acknowledged future compliance deficit.

Even if SPI has negotiated a PPA that does not permit it to sell the facility’s full output for the first three y ears of operation, that business decision does not make fluidized-bed boiler alternatives technologica lly infeasible under Step 2 of the BACT analysis. Furthermore, this business decision should not be the basis of a permit allowing SPI to install and operate equipment that will emit pollutants at a higher rate for decades after 2017, when the rationale outl ined in the SOB and the E nviron 1/23/12 Letter will no longer apply.

EPA must consider alternatives to th e facility as proposed. 42 U.S.C. § 7475(a)(2). In so doing, EPA may co nsider the need for the project. See In re Prairie State Generating Co. , LLC, 13 E.A.D. 1, 31 (EAB 2006) (“ [W]e are unable to reconcile
the view that consideration of need for a facility is outside the scope of section 165(a)(2)
of the Clean Air Act with the text of the stat ute and prior decisions.”). In order to give full effect to Congress’s dire ction to consider alternativ es, moreover, EPA must have authority to deny a permit application if ther e are alternatives th at better protect air quality.

Under the terms of the PPA as descri bed in the Advice Letter (and by SPI’s consultant), there simply is no need for this facility until 2017. The existing boiler obviously can supply sufficient steam to serv e both process and current contractual energy delivery requirements. EPA theref ore could deny the permit outright, without prejudice to renewing the a pplication—and further consider ing fluidized-bed technology as BACT—once the need for the facility arises.Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 5 of 14 Another alternative would be to require further consid eration of fluidized bed technology as BACT for the new boiler in th e context of permit conditions prohibiting operation of the new boiler and allowing SPI to continue supplying power and process steam from its existing boiler until 2017 (o r such other time as full baseload power deliveries are required under the PPA). 5 At the very least, the existence of these
alternatives—which are consistent with the PPA as described in the Advice Letter, SPI’s submissions in the record, and the SOB’s rationale—demonstrates that fluidized-bed boiler designs should not have been re jected as technically infeasible.

2. EPA Improperly Rejected Catalytic Control Technologies as
BACT for NOx.

The SOB lacks a clear and legally adequa te explanation for EPA’s rejection of Selective Catalytic Reduction, Regenerative Selective Catalytic Reduction, and other catalytic variants (collectiv ely “SCR”) as BACT for NOx, de spite SCR’s clearly superior emissions reduction potential.

EPA’s Step 2 analysis is somewhat inc onsistent. EPA concluded that SCR is “technically feasible” for the facility. SOB at 13-14. Yet the SOB also emphasized that although a number of biomass facilities have been permitted with SCR as BACT, operational data is lacking and the “demonstr ated effectiveness of SCR systems” at
biomass facilities “remains limited.” SB at 14. Lack of “demonstrated” operational data, however, is not sufficient to reject an othe rwise available and applicable technology as technologically infeasible. See NSR Manual at B.17-B.21. To the extent EPA based its rejection of SCR systems on a lack of demonstr ated effectiveness at Step 2, therefore, it did so incorrectly. 6 SCR should have been clearly ra nked as the top control option at Step 3. 7

5 Although Condition 18 of SPI’s Use Permit fr om Shasta County prohibits simultaneous operation of the new boiler and the existing bo iler, this alternativ e would not require simultaneous operation. See Statement of Conditions, Use Permit No. 07-021 (attached as Ex. B).

6 In the same vein, the SOB states that “pro jected NOx emissions fr om those facilities permitted with SCR vary considerably.” SOB at 14. The basis for this statement is not clear; the SOB fails to provide any data on projected mass NOx emissions from SCR facilities. In any event, th e variation between the emissions limit at any one of the SCR
facilities identified in the SOB and SPI’s proposed limit of .13 lbs/MMBtu is far more “considerable” than any variation among the S CR facility limits themselves. SOB at 15, Table 7.1-1 (depicting emissions limits at six of seven SCR facilities as falling between .06 and .075 lbs/MMBtu).

7 Puzzlingly, EPA’s Step 3 analysis begins with SPI’s proposed NOx limits of .13 lb/MMBtu (12-month rolling) and .15 lb/MMBtu (3-hour block average), and then lists “remaining technologically feasib le control technologies . . . in decreasing order of effectiveness”—even though SCR is roughly tw ice as effective (at .06-.075 lb/MMBtu)Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 6 of 14 EPA also failed to properly evaluate cost-e ffectiveness at Step 4 of its analysis. “The purpose of step 4 is to either valida te the suitability of the top control option identified or provide a clear ju stification as to why that op tion should not be selected as

BACT.” In re Mississippi Lime Co. , 15 E.A.D. __, PSD Appeal No. 11-01, slip op. at 12 (EAB Aug. 9, 2011).

[U]nder step 4, the permit issuer considers issues related to the relative
cost effectiveness of th e alternative control technologies, in addition to their energy and environmental impa cts. [NSR Manual] at B.31-.46. The permit issuer evaluates the economic impacts by estimating the average
and incremental cost-effectiveness of the control technologies, measured in dollars per tons of pollutant emissions removed. [Citation.] The permit issuer’s economic impacts analysis must generally be thorough and
detailed.

Id. at 16.

The critical metric for economic impact an alysis, however, is not the cost to the proposed source alone, but rather the cost-effectiveness of th e proposed control relative to other similar sources that have employe d that control. NSR Manual at B.31-B.32, B.44-B.45. “The principal purpose of the cost analysis is to determine if there are significant cost differences between the applicant and other sources that have adopted the control technology under review. . . . [T]he cost analysis also shows whether the costs of controls ‘are dispropor tionately high when compared to the cost of control for that particular pollutant and source in recent BACT determinations .’” General Motors , 10 E.A.D. at 365 (quoting NSR Manual at B.45) (emphasis added); see also Mississippi

Lime at 17 (remanding permit where rejection of BACT measure as “not commercially feasible” was based on a “single cost estimate” for the proposed plant).

Neither the SOB nor SPI’s application contains comparative information about average and incremental costs of SCR controls at other biomass facilities that have employed SCR or RSCR as BACT. Rather, the SOB and applica tion identify only the average and incremental costs for this facility. 8 See SOB at 15; App’n, App. B at 34 (Table 2), 41-43. Evaluation of the economic impact on the proposed facility alone is insufficient to support rejection of a propos ed control measure as BACT. Comparison

as SPI’s proposed limit. SCR should clearly a ppear at the top of th e control hierarchy at Step 3. NSR Manual at B.25-B.26.

8 The SOB briefly discusses the McNiel Generating Station, which adopted SCR technology as a voluntary measure in order to qualify for renewable energy credits, but offers no comparative cost information. SOB at 16. Rather, the SOB states only that the value of the credits is difficult to quantif y, and that there might be other economic
incentives at work. SOB at 16. These va gue and speculative assertions about one facility—which reveal nothi ng at all about comparative co sts at any of the other six facilities mentioned in the SOB—is entirely in adequate to demonstr ate that SCR is not cost-effective at the SPI facility.Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 7 of 14 with cost of control in othe r BACT determinations for sim ilar facilities is essential. See
General Motors , 10 E.A.D at 375-78. The record does not support EPA’s proposed
decision here.

EPA also has failed to explain clearl y why it selected SPI’s proposed NOx
emission limits as BACT. Two similar f acilities using the same control technology proposed here—selective non-catalytic reducti on (“SNCR”)—have been permitted with lower emission limits. SOB at 15, Table 7.1-1. EPA claims SPI’s proposed limit is “the most stringent . . . for stoker boilers with SNCR demonstrated in practice,” SOB at 16, but the SOB fails to explain why “demonstr ated in practice” should be the controlling
factor here. If EPA wishes to adopt an emissions limit with a “margin of safety” for compliance, it must explain its choice of a limit clearly and identify adequate support in
the record. See Mississippi Lime , slip op. at 24-33 (remanding permit where permitting authority failed to support its compliance margin determination with non-conclusory analysis and relevant compliance data). EPA has not even clearly stated that a “demonstrated in practice” emissions limit is necessary to provide a compliance margin, much less provided an adequate explanation or support for such a margin.

B. EPA Has Not Demonstrated that the Draft Permit Reflects BACT for
CO.

EPA’s BACT analysis for CO is flawed for the same reasons its analysis of BACT for NOx is flawed. First, EPA rejected fluidized-bed boiler de sign alternatives as technically infeasible. SOB at 17. As desc ribed above, this was improper. Second, EPA again failed to compare the average and increm ental cost of catalytic CO controls with equivalent costs at other comparable facili ties, despite the greater effectiveness of catalytic control methods; as with control m easures for NOx, EPA evaluated the cost of
control in terms of this faci lity alone. SOB at 19. Again, as described above in the context of BACT for NOx, this is contrary to both EAB precedent and the NSR Review
Manual.

C. EPA Has Not Demonstrated that the Draft Permit Reflects BACT for PM, PM 10 , and PM 2.5 .

EPA’s BACT analysis for PM also suffers from similar flaws as its analysis of
BACT for NOx. Lower emission limits have b een permitted at other facilities, both with the ESP and multiclone technology proposed by SPI and with the baghouse technology rejected here. SOB at 21. As with NOx emissions controlled by SNCR, EPA does not explain why it chose only a “demonstrated in practice” emissions limit rather than the most effective technically feasible control. Again, to the extent EPA is proposing some kind of compliance margin, it must state so e xplicitly, and must support its choice of an emissions limit with clear analys is and data in the record.

EPA also once again fails to provide an adequate economic impact analysis in support of its rejection of ba ghouse technology, which has been us ed at other facilities to support lower emissions limits (.01 and .018 lb /MMBtu, as compared to SPI’s proposedMr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 8 of 14 .02 lb/MMBtu). SOB at 21 and Table 7.1-5. Here, the SOB does not even discuss the average and incremental cost of control at this facility, much less provide comparative
information about the cost of c ontrol at other, simila r facilities. As set forth above in the context of BACT for NOx, this is inadequate.

D. EPA Failed to Conduct an Adequate BACT Analysis for Emergency Engine Emissions.

In the SOB, EPA rejected the most st ringent emissions control option—purchase of a NSPS-compliant non-emergency engine for use as an emergency engine—without identifying average or incremental cost of controls, providing comparative cost information from other facilities, or even re viewing other BACT determinations. SOB at 23-24. This is contrary to law. EPA’s “r ole as permit issuer requires the agency to investigate and examine recent regulatory de terminations. . . . [EPA is] obligated to investigate and evaluate other facilities.” Mississippi Lime , slip op. at 23. EPA’s statement that “economic impacts and limited environmental benefit” would not justify use of a more stringent control technol ogy, SOB at 23, is wholly conclusory and inadequate to support EPA’s rejection of the most effective control technology identified at Step 3.

E. EPA Failed to Conduct an Adequate BACT Analysis for Cooling
Tower Emissions.

The SOB acknowledges that dry and hybrid wet-dry cooling are more effective
control measures for PM emissions from the cooling tower. SOB at 25, Table 7.3-1. Yet EPA failed to provide any comparative economic analysis whatsoever in support of its rejection of these more effec tive technologies. SOB at 26. Instead, EPA relies solely on a conclusory and internally c ontradictory statement that “[t]he use of a dry or hybrid wetdry system would reduce the overall efficiency of the facility, due to the additional energy requirements for the wet and hybrid systems.” Id. It is not clear from this statement which systems have greater ener gy requirements, or why dry systems would cause a loss of efficiency due to the greater energy requirements of wet systems. The
SOB further relies on the conclu sory assertion that dry and wet-dry systems are “typically more costly,” without any supporting da ta or analysis in the record. Id. EPA appears to
believe that “the limited total amount of particulate resulting from the cooling tower operation,” id. , justifies a cursory, conclusory, an d unsupported BACT analysis, but the SOB identifies nothing in the Clean Air Act or EPA’s implementing regulations that provides authority for what amounts to an ad hoc de minimis exemption from rigorous application of BACT requirements.

II. EPA’s Air Quality Analysis Is Flawed.

The air quality analysis in the SOB is de ficient in at least two major respects. First, the SOB does not adequately explai n its assumptions regarding startup and shutdown emissions. In particular, the air quality modeling assumes startup/shutdown
NOx emission rates are the same as the norma l operational emissions rate. SOB at 31.Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 9 of 14 This assumption is apparently based on a le tter from SPI’s consultant stating that emission rates were “revised” following conve rsations with the boiler manufacturer. 9 But the description of the start up process by SPI’s consultant does not match the description of the same process in the SOB. SPI’s cons ultant states the entire startup process will take 12 hours (six hours of fi ring on natural gas and six hours on biomass fuel). Environ 5/30/12 Letter at 2. The SOB, however, says both biomass fuel and natural gas will be fired together during startup, a nd that it will take 12 hours for the boiler to reach “50% of full load and attain a sufficient steady state temperature supporting the activation of the SNCR system.” SOB at 22. Accordingly, it appears that the boile r will operate without SNCR for 12 hours during startup, and will al so operate without SNCR during shutdown once the boiler temperature once again drops below the appropriate range specified by
the SNCR manufacturer. The SOB contains no explanation for why NOx emissions with and without the SNCR system activated woul d be exactly the same. The SOB’s BACT discussion suggests emission rates without SNCR may be significantly higher. See SOB at 15, Table 7.1-2.

The SOB’s air quality analysis al so fails to quantify secondary PM 2.5 formation despite high emissions of NOx, a PM 2.5 precursor. The SOB cites no evidence or analysis in support of its conclusory assertion that emissions of secondary PM 2.5 would be significantly smaller than direct, primar y emissions. SOB at 36. Again, conclusory statements unsupported by record evidence are insufficient.

III. EPA’s Additional Impact Analysis Is Inadequate.

The SOB concludes the projec t will have no harmful effects on animals, plants, soils and minerals because modeling demonstrates compliance with existing secondary NAAQS for SOx and NOx. SOB at 42. Th e existing secondary NOx/SOx standard, however, reflects only the acute phytotoxicity of these polluta nts, not their more wideranging depositional effects on sensitive ecosystems. 10 EPA recently concluded existing secondary standards are not sufficient to protect against terrestrial and aquatic
acidification and nutrient enhancem ent caused by SOx and NOx deposition. 11 As a result, EPA cannot rely on the fact that air modeling shows no violation of the secondary NAAQS as a proxy for analysis of depos itional effects on soils and vegetation.

9 Eric Albright, Environ Int’l Corp., Letter to Gerardo Rios, EPA Region 9, Re: Updated Air Dispersion Modeling Analysis at 2 (M ay 30, 2012) (“Envir on 5/30/12 Letter”).

10 Secondary National Ambient Air Quality Stan dards for Oxides of Nitrogen and Sulfur; Final Rule, 77 Fed. Reg. 20,218, 20,234 (April 3, 2012).

11 Id. at 20,241-42 (concluding “t hat the elements of the current standards are not ecologically relevant and thus are not appropr iate to provide protection of ecosystems”
and that “current levels of oxides of nitrogen and sulfur are sufficient to cause acidification of both aquatic a nd terrestrial ecosystems, nutrient enrichment of terrestrial ecosystems and contribute to nutrient enrich ment effects in estuaries that could be considered adverse, and th e current secondary standard s to not provide adequate protection from such effects.”)Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 10 of 14 IV. The SOB Fails to Discuss Other Applicable Legal Requirements.

The Clean Air Act and EPA’s implementing regulations clearly require that SPI demonstrate compliance with other applicable standards, including SIP provisions, NSPS, and NESHAP, in conjunction with its PSD permit application. See 42 U.S.C. § 7475(c)(3); 40 C.F.R. § 52.21(j)(1). SPI’s application states that the project will be a major source of hazardous air pollutants, Application at 9, but it provides no data or analysis (other than a conclusory promise) demonstrating that the facility will comply with the applicable NESHAP fo r the proposed boiler. The SOB, in turn, does not discuss compliance with SIP provisions, NSPS, and NE SHAP at all. Neither SPI nor EPA have satisfied the Act’s clear requirements here.

EPA also has not adequately explained w hy or how it is processing this permit as a major modification. The Draft Permit is denominated a major modification of the facility’s 1994 PSD permit, SOB at 3-4, but the SOB contains no discussion of any contemporaneous emissions changes resulti ng from the modification, as required by EPA regulations and the NSR Manual. See 40 C.F.R. § 52.21(b)(3)(i); NSR Manual at A.37-
A.38. Nor does the SOB discuss the baseline (s) employed in evaluating the significance of emissions increases. Rather, the Draft Pe rmit and SOB focus solely on the new boiler, as if it were the only emissions source at th e facility. EPA’s omission of information on baseline emissions and overall changes a ssociated with the modification makes it impossible to determine how EPA arrived at significance determina tions for the various pollutants emitted by the facility.

V. The Draft Permit Relies on Unlawful EPA Rules.

A. EPA’s BACT Exemption for Biogenic CO 2 Is Unlawful.

EPA declined to consider BACT for the facility’s gree nhouse gas emissions, citing the agency’s Deferral for CO 2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of Significant Deterioration and Title V Programs , 76 Fed. Reg. 43,490 (July 20, 2011) (“Biomass Exempti on Rule”). The Center and numerous other petitioners have challenged the Biomass Exempti on Rule in the U.S. Court of Appeals for the District of Columbia Circuit. As set forth in the petitioners’ briefs filed in that challenge, the arguments of which are incorporated by reference here, the Biomass Exemption Rule is contrary to the Clean Air Act and must be vacated. 12 The case is fully briefed and awaiting oral argument. Should th e Biomass Exemption Rule be vacated, the treatment of biogenic CO 2 emissions in the Draft Permit and SOB would violate the
Clean Air Act.

12 Center for Biological Diversit y, et al., v. U.S. EPA, et al., Opening Brief of Petitioners (Corrected) (D.C. Cir. No. 11-1101, filed Marc h 16, 2012) (attached as Ex. C); Center for Biological Diversity, et al., v. U.S. EPA, et al., Reply Brief of Petitioners (D.C. Cir. No. 11-1101, filed July 10, 2012) (attached as Ex. D).Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 11 of 14 Regardless of the Biomass Exemption Ru le, EPA has an independent obligation to consider less-polluting alternatives. 42 U.S.C. § 7475(a)(2). Nothing in the Biomass Exemption Rule calls into question EPA’s finding that greenhouse gases endanger public
health and welfare. 13 EPA therefore must evaluate a lternatives that reduce dangerous carbon pollution.

Biomass power plants are si gnificant sources of greenhouse gases, regardless of the “biogenic” nature of biomass fuels. Recen t scientific studies confirm that combustion of forest biomass increases atmospheric CO 2 concentrations over a period ranging from years to decades or even centu ries, depending on the feedstock. 14 One just-published study concludes that when multiple harvests are assumed, and harvest occurs at a stand age typical of industrial forest ma nagement practices, atmospheric CO 2 increases resulting from combustion may even be permanent. 15 This increase in atmospheric CO 2 concentrations occurs even where fuels are derived from harvest “residues” 16 or forest thinning projects intended to reduce wildfire risk. 17

13 Endangerment and Cause or Contribute Fi ndings for Greenhouse Gases Under Section 202(a) of the Clean Air Act; Fina l Rule, 74 Fed. Reg. 66,496 (Dec. 15, 2009).

14 See, e.g., Stephen R. Mitchell, et al., Carbon debt and carbon sequestration parity in forest bioenergy production , GCB Bioenergy (20 12), doi: 10.1111/j.1757- 1707.2012.01173.x (attached as Ex. E); Er nst-Detlef Schulze, et al., Large-scale bioenergy from additional harvest of forest biomass is neither sustainable nor greenhouse gas neutral , GCB Bioenergy (2012) , doi: 10.1111/j.1757-1707.2012.01169.x at 1-2 (attached as Ex. F); Jon McKechnie, et al., Forest Bioenergy or Forest Carbon? Assessing Trade-Offs in Greenhouse Gas Mitigation with Wood-Based Fuels , 45 Environ. Sci. Technol. 789 (2011) (attached as Ex. G); s ee also generally Timo thy Searchinger, et al., Fixing a Critical Climate Accounting Error , 326 S CIENCE 527 (2009) (attached as Ex. __).

15 Bjart Holtsmark, The outcome is in the assump tions: analyzing the effects on atmospheric CO2 levels of increased us e of bioenergy from forest biomass , GCB Bioenergy (2012), doi: 10.1111/gcbb.12015 (attached as Ex. I).

16 “[A] change in forest management pract ices, for instance, by decreasing the rotation length or increasing the use of harvest residues , also has a long-term impact on the landscape-level terrestrial st ock or the stand-level C stock time-averaged over the rotation.” Kim Pingoud, et al., Global warming potential factors and warming payback time as climate indicators of forest biomass use , Mitig. Adapt. Strateg. Glob. Change (2011), DOI 10.1007/s11027-011-9331-9 at 2 (emphasi s added) (attached as Ex. J); see also Anna Repo, et al., Indirect Carbon Dioxide Emissi ons from Producing Bioenergy from Forest Harvest Residues , Global Change Biology Bioenergy (2010), doi: 10.1111/j.1757-1707.2010.01065.x (attached as Ex. K).

17 John L. Campbell, et al., Can fuel-reduction treatments re ally increase forest carbon storage in the western US by reducing future fire emissions? Front. Ecol. Env’t (2011), doi:10.1890/110057 (attached as Ex. L); Tara Hudiburg, et al

., Regional carbon dioxideMr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 12 of 14 The Draft Permit would expand current permit conditions limiting fuels to
“waste” materials 18 in order to allow SPI to burn a wi de range of biomass fuels derived from additional harvest of green, living trees . Draft Permit Conditions F.1, F.2 (defining “clean cellulosic biomass” as including “gr een wood” and “forest thinnings”). The Conditional Use Permit issued by Shasta C ounty for the facility similarly permits combustion of virtually any legally harvested forest biomass material. 19 As the scientific articles referenced above indicate, CO 2 emissions from combustion of biomass derived from increased harvest of growing trees can remain in the atmosphere—and contribute to the climate-warming effects EPA found to endanger public health and welfare—for decades or centuries, or even forever. Ev en combustion of harvest “residuals” or other waste similarly can increase greenhouse pollu tion for many years. The proposed facility could emit in excess of 400,000 tons per year of CO 2 -equivalent greenhouse gases, SOB at 49-50, and thus has the potential to c ontribute significantly to air pollution causing endangerment.

Accordingly, in examining alternatives to the proposed facility under Section 165(a)(2), EPA must fully evaluate whet her there are possible permit conditions (including limitations on biomass fuels) that will reduce or avoid substantial greenhouse gas pollution from the facility.

B. “Grandfathering” Provisions in EPA’s Proposed Rule Revising the PM NAAQS Are Unlawful.

EPA has proposed several revisions to the PM NAAQS, including reducing the
annual PM2.5 standard to between 12.0 and 13.0 μ g/m 3 and adopting a new PM2.5- specific visibility standard. 20 The SOB does not consider th e facility’s compliance with the proposed revisions. Although the Draft Permit would qualify for “grandfathering” under the proposed rule, 21 the proposed rule’s “grandfathering” provisions are unlawful,
as shown in the Center’s comments to EPA (incorporated here by reference). 22 Accordingly, should the revisions go into eff ect before the final permit is issued, the facility will be required to demonstrate compliance.

implications of forest bioenergy production , Nature Climate Change (2011), doi: 10.1038/NCLIMATE1264 (attached as Ex. M)

. 18 See Eric Albright, Environ Int’l Corp., Letter to Gerardo Rios, EPA Region 9, Re: Response to Additional Information Request—Draft at 2-3 (Dec. 2, 2010).

19 Statement of Conditions, supr a note 5, at C-2 (Condition 11).

20 National Ambient Air Quality Standards fo r Particulate Matter; Proposed Rule, 77 Fed. Reg. 38,890 (June 29, 2012).

21 See id. at 39,023-24.

22 Center for Biological Dive rsity, Comments on National Ambient Air Quality Standards for Particulate Matter; Proposed Rule at 20-24 (Aug. 31, 2012) (attached as Ex.N).Mr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 13 of 14 VI. Conclusion

For the foregoing reasons, the Draft Permit and SOB do not meet the requirements of the Clean Air Act, EPA’s implementing regulations, the NSR Review Manual, and applicable EAB precedent. Th e permit cannot lawfully be finalized as
drafted.

Sincerely,

Kevin P. Bundy Senior Attorney

AttachmentsMr. Omer Shalev Re: Proposed PSD Permit Modification for SPI Anderson (Application No. SAC 12-01) October 17, 2012

Page 14 of 14 List of Exhibits (submitted as PDF files via e-mail and on CD enclosed with hard copy)

Exhibit Title A Pacific Gas & Elec. Co., A dvice Letter 4102-E (Sept. 7, 2012). B County of Shasta, California, Statement of Conditions, Use Permit No. 07-021. C Center for Biological Dive rsity, et al., v. U.S. EPA, et al., Opening Brief of Petitioners (Corrected) (D.C. Ci r. No. 11-1101, filed March 16, 2012). D Reply Brief of Petitioners (D.C. Cir. No. 11-1101, filed July 10, 2012). E Stephen R. Mitchell, et al., Carbon debt and carbon sequestration parity in forest bioenergy production , GCB Bioenergy (20 12), doi: 10.1111/j.1757-

1707.2012.01173.x. F Ernst-Detlef Schulze, et al., Large-scale bioenergy fr om additional harvest of forest biomass is neither sustai nable nor greenhouse gas neutral , GCB Bioenergy (2012), doi: 10.1111/j.1757-1707.2012.01169.x. G Jon McKechnie, et al., Forest Bioenergy or Forest Carbon? Assessing TradeOffs in Greenhouse Gas Mitigat ion with Wood-Based Fuels , 45 Environ. Sci. Technol. 789 (2011). H Timothy Searchinger, et al., Fixing a Critical Climate Accounting Error , 326
S CIENCE 527 (2009). I Bjart Holtsmark, The outcome is in the assump tions: analyzing the effects on atmospheric CO2 levels of increased us e of bioenergy from forest biomass

, GCB Bioenergy (2012), doi: 10.1111/gcbb.12015. J Kim Pingoud, et al., Global warming potential factors and warming payback time as climate indicators of forest biomass use , Mitig. Adapt. Strateg. Glob. Change (2011), DOI 10.1007/s11027-011-9331-9. K Anna Repo, et al., Indirect Carbon Dioxide Emissions from Producing Bioenergy from Forest Harvest Residues , Global Change Biology Bioenergy (2010), doi: 10.1111/j.1757-1707.2010.01065.x.

L John L. Campbell, et al., Can fuel-reduction treatments really increase forest carbon storage in the western US by reducing future fire emissions? Front.
Ecol. Env’t (2011), doi:10.1890/110057. M Tara Hudiburg, et al

., Regional carbon dioxide implicat ions of forest bioenergy production , Nature Climate Change (2011), doi: 10.1038/NCLIMATE1264. N Center for Biological Diversity, Co mments on National Ambient Air Quality
Standards for Particulate Matt er; Proposed Rule (Aug. 31, 2012).