April 12, 2011

COMMENTS OF THE UTILITY AIR REGULATORY GROUP ON

EPA’S PROPOSED ACTION AND SUPPLEMENTAL STATEMENT

OF BASIS RELATING TO THE PREVENTION OF SIGNIFICANT

DETERIORATION PERMIT FOR THE AVENAL ENERGY PROJECT

The Utility Air Regulatory Group (“UARG”) submits the following comments on the 

U.S. Environmental Protection Agency’s (“EPA” or “Agency”) proposed action and 

Supplemental Statement of Basis related to the Prevention of Significant Deterioration (“PSD”)

permit application of the Avenal Power Center, LLC (“APC”) for the Avenal Energy Project (the 

“Project”) (March 2011). EPA proposes to approve APC’s PSD permit application for the 

Project without requiring a demonstration that the source will not cause or contribute to a 

violation of the 1-hour primary national ambient air quality standard (“NAAQS”) for nitrogen 

dioxide (the “Final NO2 Rule”). EPA also proposes not to require the permit applicant to meet 

PSD emission limitations for greenhouse gases (“GHGs”) or to show that the proposed source 

will not cause or contribute to a violation of the 1-hour NAAQS for sulfur dioxide (“SO2”). For 

the reasons set forth herein, UARG supports the proposed action.

UARG is a voluntary, ad hoc, not-for-profit association of electric generating companies 

and organizations and national trade associations. UARG’s purpose is to participate on behalf of 

its members collectively in EPA’s rulemakings and other proceedings under the Clean Air Act 

(“CAA” or “Act”) that affect the interests of electric generators and in litigation arising from 

those proceedings. Since 1977, UARG has participated in virtually all key rulemakings, related 

litigation, and other arenas of policy development under the Act that affect the interests of 

electric generators. For example, UARG submitted comments in the rulemaking the culminated 

in the promulgation of the Final NO2 Rule and has participated extensively in EPA rulemakings 

and permit appeal proceedings regarding application of PSD requirements to GHGs, as well as 
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on the Agency’s rulemaking and other proceedings on the 1-hour SO2 NAAQS. Further, UARG 

has petitioned EPA to reconsider certain aspects of the Final NO2 Rule.1EPA has yet to take 

action on the UARG Petition for Reconsideration.

I. Background

EPA received the permit application for the Project in February 2008. Thereafter, on 

March 19, 2008, EPA notified APC that the permit application was complete.

On June 16, 2009, EPA issued for comment a proposed permit for the Project, granting

approval to APC, pursuant to EPA’s PSD rules, to construct and operate the facility. At the time 

EPA proposed to issue the permit, EPA found that the Project’s emissions would not cause or 

contribute to violations of any of the NAAQS that applied at that time with respect to the 

“attainment” pollutants regulated under the PSD permit. Subsequently, on February 9, 2010, 

following the close of the public comment period on the proposed permit, EPA published the 

Final NO2 Rule, establishing a primary NAAQS for NO2 based on a 1-hour averaging time. The 

Final NO2 Rule became effective on April 12, 2010.

On April 1, 2010, EPA issued a memorandum explaining that any PSD permit issued by 

EPA on or after the April 12, 2010 effective date of the new NAAQS must be supported by a 

demonstration that the source will not cause or contribute to a violation of that NAAQS. See

Memorandum from Stephen D. Page, EPA Office of Air Quality Planning and Standards, 

“Applicability of the Federal Prevention of Significant Deterioration Permit Requirements to 

New and Revised National Ambient Air Quality Standards” (Apr. 1, 2010) (the “Page 

1

See Petition for Reconsideration of the American Petroleum Institute and the Utility Air 

Regulatory Group of the Final Rule on the Primary National Ambient Air Quality Standards for 

Nitrogen Dioxide, Docket No. EPA-HQ-OAR-2006-0922-0735.1 (Apr. 12, 2010) (“UARG 

Petition for Reconsideration”); as supplemented, Docket No. EPA-HQ-OAR-2006-0922-0736.1 

(June 1, 2010) (“UARG Supplemental Petition”).
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Memorandum”).2The Page Memorandum noted that, in contrast to past NAAQS rulemakings, 

EPA in the case of the Final NO2 Rule had “not promulgate[d] a grandfathering provision . . . for 

permits in process but not yet issued as of April 12, 2010.”3See Page Memorandum at 3. Thus, 

said EPA, there were “no exceptions under 40 C.F.R. § 52.21 in this case” because the Agency 

“has not adopted a grandfathering provision applicable to the 1-hour NO2 NAAQS that would 

enable the required permit to be issued to prospective sources in the absence of [an] ambient air 

quality demonstration.” Id.

Now, however, EPA states that it “has found that applicants seeking PSD permits to 

construct stationary sources of air pollution have experienced unforeseen challenges with the 

preparation and review of information to predict the impact of proposed sources on hourly NO2

concentrations.” Supplemental Public Notice, Avenal Energy Project, Permit Application No. SJ 

2

In its supplement to its Petition for Reconsideration of the Final NO2 Rule, UARG 

extended “the relief requested in the Petition to include withdrawal of the Page Memorandum at 

the same time that the Agency grants the petition.” UARG Supplemental Petition at 2.

3

EPA stated that it “generally interprets the CAA and EPA’s PSD permitting program 

regulations to require that each final PSD permit decision reflect consideration of any NAAQS 

that is in effect at the time the permitting authority issues a final permit,” and that, “[a]s a general 

matter, permitting and licensing decisions of regulatory agencies must reflect the law in effect at 

the time the agency makes a final determination on a pending application.” Page Memorandum 

at 2. “Consistent with such interpretations,” EPA continued, the Agency had “previously 

concluded that the relevant provisions cover any NAAQS that is in effect at the time of issuance 

of any permit.” Id. At the same time, EPA observed, “under certain circumstances” the Agency 

has 

previously allowed proposed new major sources and major modifications that 

have submitted a complete PSD permit application before the effective date of 

new requirements under the PSD regulations, but have not yet received a final and 

effective PSD permit, to continue relying on information already in the 

application rather than immediately having to amend applications to demonstrate 

compliance with the new PSD requirements.

Id. at 3. The Page Memorandum then went on to provide examples of instances in which EPA 

afforded “grandfathered” status to PSD permit applications pursuant to transition provisions 

expressly included in the PSD rules. Id.
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08-01 (“Supplemental Public Notice”) at 2. Due to “concerns about these challenges expressed 

by permit applicants,” the Agency continues, EPA has initiated “a policy review to determine 

whether additional action by EPA [is] necessary to facilitate the preparation of information to 

predict hourly NO2 concentrations” and to “enable EPA and other permitting authorities to 

complete action on pending PSD permit applications in a timely manner.” Id. “As part of this 

policy review” and in recognition of “EPA’s statutory obligation” under CAA § 165(c) “to grant 

or deny a complete PSD permit application within one year,” as well as “other circumstances 

present in this case,” EPA says that it “has determined that it is appropriate to grandfather,” on 

an ad hoc, individualized basis, “the PSD permit application from APC from the requirement to 

demonstrate that the proposed facility will not cause or contribute to a violation of the hourly 

NO2 standard.” Supplemental Public Notice at 2. Accordingly, EPA is now “propos[ing] to 

approve APC’s PSD permit application for the Project without requiring” such a demonstration. 

Id.

In addition, EPA says it “believes the factors that justify such an approach for the hourly 

NO2 standard also provide a basis not to subject” the APC permit application to “additional

permitting requirements that have taken effect following the promulgation of the hourly NO2 

NAAQS.” Supplemental Public Notice at 2. For that reason, EPA says it “will not require the 

source to meet emissions limitations for greenhouse gases or to demonstrate that it will not cause

or contribute to a violation of the NAAQS for hourly concentrations of sulfur dioxide.” Id.

EPA acknowledges that this “determination represents a change in the position” that the 

Agency “has taken in this matter and in previous interpretive statements issued by EPA.” See 

Supplemental Public Notice at 2. Because of this, EPA “believes it is necessary and appropriate 
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to provide the public with an opportunity to comment” on its proposed action “before the 

Agency issues a final decision on the pending permit application.” Id.

II. EPA Should Take Final Action To Approve APC’s Permit, as No Lawful Basis 

Exists for the Agency To Apply to Any Source Any New PSD Requirement that 

Takes Effect More than One Year After That Source’s PSD Permit Application Was 

Complete.

UARG supports EPA’s proposal to approve APC’s PSD permit application for the 

Project without requiring a demonstration that the source will not cause or contribute to a 

violation of the 1-hour primary NAAQS for NO2 or the 1-hour NAAQS for SO2, and without 

requiring the source to meet any PSD requirements for GHGs, for the simple reason that it would 

be unlawful for EPA to impose such requirements on the source. With respect to the NAAQS, 

UARG notes at the outset that, as it has previously argued, application of the Agency’s decision 

to apply immediately the requirements of the PSD program to the 1-hour NO2 NAAQS or the 1-

hour SO2 NAAQS is of questionable legality. See, e.g., UARG Petition for Reconsideration at 

12 n.9. Section 161 of the CAA provides that the PSD program applies “in each region (or 

portion thereof) designated . . . pursuant to [CAA § 107] as attainment or unclassifiable” 

(emphasis added). No area is currently designated as either attainment or unclassifiable for the 

1-hour NO2 NAAQS, and EPA is not scheduled to make any such designations until January 

2012.4Likewise, no area is designated as attainment or unclassifiable for the 1-hour SO2

NAAQS at this time. In advance of those designations, it is not clear that the CAA authorizes 

EPA to impose the requirements of these NAAQS to any proposed source, including the Project, 

seeking a PSD permit.

4

See 75 Fed. Reg. at 6521; EPA, “Final Revisions to the Primary National Ambient Air 

Quality Standard for Nitrogen Dioxide (NO2)” at 15 (Jan. 2010), available at 

http://www.epa.gov/air/nitrogenoxides/pdfs/20100124presentation.pdf.
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As EPA notes in its Supplemental Statement of Basis, the Project is a “well-controlled, 

natural-gas fired electric generating facility” that “will apply BACT for NO2 and not cause or 

contribute to a violation of the NAAQS that were in place before promulgation of the hourly

[NO2 and SO2] standards.” Supplemental Statement of Basis at 6. UARG notes that the fact that 

this particular facility happens to be “natural-gas fired” is beside the point; a proposed new 

source’s choice of fuel is irrelevant to the question which, if any, new requirements apply under 

the PSD provisions. But the key point is that EPA has identified no provision of the CAA that 

would require or authorize it to apply at this time the requirements of the later-adopted NO2 and 

SO2 NAAQS.

Although EPA states that the CAA “does not expressly authorize” it to “waive the 

substantive permitting criteria when a [PSD] permit application has not been granted or denied 

within the one-year deadlines” specified in CAA § 165(c), id. at 10, the Agency fails to engage 

here the fundamental question – namely, whether EPA is authorized, much less required, by the 

CAA to include in those “substantive permitting criteria” requirements related to NAAQS and to 

GHGs where those requirements took effect, if at all, only after the one-year deadline in section 

165(c) had expired. There is in fact no requirement and no authority in the CAA to penalize a 

PSD permit applicant by imposing on that applicant any new requirement that arises after EPA 

has defaulted on its clear-cut nondiscretionary statutory duty to grant or deny a complete PSD 

permit application within no more than one year after it was submitted in complete form. EPA is 

proceeding under the incorrect assumption that it is under “conflicting statutory obligations” with 

respect to the Project – a conflict that its proposed permitting action ostensibly is designed to 

resolve. Although UARG supports EPA’s proposal to take final action on the APC permit as has 

been proposed without applying the new NAAQS and GHG requirements, there is no “conflict” 
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such as EPA describes. EPA cannot, consistent with the statute, impose on PSD permit 

applicants new requirements that take effect after the first anniversary of “the date of filing of 

[the] completed application.” CAA § 165(c).

For the foregoing reasons, EPA should grant the APC permit application for the Project 

and should at the same time (i) grant UARG’s Petition for Reconsideration and (ii) rescind the 

Page Memorandum. 

III. The Complications that EPA Identifies with Implementing the Requirements of the 

Final NO2 Rule at this Time Warrant Granting the APC Permit Application and 

Applying a Consistent Policy to All Other Similarly Situated Facilities.

EPA identifies in its Supplemental Statement of Basis certain “complications” 

attributable to its having made the Final NO2 Rule effective as of April 12, 2010, without also 

“adopting a transitional provision for pending permit applications completed prior to this date.” 

Supplemental Statement of Basis at 7. EPA explains that, although it had “expected that permit 

applicants would readily be able to determine, based on existing EPA modeling guidelines, how

to expeditiously complete the analysis necessary to show that stationary source construction 

would not cause or contribute to violations of the hourly NO2 NAAQS,” the Agency now 

recognizes that “some PSD permit applicants have experienced unforeseen challenges with the 

preparation of sufficient information to predict the impact of the proposed source on hourly NO2

concentrations in accordance with PSD modeling guidelines.” Id.

In particular, EPA notes, “[t]hese challenges have resulted from the fact that to address 

the hourly NO2 NAAQS, many permit applicants need to conduct a cumulative air quality 

impact assessment,” which assessment, in turn, “necessitate[s] the application of modeling 

techniques that are more refined than those that have previously been adequate to demonstrate 

compliance with the annual NO2 standard.” Id. at 7-8. “This level of refinement,” EPA points 
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out, “requires acquisition and analysis of additional data inputs” that, while available, are “not as 

readily accessible to permit applicants as has been the case with other data used in air quality 

modeling for annual NO2 concentrations.” Id. at 8. Because of this, EPA acknowledges, 

“[p]ermit applicants and permitting authorities have needed more time than EPA expected to 

develop familiarity with these refined approaches and to obtain and analyze the necessary data.” 

Id.

It is in part due to “these complications,” EPA states, that “APC’s efforts to complete a 

sufficient modeling demonstration” with respect to the new NAAQS have “produced 

unanticipated delays in the review of the PSD permit application submitted by APC.” Id. “The 

potential for such a circumstance to arise,” the Agency contends, “was not apparent when EPA 

completed the hourly NO2 NAAQS without grandfathering pending PSD permit applications at 

that time.” Id.

UARG concurs that the “complications” EPA describes warrant the action EPA proposes 

to take with respect to the APC PSD permit. UARG disputes, however, the Agency’s 

representation that the “challenges” that permit applicants are now facing were “unforeseen.” To 

the contrary, in its Petition for Reconsideration, UARG notes that EPA received comments on 

the proposed NO2 Rule that pointed to the need for the regulation to address implementation of 

any new NO2 NAAQS through the PSD program. See Petition for Reconsideration at 8-11. 

Among other things, UARG has requested that EPA both acknowledge the lack of screening and 

refined air quality models that have been validated for predicting 1-hour NO2 concentrations, and 

defer any requirement that PSD permit applicants model compliance with the 1-hour NO2

NAAQS until models suitable for that purpose have been developed, demonstrated, and 
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incorporated into EPA’s Guideline on Air Quality Models, using appropriate rulemaking 

procedures. Id. at 11.

In light of EPA’s concession that these very issues are implicated in the continuing delay 

– in violation of § 165(c) of the Act – of EPA action on the APC permit, no basis exists for EPA 

not to grant UARG’s Petition for Reconsideration as well. Other similarly situated facilities are 

entitled to the same relief that EPA proposes to extend to APC.5

IV. EPA Is Authorized To Proceed by Individualized Adjudication.

Finally, that EPA, in (or in connection with) the NO2 NAAQS rulemaking, chose not to 

adopt, as it has in previous NAAQS rulemakings, “transition” provisions that would apply 

generally to all sources that had submitted complete PSD permit applications at the time the

Final NO2 Rule became effective does not preclude the Agency from taking action now to afford 

the Project, and similarly situated sources, “grandfathered” status. EPA’s recognition that it is 

authorized under the CAA to adopt, in conjunction with rulemakings to promulgate or revise 

NAAQS, such transition provisions for all sources reflects a recognition that EPA may 

alternatively take the sort of individualized, adjudicatory action it is proposing here with respect 

to the Project.

It was long ago settled, as a fundamental principle of administrative law, that “the choice 

made between proceeding by general rule or by individual, ad hoc litigation is one that lies 

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Such relief should include, as well, recognizing that similarly situated facilities need not 

meet the GHG requirements and need not demonstrate no violation of the 1-hour SO2 NAAQS. 

As EPA explains, “[i]f not for the delays associated with addressing the hourly NO2 NAAQS 

requirements,” the Agency “would have completed action on the APC permit application prior to 

January 2, 2011 and the application would not have been subject to the greenhouse gas 

requirements.” Supplemental Statement of Basis at 8. So, too, with respect to the 1-hour SO2

NAAQS. Id. at 9 (“EPA would have been able to complete action on this permit application 

before August 23, 2010 if it had not requested additional information from Avenal to address the 

hourly NO2 NAAQS and experienced the complications described.”).
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primarily in the informed discretion of the administrative agency.” SEC v. Chenery Corp., 332 

U.S. 194, 203 (1947). This is so, the Supreme Court explained, because “[n]ot every principle 

essential to the effective administration of a statute can or should be cast immediately into the 

mold of a general rule.” Id. at 202. Rather, “[s]ome principles must await their own 

development, while others must be adjusted to meet particular, unforeseeable situations.” Id.

For that reason, “an administrative agency must be equipped to act either by general rule or by 

individual order.” Id. As the Court observed, “problems may arise in a case which the 

administrative agency could not reasonably foresee, problems which must be solved despite the 

absence of a relevant general rule.” Id. At the same time, “the problem may be so specialized 

and varying in nature as to be impossible of capture within the boundaries of a general rule.” Id.

at 203. It is for those situations that an agency “must retain power to deal with the problems on a 

case-to-case basis if the administrative process is to be effective.” Id.

EPA’s Supplemental Statement of Basis identifies the various grounds that, in the 

Agency’s view, support its “grandfathering” the APC PSD permit from the requirements that the 

1-hour NO2 and 1-hour SO2 NAAQS and the GHG provisions otherwise arguably would impose. 

Although UARG concurs that the circumstances EPA cites (as well as other factors) fully justify 

the Agency’s proposed action here, as UARG also explains above and in its Petition for 

Reconsideration, there are other facilities for which the same relief is warranted. Accordingly, 

unless EPA immediately grants UARG’s Petition for Reconsideration or rescinds the Page 

Memorandum, EPA should, in issuing the final APC PSD permit, acknowledge that all similarly

situated facilities are entitled to similar “grandfathered” status and to the same relief.