1 

### PART 71 FEDERAL OPERATING PERMIT

STATEMENT OF BASIS

Morongo Casino Cogeneration Facility

Permit No. MO-ROP 10-01

1. Facility Information

a. Permittee

Morongo Casino Cogeneration Facility

11581 Potrero Rd. Banning, CA 92220

b. Facility location

The Morongo Casino Cogeneration Facility (MCC) is located on the reservation of the Morongo Band of Mission Indians (“ Morongo Reservation”) in the city of Banning in Riverside County, CA.

c. Contact information

Facility Contact: Michael Milhis er, Chief Administrative Officer (951) 755-5115

Responsible Official: Robert Martin, Tribal Chairman (951) 755-5100

d. Description of operations, products

The facility is a 8.4 megawatt cogenerati on facility consisting of four 4-stroke, lean-burn CAT G3520 natural gas-fired engines, and three 4-stroke CAT 3516 backup diesel-fired generators.

e. Permitting and/or construction history

MCC was constructed in 2004. EPA issued the initial title V permit for the facility on August 2, 2005. The permit limits the facility’s po tential to emit of

NO

x and VOC to less than 18.7 tons per year of each pollutant.2 f. Emission-generating units and activities

Table 1. Emission-generating units and activities

Emission

Unit I.D.

No. Unit Description Associated Control Equipment

EG-1 Caterpillar G3520 natural gas-fired generator selective catalytic reduction (SCR) unit and oxidation catalyst

EG-2 Caterpillar G3520 natural gas-fired generator selective catalytic reduction (SCR) unit and oxidation catalyst

EG-3 Caterpillar G3520 natural gas-fired generator selective catalytic reduction (SCR) unit and oxidation catalyst

EG-4 Caterpillar G3520 natural gas-fired generator selective catalytic reduction (SCR) unit and oxidation catalyst

EG-5 Caterpillar 3516B dieselfired generator n/a

EG-6 Caterpillar 3516B dieselfired generator n/a

EG-7 Caterpillar 3516B dieselfired generator n/a

Potential to Emit

The Morongo Reservation lie s within Banning Pass, near the air quality planning boundary between Coachella Valley and the S outh Coast Air Basin (“South Coast”). Under the Clean Air Act, as amended in 1990 (CAA or “Act”), Coachella Valley was included as part of the “Southeast Desert Modified AQMA Area” and classified as

“severe-17” nonattainment for the 1-hour oz one national ambient air quality standard (NAAQS). The South Coast Air Basin, the adja cent air planning area, was classified as “extreme” for the 1-hour ozone NAAQS. U nder CAA §§ 182(d) and 182(e), the applicable New Source Review (NSR) “major source” threshold is 25 tons per year (tpy) of ozone precursors (i.e., VOC or NO

x ) in “severe-17” ozone nonattainment areas and 10 tpy in “extreme” areas; thus, under the CAA, the applicable NSR ma jor source threshold for ozone precursors is 25 tpy in Coachella Valley and 10 tpy in the South Coast. Until EPA approved the State of California’s boundary change request, as described below, the Morongo Reservation was included in the Southeast Desert Modified AQMA Area by virtue of being included in Coachella Valle y, and thus was subject to the NSR major

source threshold for ozone precursors of 25 tpy.

On October 7, 2003, EPA approved the State of California’s request to move the3 boundary between the Southeast Desert Modi fied AQMA Area and the South Coast Air Basin eastward to the east end of Banning Pass, with the effect that the entire Morongo Reservation became newly part of the Sout h Coast Air Basin. 68 Fed. Reg. 57820. From the standpoint of air permitti ng, the effect of the boundary change was to lower the applicable NSR major source threshold for ozone precursors within the Morongo Reservation from 25 tpy to 10 tpy, effective November 6, 2003, due to the differences in the ozone classifications of the two air quality planning areas.

Prior to the issuance of MCC’s Part 71 permit, the NSR threshold was increased back to 25 tpy for the South Coast Air Basin through the planning process for the 8-hour ozone NAAQS. In an April 30, 2004 rulemaking, EPA designated the South Coast Air Basin as “severe-17,” which has a 25 tpy NSR threshold. 1 Moreover, the 1-hour ozone standard for the South Coast Air Basin, along with the 1-hour ozone standards for the rest of the nation, was revoked on June 15, 2005; therefore th e 10 tpy threshold c eased to apply to sources on the Morongo Reservation. 40 C.F.R. § 50.9(b); see also 69 Fed. Reg. 23951 (April 30, 2004).

Thus, when EPA issued the initial Part 71 permit to the Facility in late 2005, the NO

x and VOC major source threshold that applied in the ozone nonattai nment area where the plant is located was 25 tpy under the 8-hour ozone NAAQS. At that time, MCC agreed to avoid major source status and nonattain ment NSR permitting by taking federally enforceable limits on its poten tial to emit (PTE) of NO

x and VOC to stay below the 25 tpy threshold.

However, the new 8-hour ozone standards were challenged, and on August 29, 2007, the U.S. Court of Appeals for the District of Columbia Circuit vacated the provisions of EPA’s Phase I implementation rule that wa ived obligations unde r the revoked 1-hour ozone standard for NSR, among other provisions. See South Coast Air Quality Management Distri ct, et al., v. EPA , 472 F.3d 882 (D.C. Cir. 2006), rehearing denied, 489 F.3d 1245 (clarifying that th e vacature was limited to th e issues on which the court granted the petitions for review ). The effect of the cour t’s ruling was to restore NSR applicability thresholds and emission offsets to the classifications previously in effect for areas designated nonattainment for the 1-hour ozone standard. In the case of the Morongo Reservation, the effect was to rest ore the 10 tpy major source threshold for

ozone precursors.

In the wake of the court’s ruling, MCC b ecame an existing major source because, at 18.7 tpy, its PTE for ozone precursor s exceeds the appli cable major source threshold of 10 tpy. MCC is not immediately affected by the rest oration of the 10 tpy major source threshold, but, because MCC is now considered an ex isting major source, any modification that

results in an increase in em issions of ozone precursors from any “discrete operation, unit,

1 Subsequently, effective June 4, 2010, with the exception of Indian country pertaining to the Morongo and Pechanga Tribes, EPA reclassified the South Coast Air Basin to “extreme” under the 8-hour ozone NAAQS standard, which would again lower the NSR threshold to 10 tpy. See 75 Fed. Reg. 24409 (May 5, 2010). EPA deferred reclassification of Indian country pertaining to the Morongo Tribe, as it had requested a boundary change to be included back in the Coachella Valley, which was reclassified as of May 5, 2010, to “severe-15,” with a regulatory threshold of 25 tpy.4 or other pollutant emitting activity” would be considered a “major” modification and thereby subject to a “lowest achievable emission rate” (LAER) control technology requirement and offsets, among other NSR requirements, as required for all major

sources in “extreme” ozone nonattainment areas. See CAA § 182(e)(2). EPA has retained the plant-wide federally enforceable limits of 18.7 tpy for each of the pollutants that were established in the initial title V permit as limits to the source’s PTE. Table 2

shows MCC’s actual NO

x and VOC emissions in 2009.

Table 2. MCC’s 2009 Actual NO

x and VOC Emissions (in tons/year)

Unit NO

x VOC

EG-1 1.7 1.6

EG-2 1.6 1.6

EG-3 2.1 2.1

EG-4 1.7 1.6

EG-5 0.3 0

EG-6 0.4 0

EG-7 0.3 0

TOTAL 8.1 6.9

Table 3 shows MCC’s PTE for various pollutant s, including the enforceable annual caps

for NO

x and VOC that were established in the initial title V permit.

Table 3. MCC’s Facility-wide PTE (in tons/year)

Pollutant

NO

x VOC SO 2 PM 10 CO HAP

18.7 18.7 1.08 3.62 39.75 5.92

2. Tribe Information

a. General

The Morongo Reservation covers more th an 32,000 acres in southern California, west of Palm Springs and east of Los Angeles. Total population on the Reservation is approximat ely 1,100, of which over 500 are tribal members. The Tribe runs a casino, and has significant wetlands on the upper acreage of the

Reservation.

b. Local air quality and attainment status5 The Morongo Reservation is part of the South Coast Air Basin, which is currently designated as attainment or unclassifiable for CO, NO 2 , SO 2 , and lead, and nonattainment for 8-hour and 1-hour ozone, PM 10 , and PM 2.5 . The area is

classified as extreme for both 8-hour and 1-hour ozone, and serious for PM 10 and

CO.

3. Applicable Requirements

a. NESHAP 40 CFR Part 61, Subpart M - Demolition or Renovation Activity

Based on MCC’s application, the facility is not currently engage d in the activities regulated under this provision. If MCC conducts any demolition or renovation activity, the permittee must assure that the project is in compliance with the federal rules governing asbestos incl uding the requirement to conduct an inspection for the presence of asbestos . Including this term in the permit minimizes the need to reopen the permit if MCC ever conducts any demolition or renovation activity.

b. Table 4. Incorporation of Applicab le Requirements into Part 71 Permit

Requirement Condition/

Section Permit

Condition Description/Notes

Stratospheric

Ozone Protection 40 CFR

Part 82 III.D Requirements for treatment

of class I and II substances

Asbestos

NESHAP 40 CFR Part 61, Subpart M III.E Requirements for

demolition and renovation at facilities containing

asbestos

c. Inapplicable Requirements

i. Compliance Assurance Monitoring

The CAM regulations, codified in 40 CF R Part 64, apply to title V sources with large emission units that rely on add-on control devices to comply with applicable requirements. The u nderlying principle, as stated in the preamble, is “to assure that the control measures, once installed or otherwise employed, are properly operated and maintained so that they do not deteriorate to the point where the ow ner or operator fails to remain in compliance with applicable requirements.” 62 Fed. Reg. 54902 (Oct. 22, 1997)

CAM applies to emission units at major sources that are subject to an emission limit or standard, use a co ntrol device to achieve compliance with the limit, and have potential pre- control emissions equal to or greater6 than the major source threshold.

MCC operates SCR on its four natural gas-fired engines. However, the only emission limitations these engines are subject to are the facility-wide caps on NO

x and VOC emissions. The CAM regulations contain an exemption for “an emissions cap that meets the requirements specified in 40 CFR § 70.4(b)(12) or 40 CFR § 71.6(a)(13)(iii) of this chapter. 2 40 CFR § 64.2(b)(v). The CAM rule was not designed to ensure compliance with emission caps. 3 Since MCC’s natural gas-fired engines are not subject to any non-exempt emission limit, CAM does not apply to the engines and SCR system. Therefore, the permit does not contain any CAM requirements.

ii. National Emissions Standards for Hazardous Air Pollutants (NESHAP) for Stationary Reciprocating Internal Combustion Engines (40 CFR Part 63, Subpart ZZZZ)

Subpart ZZZZ establishes emission and operating limitations for hazardous air pollutants (HAPs) emitte d from stationary reciprocating internal combustion engines (RICE) located at major and area HAP sources. Even though MCC’s seven engines meet the definition of “existing stationary RICE” as define d in Subpart ZZZZ, the specific type of RICE used by MCC (spark ignition 4 stroke lean burn and compression ignition stationary RICE) are specifica lly listed as not being subject to Subpart ZZZZ. See 40 CFR § 63.6590(b)(3). Therefore, the permit does not contain any NESHAP Subpart ZZZZ requirements.

iii. Standards of Performance for New Stationary Sources (NSPS) for Stationary Compression Ignition Inte rnal Combustion Engines (40 CFR Part 60, Subpart IIII)

Subpart IIII applies to operators of compression ignition (i.e., oil-fired) internal combustion engines that commence construction, modify, or reconstruct after July 11, 2005. MCC operates three diesel-fired backup engines. As noted above, MCC wa s constructed in 2004. The engines

have not been modified or reconstr ucted since then. Therefore, NSPS Subpart IIII does not apply to MCC’s oil-fired engines.

2 While the permit does contain short term limits NO

x and VOC emissions in Conditions II.A.1 and II.A.2, these are contained in the permit merely to support the cap pursuant to CAA § 304(f) and 40 C.F.R. § 71.6(b). CAM only applies to an “emission limitation or standard” that is defi ned as an “applicable requir ement” under Part 71, which does not include such limits, even tho ugh these limits are enfor ceable pursuant to CAA § 304(f) and 40 C.F.R. § 71.6(b).

3 An emission cap requires a source to quantify emissions in a repeatable and reproducible manner. The CAM regulations do not provide for quantifying emissions. Instead, the rule requires the source owner to monitor the operation of a control device to maintain a reasonable assurance of compliance and to respond to excursions with corrective action and reporting, not to quantify the amount of emissions during normal operations or of any excess emissions during excursions.7 iv. Standards of Performance for New Stationary Sources (NSPS) for Stationary Spark Ignition Internal Combustion Engines (40 CFR Part 60, Subpart JJJJ)

Subpart JJJJ applies to operators of spark ignition internal combustion engines (i.e., gasoline or natural ga s-fired) that co mmence construction, modify, or reconstruct after June 12, 2006. MCC operates four natural gas-fired engines. As noted above , MCC was constructed in 2004. The engines have not been modified or r econstructed since then. Therefore, NSPS Subpart JJJJ does not apply to MCC’s natural gas-fired engines.

v. Chemical Accident Prevention Program (40 CFR Part 68)

The Chemical Accident Prevention Pr ogram requires sources that use or store regulated substances above a ce rtain threshold to develop plans to prevent accidental releases. Based on MCC’s application, and the fact that MCC uses urea (which is not a regula ted substance under Part 68) in its SCR systems instead of ammonia, MCC currently has no regulated substances above the threshold quant ities and is not subject to the requirement to develop and submit a ri sk management plan. Therefore, this requirement has not been included in the permit. However, MCC has an ongoing responsibility to submit a risk management plan if a substance is listed that is present at the f acility in quantities over the threshold

amount.

4. Monitoring

The permit includes monitoring provisions to assure compliance with the short term and

annual emission limits that will limit MCC’s NO

x and VOC PTE. EPA is not proposing any changes to the monitoring conditions th at were included in the initial permit. Demonstrating compliance with the annual NO

x limit through the use of the equation in Condition II.C.1. is expected to also demons trate compliance with the annual VOC limit of 18.7 tons per year since VOC emission fact ors for the natural gas-fired engines and No. 2 fuel oil fired engines ar e equal to or less than the NO

x emission factors listed in the equation.

In order to determine compliance with the short-term NO

x emission limit for the gas-fired engines, the permit requires annual performa nce testing. Regular use of a portable NO

x analyzer is also required to determine if the engines might be exceeding the emission limit. The analyzer monitoring requires MCC to take corrective action if the NO

x concentration exceeds 12.0 ppmv @15% O2, a conservative equivalent (assuming worst case operating scenario) of the NO

x mass emission limit for the gas-fired engines (0.15 grams per brake horsepower- hour) in condition II.A.1.

This monitoring is important to assure that the facility co mplies with its annual emission caps in order for it to not trigger New Source Review permitting requirements.8 Table 5. Monitoring in the title V permit

Requirement Permit

Condition # Monitoring Description Monitoring

Condition #

NO

x and VOC facility-wide limits II.A.3. rolling 12-month emission

calculation II.C.1.

NO

x and VOC

short term limits II.A.1 and

II.A.2 portable NO

x analyzer (quarterly) II.C.2. through

II.C.4.

annual performance testing II.C.5.

5. Use of All Credible Evidence

Determinations of deviations, continuous or intermittent compliance status, or violations of the permit are not limite d to the testing or monitoring methods required by the underlying regulations or this permit; other cr edible evidence (including any evidence

admissible under the Federal Rules of Eviden ce) must be considered by the source and

EPA in such determinations.

6. EPA Authority

Title V of the Clean Air Act requires that EPA promulgate, administer, and enforce a Federal operating permits program when a State does not submit an approvable program within the time frame set by title V or does not adequately administer and enforce an EPA-approved program. On July 1, 1996, EPA adopted regulations codified at 40 CFR Part 71 setting forth the procedures and te rms under which the Agency would administer a Federal operating permits program. 61 Fed. Reg. 34202. These regulations were updated on February 19, 1999, to incorporat e EPA's approach for issuing Federal operating permits to covered stationary sour ces located in Indian country. 64 Fed. Reg.

8247.

As described in 40 CFR 71.4(a), EPA will impl ement a Part 71 program in areas where a State, local, or Tribal agency has not deve loped an approved Part 70 program. Unlike States, Indian Tribes are not required to develop operat ing permits programs, though EPA encourages Tribes to do so. See, e.g., Indian Tribes: Air Quality Planning and Management, 63 Fed. Reg. 7253 (Feb. 12, 1998) (also known as the Tribal Authority Rule). Therefore, within Indian country, EP A believes it is genera lly appropriate that

EPA administers and enforces a Part 71 Federal operating pe rmits program for stationary

sources until Tribes receive approval to administer their own operating permits programs.

MCC is located within th e boundaries of the Morongo Re servation. Consequently, jurisdiction over the source lies with the Mo rongo Tribe and with EPA. Because the Tribe does not have an approved Part 70 program, EPA is issuing the permit under its9 Part 71 authority.

7. Endangered Species Act

Pursuant to Section 7 of the Endangered Species Act (ESA), 16 U.S.C. § 1536, and its implementing regulations at 50 C.F.R. Part 402, EPA is required to ensure that any action authorized, funded, or carried out by EPA is not likely to jeopardize the continued existence of any Federally-listed endangered spec ies or threatened species or result in the

destruction or adverse modificatio n of such species’ designated critical habitat. The title V permit EPA is issuing to MCC does not au thorize the construction of new emission units, or emission increases from existing units , nor does it otherwis e authorize any other physical modifications to the facility or its operations. Therefore, EPA has concluded that the issuance of this permit will have no effect on listed species or their critical

habitat.

8. Public Participation

a. Public Notice.

As described in 40 C.F.R. § 71.11(a)(5), all Part 71 draft ope rating permits shall be publicly noticed and made available fo r public comment. The public notice of permit actions and public comment period is described in 40 C.F.R. § 71(d).

There is a 30-day public comment period fo r actions pertaining to a draft permit. Public notice will be given for this draf t permit by mailing a copy of the notice to the permit applicant, the Morongo Band of Mission Indians, the California Air Resources Board, and the South Coast Air Quality Management District. A copy of the notice will also be provided to all persons who have submitted a written request to be included on the mailing list. Public notice will also be published in the Desert Sun newspaper.

b. Opportunity for Comment

Members of the public may review a copy of the draft permit prepared by EPA, this statement of basis for the draft pe rmit, the application, and all supporting materials submitted by the source at the a ddress listed in Section 8.e, below. Copies of the draft permit and statement of basis can also be obtained from EPA’s website (http://www.epa.gov/region9/air/ permit/r9-permits-issued.html), or by contacting Roger Kohn at the EPA address, phone number, or email address listed in Section 8.e, below. All documents will be available for review at the EPA Region 9 office indicated in Section 8.e. below, during regu lar business hours.

If you believe that any condition of the draft permit is inappropriate, you must raise all reasonably ascertainable issues and submit all arguments supporting your position during the 30-day public comment period. Any supporting documents must be included in full and may not be in corporated by reference, unless they are already part of the administrative record for this permit or consist of tribal, state10 or federal statutes or regula tions, or other generally ava ilable referenced materials.

All comments received during the public comment period and all comments made during any public hearing will be considered in arriving at a final decision on the permit. The final permit is a public r ecord that can be obtained by request. A statement of reasons for changes made to the draft permits and responses to

comments received will be sent to a ll persons who commented on the draft permit.

c. Opportunity to Request a Hearing

Any person may submit a written request fo r a public hearing to Roger Kohn, at the address listed in Section 8.e., below, by stating the nature of the issues to be raised at the public hearing. EPA shall hold a public hearing if EPA finds, on the basis of requests, a significant amount of pub lic interest in the draft permit. If a public hearing is held, EPA will provid e public notice of the hearing and any person may submit oral or written stat ements and data concerning the draft permit.

d. Mailing List

If you would like to be added to our mailing list to be informed of future actions on this or other CAA permits issued in Indian Country, please send your name and address to Roger Kohn at the address listed below.

e. Contact Information

Roger Kohn (AIR-3) U.S. Environmental Protection Agency, Region IX

75 Hawthorne St. San Francisco, CA 94105 telephone: (415) 972-3973 e-mail: kohn.roger@epa.gov