Avenal Energy Project PSD Permit 

APC’s Request to EPA for 18-Month Extension 

of the PSD Permit’s Deadline for Commencing Construction 

Background and Analysis

June 26, 2013 

Background 

In a letter dated December 19, 2012, Avenal Power Center, LLC (APC) requested that 

the U.S. Environmental Protection Agency (EPA) provide an 18-month extension of the deadline 

for commencing construction under the Prevention of Significant Deterioration (PSD) permit for 

the Avenal Energy Project (AEP), pursuant to 40 CFR 52.21(r)(2). In a letter dated February 15, 

2013, APC provided more detailed information concerning the basis for its request, including the 

reasons why APC has been unable to commence construction on the AEP to date and why APC 

believes that an 18-month extension is necessary. 

The PSD permit that EPA issued for the AEP became effective and final on August 18, 

2011, at which time APC was granted legal authority to construct the AEP for PSD purposes. 

The PSD regulations at 40 CFR 52.21(r)(2) provide that approval to construct shall become 

invalid if construction is not commenced within 18 months after receipt of such approval, if 

construction is discontinued for a period of 18 months or more, or if construction is not 

completed within a reasonable time. 40 CFR 52.21(r)(2) further provides that EPA may extend 

the 18-month period upon a satisfactory showing an extension is justified. APC submitted its 

justification for an extension of the period for commencing construction prior to February 18, 

2013, i.e., 18 months after August 18, 2011, the date on which APC received approval to 

construct the AEP.1 

Discussion 

I. An Extension of the Deadline for Commencement of Construction Is Justified 

APC’s letters provided an overview of some of the procedural history relating to EPA’s 

PSD permit decision for the AEP. Of particular relevance to this extension request is the delay 

in EPA’s processing of its PSD permit decision for the AEP, and the associated determination by 

EPA to grandfather the PSD permit application for the AEP from demonstrating compliance with 

new PSD permit requirements that became effective more than one year after EPA determined 

the PSD permit application for the AEP to be complete. EPA had initially taken the position that 

the AEP would be required to demonstrate compliance with these new PSD permit requirements. 

EPA’s later decision to grandfather APC’s PSD permit application for the AEP from the new 

PSD permit requirements is at the heart of the pending petitions for review challenging EPA’s 

PSD permit decision for the AEP before the Ninth Circuit Court of Appeals (Ninth Circuit), and 

the Ninth Circuit has not yet issued a decision in the case. APC’s letters explained that APC has 

 

1

It should be noted that EPA has discussed PSD permit extensions in various policy documents, including several 

mentioned below. 
2 

been unable to commence construction of the AEP due to uncertainty resulting from this pending 

litigation before the Ninth Circuit. APC explained that although the petitions for review were 

filed with the Ninth Circuit by November 2011, and the case had been fully briefed by May 

2012, the Ninth Circuit has not yet issued a decision, and oral argument has not yet been 

scheduled. We note that as of the date of this extension request analysis, EPA has not received 

any information from the Ninth Circuit indicating when oral argument will be scheduled. 

APC noted that according to a recent report from the Ninth Circuit Court of Appeals, the 

Ninth Circuit takes an average of 17.4 months from the date of filing to the resolution of an 

appeal. APC sought expedited review from the Ninth Circuit through an unopposed motion that 

it filed in May 2012, but the Ninth Circuit denied this request. APC also noted that in an average 

case, the Ninth Circuit issues a decision within six weeks of oral argument. 

APC further stated that, due to uncertainty resulting from the ongoing litigation, it is 

unable to commence construction by entering into either a continuous, physical onsite 

construction program or an irrevocable contract for such a program. Although the pending 

litigation per se does not preclude APC from commencing construction, APC explained that it is 

unable to complete the detailed project design and scope necessary to obtain financing and 

execute binding contracts with suppliers until there is certainty in the project’s ability to move 

from construction to commercial operation. In particular, APC noted that the approximately 

$500-600 million in necessary financing for the AEP cannot be obtained from a lending 

institution as the legal authorization for the project could be delayed or rendered invalid by the 

outcome of the pending litigation, and that without such financing, the project cannot reach final 

design or commence construction. APC stated that it has spent millions of dollars to date and 

continues to spend money to maintain the viability of the AEP. 

With respect to the length of time requested for the extension, APC stated that it is unable 

to commence construction immediately upon a favorable decision from the Ninth Circuit, as 

APC will need to obtain financing, complete engineering, and satisfy all of the California Energy 

Commission’s (CEC) preconstruction requirements, which will take significant time. APC noted 

that the date and nature of the Ninth Circuit’s decision is unknown at this time, and stated that 

the necessary contracting, documentation and preconstruction filing obligations of the CEC alone 

could result in a 12-month delay in starting construction from the date of any ruling by the Ninth 

Circuit. APC concluded that the timing considerations involving the Ninth Circuit litigation and 

the required activities (including CEC preconstruction obligations) to move to construction as 

soon as possible following the ruling necessitate an 18-month extension of the deadline for 

commencing construction under the permit. 

As stated above, 40 CFR 52.21(r)(2) provides that EPA may extend the 18-month period 

for commencement of construction under a PSD permit issued pursuant to 40 CFR 52.21 upon a 

satisfactory showing that an extension is justified. In this case, EPA Region 9 has considered all 

of the information provided by APC in support of its request for an extension of time for 

commencing construction of the AEP. We have also considered the larger procedural history of 

this PSD permit decision that led to the litigation, and the primary issue that is being considered 

in the litigation, i.e., EPA’s decision to grandfather APC’s PSD permit application for the AEP 

from making a demonstration that it meets certain PSD requirements that became effective more 

than one year after its PSD permit application had been determined complete. While the Ninth 

Circuit litigation per se does not preclude APC from commencing construction as authorized 
3 

under the permit, we find that given the history of this permit proceeding, the grandfathering 

issues currently under consideration in the litigation before the Ninth Circuit produce significant 

uncertainty regarding the continued effectiveness and the specific requirements of the PSD 

permit for the AEP until the Ninth Circuit issues a decision on the grandfathering issues. After 

consideration of all of the above, EPA has determined that a satisfactory showing has been made 

to justify an 18-month extension of the deadline in the PSD permit for commencing construction 

of the AEP. 

Region 9 finds that APC’s request for an additional 18 months for commencing 

construction of the AEP is reasonable and justified, focusing on the following factors: (1) the 

procedural history and attendant delays in EPA’s processing of the PSD permit application for 

the AEP and the circumstances of EPA’s associated grandfathering decision for this permit 

application; (2) the nature of the grandfathering issues under consideration in the pending 

litigation challenging the PSD permit for the AEP in the Ninth Circuit; (3) the duration of the 

pending litigation and the fact that the Ninth Circuit has not yet issued a decision; (4) the 

significant uncertainty stemming from this litigation regarding the continued effectiveness of the 

current PSD permit and the specific requirements that AEP must meet under the PSD program; 

(5) the negative impact on the availability of financing for this $500-600 million dollar project 

arising from this uncertainty; (6) the difficulties APC faces in proceeding with design and 

scoping of the project due to the uncertainty; (7) the inability of APC to enter into contracts for 

construction without completing additional design and scoping work; and (8) the need for 

additional time following a decision by the Ninth Circuit, if favorable, for APC to secure 

financing, enter into contracts for design and construction, complete final design, and satisfy the 

CEC’s preconstruction requirements.

Region 9 has determined that it will extend the deadline for commencing construction for 

the AEP by 18 months from the date the deadline would otherwise have run, to August 18, 2014. 

The PSD permit for the AEP includes a condition that reflects the language in 40 CFR 

52.21(r)(2), thus Region 9 is issuing a document that administratively amends Condition I of the 

APC PSD permit for the AEP to incorporate this change. Accordingly, the deadline in Condition 

I.A is being amended to read as follows:2

 I. PERMIT EXPIRATION 

As provided in 40 CFR § 52.21(r), this PSD Permit shall become invalid if 

construction: 

 A. is not commenced (as defined in 40 CFR § 52.21(b)(9)) within 36 months after 

 the approval takes effect; or ... 

 

2

For clarity, we show the amended language in Condition I in redline/strikeout: 

 I. PERMIT EXPIRATION 

As provided in 40 CFR § 52.21(r), this PSD Permit shall become invalid if construction: 

 A. is not commenced (as defined in 40 CFR § 52.21(b)(9)) within 1836 months after the approval 

 takes effect; or . . . 
4 

All of the other conditions of the PSD permit, including Conditions I.B and I.C, are unchanged, 

and remain in place, effective as written. 

II. No Additional Procedure Is Required Under 40 CFR Part 124 or Otherwise for Granting 

this Extension Request 

As discussed above, 40 CFR 52.21(r) gives EPA discretion to extend the 18-month 

commencement of construction deadline for PSD permits issued under federal authority where 

EPA determines that a “satisfactory showing that an extension is justified” has been made.3 The 

regulation indicates that EPA should exercise this discretion on a case-by-case basis, evaluating 

whether the showing offered for a particular extension is satisfactory and, accordingly, whether 

an extension is justified for a particular permit. The text of 40 CFR 52.21(r)(2) does not provide 

any specific criteria or required process that must be satisfied before EPA can exercise its 

discretion to determine that a permit extension is justified. Thus, EPA’s interpretation that a 

case-by-case evaluation of the particular facts of the case is appropriate for determining whether 

to grant a permit extension is a permissible and reasonable interpretation of the regulation. Based 

on the circumstances in this case, Region 9 has concluded that it will grant a permit extension to 

APC for the AEP as explained above. 

Considering all of the information discussed above, Region 9 does not believe that in this 

case it would be equitable, or an appropriate use of EPA resources, to require APC and Region 9 

to re-analyze substantive PSD requirements for the AEP in order to show that an extension of the 

18-month commencement of construction deadline is justified under 40 CFR 52.21(r)(2), 

particularly as the initial PSD permit decision for the AEP remains subject to judicial review 

before the Ninth Circuit, and the Ninth Circuit has not yet issued a substantive ruling regarding 

EPA’s decision to grandfather the AEP permit application from certain new PSD requirements. 

The Region has therefore focused its analysis under 40 CFR 52.21(r)(2) in this case on the 

justification for APC’s delay in commencing construction and for the particular extension 

requested, and the larger context of the grandfathering issues being considered in the litigation, 

as discussed above.4 

Because this action only extends the deadline to commence construction under the permit 

without revising or reconsidering the substantive conditions of the permit (or APC’s showing 

that it has satisfied the criteria for obtaining the PSD permit), Region 9 has determined that this 

action is not subject to the procedures in 40 CFR Part 124. The provisions in Part 124 do not 

reference extensions of PSD permits. EPA notes that section 124.15 does state that a “final 

 

3 The Clean Air Act does not expressly include the 18-month deadline in 40 CFR 52.21(r)(2) or the provisions for 

extending that deadline. Thus, EPA’s analysis focuses on the regulatory text. 

4 We note that APC’s February 15, 2013 letter asserts that while APC continues to object to the application of any 

standards adopted after EPA’s statutory deadline for action on its PSD permit, it believes that the AEP would meet 

the newly adopted standards in any event, and that natural gas-fueled combined-cycle power plants similar to the 

AEP have been determined by permitting agencies to be BACT for greenhouse gases. Region 9 does not believe 

that it is necessary or appropriate to conduct a substantive evaluation of whether the AEP would meet PSD 

requirements in the context of this analysis of APC’s request for an extension of the commence construction 

deadline for the AEP, and the Region is not relying in any way on APC’s assertions in this regard in reaching our 

determination at this time that an extension of the deadline for commencing construction in the PSD permit for the 

AEP is justified. 
5 

permit decision” includes a decision to “modify” a permit, but EPA has not yet promulgated 

more specific provisions regarding modifications of PSD permits. See 40 CFR 124.5(g). 

Therefore, the precise scope and meaning of the term “modify” as applied to a PSD permit is not 

clear from the Part 124 regulations. In the absence of controlling regulations, EPA views the 

modification of a PSD permit to include material changes to substantive terms and conditions 

that govern the construction and operation of the source. We do not interpret the term “modify” 

in this context to include the decision to issue an administrative amendment to extend the 

deadline for commencing construction under the PSD permit without reconsideration or 

amendment of the substantive conditions of the permit. Nevertheless, in light of the level of 

public interest to date in the PSD permit decision issued by EPA for the AEP and the ongoing 

litigation concerning this permit decision, Region 9 will provide notice in the Federal Register of 

this action and the opportunity to request judicial review of the Region’s decision to grant APC’s 

request for an 18-month extension of the commencement of construction deadline in the PSD 

permit for the AEP. 

We note that in 1988, Wayne Blackard, then Chief of Region 9’s New Source Section (a 

first-line supervisor), issued a policy memorandum describing how Region 9 intended to exercise 

its discretion at that time in determining whether granting an extension of the 18-month 

commencement of construction deadline was justified per 40 CFR 52.21(r)(2). The approach 

described in the 1988 memorandum is not, and never has been, the exclusive means by which an 

applicant can show that an extension of the 18-month expiration period is justified. The 1988 

policy memorandum does not purport to interpret the terms of 40 CFR 52.21(r)(2) and does not 

state that the regulation requires the approach outlined in the memorandum to show that an 

extension of a previously issued PSD permit is justified. Accordingly, the 1988 policy 

memorandum should not be viewed as a controlling EPA interpretation of 40 CFR 52.21(r)(2), 

but rather should be regarded as a prior policy statement. 

This 1988 Region 9 policy would effectively have the permittee submit a complete reanalysis of PSD permit requirements and have the Region conduct another comprehensive PSD 

review, including a re-analysis of BACT, a re-analysis of air quality impacts and PSD increment 

consumption, and an analysis of any new PSD requirements, and conduct a public participation 

process under 40 CFR Part 124, in order to determine that a PSD permit extension is justified 

under 40 CFR 52.21(r)(2). However, application of this 1988 policy makes little or no practical 

distinction between the extension of an existing PSD permit and an applicant’s having to apply 

for a new permit. In order to give meaning to the extension provision in section 52.21(r)(2) of 

its regulations, EPA is not inclined to continue applying the 1988 policy. After further 

consideration of the practical impact of the 1988 policy, Region 9 has determined that it is more 

appropriate and consistent with the terms of 52.21(r)(2) to evaluate on a case-by-case basis 

whether an applicant has shown that an extension of a PSD permit is justified under the 

particular facts of each situation, including a case-by-case consideration of the appropriate 

factors to be evaluated and the appropriate process to be employed in determining whether to 

grant such request in light of the particular facts. As 40 CFR 52.21(r)(2) does not specify that 

any particular criteria must be shown or process followed, this case-by-case approach is 

consistent with the regulation and the discretion that it provides to EPA. And, in this case, in 

light of all of the factors described above, Region 9 has determined that it would not be 

equitable, or an appropriate use of limited EPA resources, to require APC and Region 9 to reanalyze substantive PSD requirements for the AEP or to conduct a public participation process in 
6 

order to show that the requested 18-month extension of the commencement of construction 

deadline is justified. 

We also note that EPA has been considering what policy to apply to PSD permit 

extension requests for many years. In addition to the 1988 Region 9 policy described above, in 

1985, an EPA headquarters office developed a draft policy addressing PSD permit extension 

requests that was distributed for review among EPA staff. Memorandum from Darryl D. Tyler, 

Director, Control Program Development Division, Revised Draft Policy on Permit Modifications 

and Extensions (July 5, 1985). EPA headquarters also developed a similar (but not identical) 

draft policy dated June 11, 1991. However, these documents were never issued in final form. 

Because these documents were drafts that were never finalized, they did not establish a 

controlling interpretation of the text in 52.21(r)(2) that precludes EPA from accepting the type of 

showing made in this case as sufficient to demonstrate that an extension of the permit issued to 

APC is justified. 

These draft EPA headquarters policies called for public notice and comment for PSD 

permit extensions and a substantive re-analysis of BACT and in some instances other PSD 

requirements. The draft policies discussed the role of the permit expiration requirement in 

ensuring that PSD analyses, in particular BACT, be current for PSD-permitted projects. These 

draft policies were based on the idea of allowing extensions readily but requiring substantive 

review to ensure that the BACT limits and other conditions in the original permit remained 

current. EPA developed this draft approach as an alternative to other approaches, such as 

requiring a showing of impossibility or economic impracticability. In the 1985 and 1991 draft 

policies, EPA explained that the latter approaches presented varying degrees of subjectivity and 

certain difficulties in the factual analysis, which these draft policies sought to avoid. However, 

the drafts did not discuss how requiring substantive review of a prior PSD permitting decision 

and conducting an additional public participation process could obscure the distinction between 

extension of an existing permit and requiring the applicant to demonstrate that it is eligible for a 

wholly new permit. They also did not recognize the potential downsides of such an approach, 

such as the potential for substantial further delay or the significant resource burden that may 

result from such analysis in the context of even a relatively brief extension request. Nor did they 

demonstrate that such an approach was necessary when other factors may otherwise provide a 

reasonable justification for an extension. The intensive substantive review and associated public 

participation process called for in the 1988 Region 9 policy statement further illustrates this 

tension between permit extension and new permits. 

With regard to the procedures for permit extension, the 1985 and 1991 draft policies 

called for public comment as part of EPA’s consideration of an extension request. However, the 

policies deemed this process advisable in the context of other elements of the policies that called 

for substantive review of PSD requirements such as BACT before granting the extension. Where 

an applicant has demonstrated that an extension is justified without substantive reconsideration 

of the permit conditions, Region 9 does not see the same basis for providing an opportunity for 

public comment on an extension of the deadline for commencing construction in a PSD permit. 

In the case of the Avenal PSD permit extension, the circumstances described above 

demonstrate clearly that the applicant faces uncertainty that is making it economically 

impractical, if not financially impossible, for the source to proceed with construction. Region 9 

has not experienced difficulty with the analysis of the facts showing economic impracticability in 
7 

this instance, contrary to the concerns regarding the potential for such difficulty that were 

expressed in the 1985 and 1991 draft policies, and believes that the facts show that an extension 

is justified in this case without reconsideration of the substance of the original PSD permitting 

decision. Thus, we do not believe that the considerations that motivated the approach described 

in the 1985 and 1991 draft policies are present in this case. In fact, the unique facts of this case 

help demonstrate why a different approach – one that gives fuller effect to the discretion 

provided in the text of 40 CFR 52.21(r)(2) by allowing EPA to make a case-by-case decision 

whether an extension is justified based on the particular facts of the case – is reasonable under 

that regulation. Furthermore, we find that in this case, the totality of the circumstances, based on 

the specific factors present in this case that are described above, including in particular the 

lengthy procedural history of the PSD permit decision for the AEP, and the fact that this initial 

permit decision remains subject to judicial review before the Ninth Circuit, and that the Ninth 

Circuit has not yet issued a substantive ruling regarding EPA’s decision to grandfather the AEP 

permit application from certain new PSD requirements, support our determination to grant the 

18-month extension requested by APC in this case without further substantive PSD analysis or 

public process. 

In addition to these considerations, other factors such as relative length of the requested 

extension, our goal of moving toward finality in the still-pending PSD permit proceeding for the 

AEP, avoiding the significant additional resource burden that we believe likely would be 

associated with more substantive PSD analysis and process in this case, and considerations of 

equity, provide further support for our conclusion that it is appropriate in this case to issue this 

determination without requiring or conducting additional substantive PSD analysis and public 

process. In this case, all of these considerations lead us to conclude that this approach is more 

appropriate than requiring further PSD analyses and additional public participation as per the 

1988 Region 9 policy and draft EPA headquarters policies for PSD permit extensions.