May 1 1 , 2010

Gerardo Rios, Chief

Permits Office

US EPA Region 9

75 Hawthorne Street San Francisco, CA 94105

Subject: Information to Support Finalization of the Prevention of Significant Deterioration ( PSD ) Permit for Avenal Energy Project (Project)

Dear Mr. Rios :

I am writing on behalf of Avenal Power Center, LLC (APC), to follow up on the conference call we had last Thursday with you and your team regarding the PSD permit referenced above. I understand from this call there may be a need for more discussions regarding the Biological Opinion and modeling related to the new hourly standard for

NO 2 ; you indicated , however, that the only remaining issues on the permit itself are as

follows:

1. APC’s requested c hange from limits on annual number of operat ion hours for the Project duct burners and auxiliary boiler;

2. B est A vailable C ontrol T echnology (BACT) requirements for startups;

3. BACT requirements for carbon monoxide for combustion gas turbine operation with and without duct firing;

4. A ir dispersion modeli ng of simultaneous gas turbine and auxiliary boiler emissions during startups;

5. Emergency generator engine combustion technology and emission control technology; and

6. Emergency fire wate r pump engine combustion technology and emission control technology

.

As we discussed last Thursday, this letter should provide all the information you need to

resolve these issues in the final permit package

.

1. APC’s requested c hange from limits on annual number of operation hours for the Project duct burners and auxiliar y boiler

In our July 15, 2009 letter transmitting our comments on the draft PSD Permit for the Avenal Energy Project , we requested that annual restriction s on usage of the duct burners and the auxiliary boiler be changed from limit s on annual hours to lim it s on annual heat input. The reason for the requested change is that the hour limits provide no additional 

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- 6755Gerardo Rios

- 2

- May 1 1 , 2010

environmental protection (as compared with fuel

- based limits), yet impose a n

unnecessary constraint on operation of the duct burners and auxiliary boiler

.

A s stated in that letter, a ll annual emission calculations and air quality impact analys e s in

the February 2008 initial application were based on heat input in MMBtu. Therefore, the environmental imp acts computed in the impact analysis cannot i ncrease beyond those

de scribed in the initial application

, 1 and in the March 2, 2010 request to the San Joaquin Valley Air Pollution Control District (District) for modification of the Project’s Final Determination of Compliance ( FDOC )

. 2

Specifically, the draft PSD permit annual limit of 800 hours/year for duct firing on each

HRSG 3 should be changed to an annual heat input limit of 899,600 MMBtu/year for facility duct burning (562.26 MMBtu/hr [HHV] x 800 hours/duct burner x 2 duct burners). Also, the draf t PSD permit annual limit of 1,248 hours /year of auxiliary boiler operation that appears in Section E on page 8 of draft permit proposed permit conditions should be changed to an annual heat input limit of 46,675 MMBtu/year (37.4 MMBtu/ hr x 1,248 hours ).

2. B est A vailable C ontrol T echnology requirements for startups

EPA has requested a supplemental assessment of BACT requirements during gas turbine startups and shutdowns of the gas turbine/HRSG . A top

- down BACT analysis was

submitted to EPA 4 on Octob er 15, 2009

, that included a detailed discussion of the following possible control technologies for startup emissions, by pollutant, as outlined

below.

For nitrogen oxides (NOx):

**•** A Selective Catalytic Reduction (SCR) system capable of continuously comply ing with a limit of 2.0 ppmvd @15% O 2 (1

- hour average) ;

**•** A SCONOx system capable of continuousl y complying with a limit of

2.0 ppmvd @15% O 2 (1

- hour average) ;

**•** Fast

- start technologies (i.e., Rapid Response) ;

**•** General Electric OpFlex Startup NOx ; and

**•** Operating practices to minimize the duration of startup and shutdown

.

1 For example, the air dispersion modeling results included the impacts of 46,675 million British thermal units per year (MMBtu/y r ) of heat input to the auxiliary boiler.

2 For example, the impacts of the requested reduced annual emissions of 198,840 pounds per year of NOx would be less than the compliant originally modeled impacts from NOx emissions of 556,317 lbs/year

. 3 USEPA. Draft PSD Permit Statement of Basis and Ambient Air Quality Impact Report , Table 7

- 1, p.17,

June 2009.

4 Downey Brand. Prevention of Significant Deterioration Permit for the Avenal Energy Project, Client Matter No. 39011.00001, October 15, 2009.Gerardo Rios

- 3

- May 1 1 , 2010

For carbon monoxide (CO) and volatile organic compounds (VOC):

**•** An o xidation catalyst unit capable of achieving 2 ppmvd @ 15% O 2 ;

**•** Fast

- start technologies (i.e., Rapid Response); and

**•** Operating p ractices to minimize the duration of startup and shutdown.

That BACT analysis reached the conclusions outlined below, by pollutant.

NOx:

BACT for NOx during startups/shutdowns is the use of operating systems/practices that reduce the duration of star tups and shutdowns to the greatest extent feasible, and the use of operational techniques to initiate ammonia injection as soon as possible during a startup. Because the duration of each startup event is strongly determined by a number of environmental fac tors (e.g., ambient temperature and the length of time the unit has been shut down prior to the restart), and because of the lack of operating experience with systems like Rapid Response, and the lack of guaranteed emission reductions during startups

assoc iated with OpFlex, the emission reductions associated with these technologies during startups are impossible to quantify; and an individual startup may take as long as a traditional startup. Therefore, BACT is determined to be the application of operating systems/practices that minimize startup and shutdown durations, in combination with the use of operational techniques to initiate ammonia injection as soo n as possible during a startup.

CO:

BACT for CO during startups/shutdowns is the use of operating systems/practices that reduce the duration of startups and shutdowns to the greatest extent feasible. Because the duration of each startup event is strongly determined by a number of environmental factors (e.g., ambient temperature),, and because of the l ack of operating experience with systems like Rapid Response, the emission reductions are impossible to quantify; and an individual startup may take as long as a traditional startup. Therefore, BACT is determined to be the application of operating systems/ practices that minimize startup and shutdown durations.

VOC:

BACT for VOC during startups/shutdowns is the use of operating systems (i.e., Rapid Response) and operating practices that reduce the duration of startups and shutdowns to the greatest exten t feasible. Because the duration of each startup event is strongly determined by a number of environmental factors, and because of the lack of operating experience with systems like Rapid Response, the emission reductions are impossible to quantify; and an individual startup may take as long as a traditional startup. . Therefore, BACT is determined to be the application of operating systems/practices that minimize startup and shutdown

durations.Gerardo Rios

- 4

- May 1 1 , 2010

PM/PM 10 /PM 2.5 :

Because PM and PM 10 emissions result from t he characteristics of the fuel burned and do not rely on any emissions control system, the BACT determinations for

SO 2 and PM 10 emissions during normal operations are applicable during startup

and shutdown as well.

SOx:

Because SO 2 emissions result from the characteristics of the fuel burned and do not rely on any emissions control system, the BACT determinations for SO 2 (and

PM 10 ) emissions during normal operations are applicable during startup and

shutdown as well.

Additional evidence that the fast

- st art technologies currently being marketed do not represent BACT can be found in a review of the Final Determination of Compliance for the Lodi Energy Center. That project uses the Siemens vers ion of this technology

— marketed as “Flex 30”

— to reduce startup times, but the permitted emission limits during startups are similar to those proposed for AEP: 160 lbs/hr for NOx (identical to AEP limit); 900 lbs/hr for CO (vs 1000 lbs/hr for AEP); 16 lbs/hr for VOC (identical to AEP). 5

Consequently, APC believes th at BACT for startups and shutdowns continues to be the requirements of EPA’s proposed PSD permit for the project.

3. BACT for combustion gas turbine operation with and without duct fi ring

The top

- down BACT analysis submitted on October 15, 2009

, for normal operation and startup and shutdown of the combustion gas turbines appl ies whether the HRSG

equipped duct burners are firing or not. The basic equipmen t controls include DLN

combustors on the F

- class turbines and low

- NOx duct burners. The BACT

- com pliant
post

- control systems of SCR for NOx and an o xidation catalyst for CO are applicable with and without duct firing as demonstrated by the permit condition

- required emission levels of 2 ppmvd @ 15 % O 2 for both criteria pollutants

. 6

Comments on the dra ft PSD permit suggested that the BACT analysis for two other plants should have driven the CO BACT determination for the proposed project to lower

levels as follows : Kleen Energy Systems in Connecticut (0.9 to 1.7 ppmvd) and CPV Warren in Virginia (1.3 an d 1.8 ppmvd without duct burning).

Concerning the Virginia permit, the CO limits are actually not more restrictive than those proposed for the Avenal Energy Project because (1) the Virginia CO limits are enforced

on a three

- hour average , not the more rest rictive one

- hour average proposed for Avenal ;

5 Final Determination of Compliance, Lodi Energy Center (08

- AFC

- 10), San Joaquin Valley Air P ollution Control District, January 22, 2010.

6 See Footnote 3 and Condition C1 on page 6 of Proposed Permit Conditions, June 2009.Gerardo Rios

- 5

- May 1 1 , 2010

(2) the CO limits are enforced on the basis of a n initial source test conducted after plant startup, at base load; (3) there are no annual source test requirements, only the ability of the agency to request a s ource test in the future; and (4) the CO limits are not enforced through any continuous emiss ions monitoring requirements. CO emissions from the Avenal Energy Project would be continuously monitored, and subject to an annual source test. Finally, and mos t important, the Virginia power plant in th e cited permit was never built; hence, the proposed CO permit limits were never “achieved in practice” as required

for a valid BACT determination.

Concerning the Connecticut permit, the Kleen Energy Systems, LLC plant is under construction, and therefore will not be able to demonstrate that its proposed CO level is “achieved in practice” until late 2010/2011. 7 Merely the issuance of a permit to construct a project does not establish BACT for the source category.

4. A ir dispersion modeling of simultaneous gas turbine and auxiliary boiler emissions during startup s

Although the auxiliary boiler will generally have limited operation in parallel with the combustion gas turbine s
, a ir dispersion modeling conducted to compute the ground

- level air quality impact of Project emissions during normal operation and startup periods consistently included simultaneous emissions from both turbines, the auxiliary boiler, and even, to be conservative, one

- hour testing of the natur al gas

- fueled emergency generator engine and Diesel

- fueled emergency fire water pump engine. 8

5. Emergency generator engine combustion technology and emission control technology

The proposed natural gas

- fueled emergency generator engine is an 860 brake h orsepower Caterpillar Model G3512LE

. 9 The proposed engine technology is lean

- burn combustion equipped with a n integrated Miratech SCR /oxidation catalyst po st

- combustion control system that reduces NOx emissions to 1.0 g/bhp

- hr and CO to 0.21 g/bh p

- hr.

6. Emergency fire water pump engine combustion technology and emission control technology

The proposed Diesel

- fueled emergency fire water pump engine is a lean

- burn, turbocharged

, after

- cooled Clarke Model JW6H

- UF40 engine

.

7 Kleen Energy Systems, LLC. W eb page notes “In Construction” and refers questions to Gordon Holk, General Manager, Power Plant Management Services

, http://kleenenergy.com/.

Reuters . R eported on Fitch Rating ’s expectation that the ongoing construction will stay on sched u le to complete by June 1, 2010

, http://www.reuters.com/article/pressRelease/idUS185325+17

- Sep

2009+BW20090917 , September 17, 2009.

8 The quantitative emission rates from all f ive emitting units during startups were contained in the application for the PSD permit in Air Quality Appendix Table 6.2

- 2.5.

9 The District FDOC mistakenly used the number 3456 (a Diesel engine) for the Caterpillar model in place

of the correct number G3 512LE ; however, the FDOC correctly described the engine as natural gas

- fired.Gerardo Rios -6- May 11,2010

Thank you for the opportunity to provide additional information on the remaining issues

related to finalizing the June 16, 2009 draft PSD Permit for the Avenal Energy Project.

We hope that this information is adequate to issue the final permit. Please contact me if

any other information is needed.

Sincerely,

# Gary~e~~~

cc: Jim Rexroad, Avenal Power Center, LLC

Jeff Holmstead, Bracewell & Giuliani, LLP