AUTHORITY TO CONSTRUCT / MODIFY

PREVENTION OF SIGNIFI CANT DETERIORATION PERMIT

ISSUED PURSUANT TO THE REQUIREMENTS AT 40 CFR § 52.21

U.S. ENVIRONMENTAL PROTEC TION AGENCY, REGION IX

PSD PERMIT NUMBER: SE 98-01

PERMITTEE: High Desert Power Project, LLC

FACILITY LOCATION: 19000 Perimeter Road, Victorville, CA 92394

This Permit is issued pursuant to the Pr evention of Significant Deterioration (PSD) requirements of the Clean Air Act, as am ended, 42 U.S.C. §§ 7401 - 7671, et. seq. ), and the Code of Federal Regulations (CFR) Title 40, Section 52.21. The Unite d States Environmental Protection Agency Region IX (EPA) is issuing an approval to co nstruct/modify operation to the High Desert Power Project (HDPP), an existing 720 megawatt power ge nerating facility loca ted in the city of Victorville, California, as desc ribed herein, in accordance with the permit application (and plans submitted with the permit application), the fede ral PSD regulations at 40 CFR § 52.21, and other

terms and conditions set forth in this PSD Permit.

Failure to comply with any condition or term set forth in this PSD Permit is subject to enforcement action pursuant to Section 113 of th e Clean Air Act. This Permit does not relieve the Permittee from the obligation to comply with any other applicable provisions of the Clean Air Act (including 40 CFR Parts 51, 52, 60, 61, 63, and 72 through 75), federal, state, or Mojave Desert Air Quality Management District rules and regulations.

This PSD Permit becomes effective on the date of issuance pursuant to 40 CFR §124.15(b)(3).

Deborah Jordan Date Director, Air DivisionHIGH DESERT POWER PROJECT

PREVENTION OF SIGNIFICANT DETERIORATION PERMIT SE 98-01

PROPOSED REVISIONS TO PERMIT CONDITIONS

PROJECT DESCRIPTION

The High Desert Power Project (HDPP) has a power generating capacity of 720 megawatts and consists of three existing natural gas-fired comb ined cycle combustion turbines (CT) each with dedicated heat recovery steam generators (HRSG) , associated air polluti on control devices, and auxiliary equipment. EPA Region IX issued an initial PSD permit for the construction and operation of HDPP on February 15, 2001. The facili ty began commercial operations in April

2003 and is located at 19000 Perimete r Road, Victorville, California.

For this permit revision, HDPP has requested revi sions to the initial PSD permit to incorporate minor changes. The proposed changes include addi ng an alternative startu p scenario, revising the continuous monitoring systems permit language such that it is consistent with the Acid Rain regulations (40 CFR Part 75), and allowing additional use of EPA Test Methods. Other minor changes are administrative in nature such as deleting obsolete language and clarifications. The new alternative startup scenario will give HDPP more flexibility for startup while also reducing the existing permitted startup emission limits for carbon monoxide and nitrogen oxide. The equipment affected by these revisions is listed below.

EQUIPMENT DESCRIPTION

Unit ID Equipment Description

CT1 Siemens Westinghouse 501F natural gas turbine (190 MW) equipped with a HRSG and duct burner (160 MMBtu/hr); dry low NO

x burners; CO oxidation catalyst; and a Selective Catalytic Reduction system. Steam turbine generator shared with units

CT2 and CT3.

CT2 Siemens Westinghouse 501F natural gas turbine (190 MW) equipped with a HRSG and duct burner (160 MMBtu/hr); dry low NO

x burners; CO oxidation catalyst; and a Selective Catalytic Reduction system. Steam turbine generator shared with units

CT1 and CT3.

CT3 Siemens Westinghouse 501F natural gas turbine (190 MW) equipped with a HRSG and duct burner (160 MMBtu/hr); dry low NO

x burners; CO oxidation catalyst; and a Selective Catalytic Reduction system. Steam turbine generator shared with units

CT1 and CT2.

STG Toshiba TCDF steam turbine generator (330 MW)PERMIT CONDITIONS

I. Permit Expiration

This Authority to Construct shall become i nvalid (1) if construction is not commenced (as defined in 40 CFR 52.21(b)(8 )) within 18 months after the approval takes effect, (2) if construction is discontinued for a period of 18 months or more, or (3 ) if construction is not completed within a reasonable time.

II. Notification of Commencement of Construction and Startup

The Regional Administrator shall be notifie d in writing of the an ticipated date of initial startup (as defined in 40 CFR 60.2(o)) of each facility of the source not more than sixty (60) days nor less than thirty (30) days prior to such date and shall be notified in writing of the act ual data of commencement of construction and startup within fifteen (15) days of such date.

III. Facilities Operation

All equipment, facilities, and systems inst alled or used to achieve compliance with the terms and conditions of this Authority to Construct shall at all times be maintained in good working order and be opera ted as efficiently as possible so as to minimize air pollutant emissions.

IV. Malfunction Reporting

A. Reporting

The EPA Regional Administrator shall be notified by telephone, facsimile, or

electronic mail transmission within two (2) working days following the discovery any failure of air pollution c ontrol equipment, process equipment, or of a process to operate in a normal manner, which resu lts in an increase in emissions above any allowable emission limit stated in Condition X-E of this Authority to Construct. In addition, th e Regional Administrator sh all be notified in writing within fifteen (15) days of any such failure. The notification shall include a description of the malfun ctioning equipment or abnormal operation, the date of the initial malfunction, the period of time over which emissions were increased due to the failure, the cause of the failure, the estimated resultant emissions in

excess of those allowed under Conditi on X-E of these conditions, and the methods utilized to mitigate emissions and restore normal operations. Compliance with this malfunction notification provi sion shall not excu se or otherwise constitute a defense to any vi olation of this permit or of any law or regulation that such malfunction may cause, except as pr ovided for in Condition IV-B of this permit.

High Desert Power Project Proposed PSD Permit (SE 98-01) 2
February 2010B. Treatment of Emissions

1. Definition of malfunction: A malfunc tion means a sudden and unavoidable breakdown of equipment or of a proce ss beyond the reasonable control of the

source.

2. Emissions in excess of the limits in Condition X-E of this permit shall constitute a violation and may be the subject of enforcement proceedings.

3. Affirmative defense: In the context of an enforcement proceeding, emissions which are below the limits set forth in Condition IV(B)(3)(ii) shall not be subject to penalty if the Permittee re tains properly signed, contemporaneous operating logs or other relevant evid ence and can demonstrate all of the following:

i. A malfunction caused the emissions in excess of the limits in Condition XE;

ii. The emissions did not exceed the following levels:

16 ppm NO

x (1-hour average, corrected to 15% O 2 ) 6 ppm CO (24-hour average, corrected to 15% O 2 );

iii. The permitted facility, including the air pollution control equipment and process equipment, was being prope rly operated at the time of the malfunction;

iv. Preventative maintenance was regularly performed in a manner consistent with good practice for minimizing emissions;

v. The excess emissions were not part of a recurring pattern indicative of inadequate design, operation, or maintenance;

vi. During the period of the malfuncti on the Permittee took all reasonable steps to minimize the amount and duration of emissions (including any bypass) that exceeded the emission standards in Condition X-E. Reasonable steps to minimize emissions could include, but are not limited to, reducing production to the lowest le vel practical; reducing the material

feed that results in the increased em issions, and switching to alternative, less polluting fuels. Where repairs were required, repairs were made in an expeditious fashion when the opera tor knew or should have known that applicable emission limitations were being exceeded. Off-shift labor and

overtime must have been u tilized, to the extent pract icable, to ensure that such repairs were made as expeditiously as possible; and

High Desert Power Project Proposed PSD Permit (SE 98-01) 3
February 2010vii. The Permittee complied with the malf unction reporting requirements of Condition IV-A of this permit.

4. All emissions, including those associated with a malfunction which may be eligible for an affirmative defense, must be included in all emissions

calculations and demonstrations of co mpliance with mass emission limits in Condition X-E (e.g., daily, monthly, and annual emission limits).

5. This provision is in addition to a ny emergency or malfunction provision contained in any applicable requirem ent or elsewhere in this permit.

V. Right to Entry

The Regional Administrator, the head of the State Air Pollution Cont rol Agency, the head of the responsible local Air Pollution C ontrol Agency, and/or their authorized representative, upon the presentation of credentials, shall be permitted:

A. to enter the premises where the source is located or where any records are required to be kept under the terms and c onditions of this Aut hority to Construct;

and

B. at reasonable times to have access to and to copy any records required to be kept

under the terms and conditions of th is Authority to Construct; and

C. to inspect any equipment, operation, or method required in this Authority to Construct; and

D. to sample emissions from the source.

VI. Transfer of Ownership

In the event of any changes in control or owne rship of the facilities to be constructed or modified, this Authority to Construct sha ll be binding on all subsequent owners and operators. The applicant shall notify the su cceeding owner and operator of the existence of this Authority to Construct and its c onditions by letter, a c opy of which shall be forwarded to the Regional Administrator a nd the State and local Air Pollution Control Agency.

VII. Severability

The provisions of this Authority to Construc t are severable, and, if any provision of the Authority to Construct is held invalid, the remainder of this Authority to Construct

shall not be affected.

High Desert Power Project Proposed PSD Permit (SE 98-01) 4
February 2010VIII. Other Applicable Regulations

The owner and operator of the proposed project shall construct and operate the proposed stationary source in compliance with all other applicable provisions of 40 CFR Parts 52, 60 and 61 and all other applicab le federal, state and local air quality regulations.

IX. Paperwork Reduction Act

Any requirements established by this permit for the gathering and reporting of information are not subject to review by th e Office of Management and Budget (“OMB”) under the Paperwork Reduction Act because this permit is not an “information collection request” within the meaning of 44 U. S.C. §§ 3502(4) & (11), 3507, 3512, and 3518. Furthermore, this permit and any informa tion gathering and re porting requirements established by this permit are exempt from OMB review under the Paperwork Reduction Act because it is directed to fewer than ten persons. 44 U.S.C. § 3502(4), (11); 5 C.F.R. § 1320.5(a).

X. Special Conditions

A. Certification

HDPP shall notify the EPA in writing of compliance with Special Conditions XB and X-D and shall make such notification within (15) days of such compliance. This letter must be signed by the Responsible Official of HDPP.

B. Air Pollution Control Equipment

On or before the date of startup of the facility, and thereaft er (as defined in 40 CFR 60.2), HDPP shall install, continuously operate and maintain the following air pollution controls to mi nimize emissions at or below the levels specified in Condition X-E of this Authority to Contruct. The aforementioned “continuous” periods of operation do not include periods of startup and shutdown, as defined in Condition X-E-3, or periods of malfunction as defined in Condition IV-B-1 of this Authority to Construct.

1. A Selective Catalytic Reduction (SCR) sy stem on each turbine train unit for

control of NO

x .

2. An oxidation catalyst on each turbine unit for control of CO.

C. Operating Limitations

High Desert Power Project Proposed PSD Permit (SE 98-01) 5
February 20101. HDPP shall restrict fuel use for the op eration of the combustion turbines and supplemental duct firing to Public U tility Commission-quality natural gas with a sulfur content of 0.2 grains/100 dscf or less on a twelve month rolling average basis.

2. The duct burners shall not be operated unl ess the associated turbine units are in operation.

D. Continuous Emission Monitoring

1. Prior to the date of startup and therea fter, HDPP shall install, maintain and operate the following continuous emission monitoring systems (CEM S ) on

each of the combustion turbin e train exhaust stack:

a. A continuous monitoring system to measure stack gas NO

x concentrations. The system shall meet EPA monito ring performance sp ecification (40 CFR 60.13 and 40 CFR 60, Appendix B).

b. A continuous monitoring system to m easure stack gas CO concentrations. The system shall meet EPA monitori ng performance specifications (40 CFR 60.13 and 40 CFR 60, Appendix B).

c. A continuous monitoring system to measure stack gas volumetric flow

rates. The stack gas volumetric flow rates shall be calculated in

accordance with the fuel flowmete r requirements of 40 CFR Part 75 Appendix D in combination with the appropriate parts of EPA Method 19.

The system shall meet EPA performance sp ecifications (40 CFR Part 52, Appendix E).

2. HDPP shall notify EPA (Attn: AIR-5) of the date on which demonstration for the continuous monitoring system performance commences (40 CFR 60.13).

This date shall be no later than 60 days after startup.

3. Not less than 90 days prior to the date of startup of the facility, HDPP shall have a quality assurance (QA) project plan developed for the certification and operation of the CEMS. Such a plan shall conform to the EPA document “Guidelines for developing a Quality Assurance Project Plan” (QAMS 005/80). The QA project plan must be maintained on-site and be available to EPA upon request.

E. Emission Limits

1. The NO

x emissions (calculated as NO 2 ) from each turbine train unit shall not exceed 18.0 lb/hr for the 3F configur ation or 24.55 lb/hr for the 2G

High Desert Power Project Proposed PSD Permit (SE 98-01) 6
February 2010configuration (based on 2.5 ppmvd @ 15% O 2 , averaged over a one hour period).

2. The CO emissions from each turbine train unit shall not exceed 17.53 lb/hr for the 3F configuration or 23.91 lb /hr for the 2G configuration (based on 4.0 ppmvd @ 15% O 2 , averaged over a 24 hour period).

3. The emission limits in Conditions X-E-l and X-E-2 shall apply at all times to each turbine train unit, except during startups and shutdowns defined as

follows:

a. Startup shall be defined as the peri od beginning with i gnition and lasting until the equipment has reached a continuous operating level and operating permit limits.

i. Cold startup means a startup when the combustion turbine has not been in operation duri ng the preceding 72 hours or the steam turbine inner metal temperature ≤ 325 oF.

ii. Hot startup means a startup when th e combustion turbine has been in operation during the preceding 8 hours.

iii. Warm startup means a startup that is not a hot or cold startup.

iv. Shutdown shall be defined as the period beginning w ith the lowering of equipment from normal operating load base load and lasting until fuel flow is completely off and combustion has ceased.

b. Transient conditions shall not ex ceed the following durations:

i. Cold startup: 4.5 hours

ii. Warm startup: 2.6 hours

iii. Hot startup: 1.9 hours

iv. Shutdown: 1 hour

c. Emissions during startup and shutdo wn, verified by CEMS, shall not exceed the following:

3 F Configuration

Pollutant Cold Startup (lb) Warm Start up (lb) Hot Startup (lb) Shutdown (lb)

NO

x 183 168 138 97

CO 3541 3596 3729 239

2G Configuration

Pollutant Cold Startup (lb) Warm Startup (lb) Hot Startup (lb) Shutdown (lb)

High Desert Power Project Proposed PSD Permit (SE 98-01) 7
February 2010NOx 561 269 215 133

CO 6890 3177 2711 288

d. Alternative Cold Startup Scenario

The Permittee may use the following alternative startup scenario for cold starts: one combustion turbine (“warming turbine”) is used to warm the components of the steam turbine gene rator and to bring the SCR online. The remaining two combustion turbines are then brought online quickly. Emissions during the alternative cold startup scenario shall not exceed the following:

Unit NO

x (lb/event) CO (lb/event) Startup Duration “Warming turbine” 235 4394 9.5 hours

Combustion Turbine 2 138 2391 1.9 hours

Combustion Turbine 3 138 2391 1.9 hours

F. G. Performance Test

1. Pursuant to 40 CFR 60.8, within 60 days of achieving the maximum production rate of the proposed equipmen t but not later than 180 days after initial startup of the e quipment as defined in 40 CFR 60.2, and at such other times as specified by the EPA, HDPP shall conduct performance tests for NO

x and CO and furnish the EPA (Attn: AIR-5) with a written report of the results

of such tests. The tests for NO

x and CO shall be conducted once every five years, prior to the submission of the re newal application for each five year Title V permit term, on an annual basis and at the maximum operating capacity of the facili ties being tested. In the event of a failed annual CEMS performance specification test (C ondition X-D-1), HDPP shall conduct a performance test concurrent with the re-testing of the annual CEMS performance specification. Upon written request (Attn: AIR-5) from HDPP, EPA may approve the conducti ng of performance test at as a lower specified production rate. After initial performance tests and upon written request and adequate justification from HDPP, EPA may waive a specified annual test for the facility.

2. Performance tests for the emissions of NO

x and CO shall be conducted and the results reported in ac cordance with the test methods set forth in 40 CFR 60, Part 60.8 and Appendix A

. The following test methods shall be used:

a. Performance tests for the emissions of NO

x shall be conducted using EPA

Methods 1-4 and 7E. EPA Methods 19, and 20 may be used in addition to,

but not as a substituti on for, EPA Method 7E.

High Desert Power Project Proposed PSD Permit (SE 98-01) 8
February 2010High Desert Power Project Proposed PSD Permit (SE 98-01) 9
February 2010 b. Performance tests for the emissions of CO shall be conducted using EPA

Methods 1-4 and 10. EPA Methods 19, and 20 maybe be used in addition to, but not as a substitution for, EPA Method 10.

3. The EPA (Attn: AIR-5) shall be notified in writing at least 30 days prior to

such test to allow time for the develo pment of an approvable performance test plan and to arrange for an observer to be present at the test. Such prior approval shall minimize the possibility of EPA rejection of test results for procedural deficiencies. In lieu of the above-mentioned test methods, equivalent methods may be used with prior written approval from the EPA.

4. For performance test purposes, sampli ng ports, platforms and access shall be provided by HDPP on the exhaust stack in accordance with 40 CFR 60.8(e).

G. H. Recordkeeping and Reporting

1. HDPP shall maintain records of all measurements, including continuous monitoring systems evaluations; all continuous monitoring systems or monitoring device calibration checks; adjustments and maintenance performed on these systems or devices; performance and all other information required by 40 CFR 60 or 40 CFR 75 recorded in a permanent form suitable for inspection. The file shall be retained for at least five (5) years following the date of such measurements, ma intenance, reports and records.

2. HDPP shall submit a written report of all excess emissions to EPA (Attn: AIR-5) for every calendar quarter. Th e report shall include the following:

a. The magnitude of the excess emissions computed in accordance with 40 CFR 60.13(h), any conversion factors us ed, and the date and time of commencement and compilation of each time period of excess emissions.

b. Specific identification of each period of excess emissions that occurs during startups, shutdowns, and malf unctions of the engine exhaust systems. The nature and cause of any malfunction (if known) and the corrective action taken or preventativ e measures adopted shall also be reported.

c. The date and time identifying each period during which the CEMS was inoperative except for zero and span ch ecks, and the nature of the system repairs or adjustments.

d. When no excess emissions have occu rred or the CEMS has not been inoperative, repaired, or adjusted, such information shall be stated in the

report.e. Excess emissions shall be defined as any one-hour period during which the average emissions of NO

x as measured by the CEM S exceeds the

maximum emission limits set forth in Condition X-E.

Excess emissions shall be defined as any 24-hour period during which the average emissions of CO, as measured by the CEM S exceeds the

maximum emission limits set forth in Condition X-E.

3. Excess emissions indicted by the CEM S system shall be considered violations of the applicable emission limit for the purpose of this permit.

4. The quality assurance project plan used by HDPP for the certification and operation of the continuous emissions monitors, which meets the requirements of 40 CFR Part 60, Appendix F, shall be available upon request to EPA.

H. I. New Source Performance Standards

The facility’s combustion turbines are subject to the New Source Performance Standards (NSPS), 40 CFR 60, Subpart GG, as well as the genera l provisions of Subpart A. The owner/operator shall meet all applicable requirements of the aforementioned NSPS Subparts.

XI. Agency Notifications

A. Unless otherwise directed by EPA or this permit, the Permittee shall submit a copy of all test plans, repor ts, certifications, notifica tions, and other information pertaining to compliance with this permit to:

Director, Air Divi sion (Attn: AIR-5) U.S. Environmental Protection Agency, Region 9

75 Hawthorne Street San Francisco, CA 94105

E-mail: R9.AEO@epa.gov Fax: (415) 947-3579

B. The Permittee shall submit permit applic ations, permit amendments, and other applicable permit information, which incl udes but not limited to installation of control equipment, replacemen t of an emissions unit, and changes that contravene permit terms to:

Director, Air Divi sion (Attn: AIR-3) U.S. Environmental Protection Agency, Region 9

75 Hawthorne Street San Francisco, CA 94105

High Desert Power Project Proposed PSD Permit (SE 98-01) 10
February 2010High Desert Power Project Proposed PSD Permit (SE 98-01) 11
February 2010 E-mail: R9AirPermits@epa.gov Fax: (415) 947-3579

C. Copies of all correspondence required by this PSD Permit shall be forwarded to:

Air Pollution Control Officer Mojave Desert Air Qualit y Management District

14306 Park Avenue Victorville, CA 92392

All correspondence as require d by this Authority to Constr uct shall be forwarded to:

A. Director, Air Division (Attn: AIR

- 3) U.S. Environmental Protection Agency

75 Hawthorne Street

San Francisc o, CA 94105

B. Chief, Stationary Source Division

California Air Resources Board

P.O. Box 2815 Sacramento, CA 95812