Sr 47 . I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY REGIONLX 4 (p

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75 Hawthorne Street San Francisco, CA941 05-3901 JUN
2 6 2013 Mr. Jim Rexroad Vice President Avenal Power Center, LLC 500 Dallas Street, Level 31 Houston, Texas 77002 Dear Mr. Rexroad: Thank youfor yourletter toGina McCarthy dated December 19, 2012, in which Avenal Power Center, LLC (APC) requested that the U.S. Environmental Protection Agency (EPA) provide an18-month extension of the deadline for commencing construction under the Prevention of Significant Deterioration (PSD) permit for the Avenal Energy Project (AEP), pursuant
to40 CFR 52.2 1(r)(2). In aletter dated February 15, 2013, you provided moredetailed information concerning the basis for your request, including the reasons why APC has been unable tocommenceconstruction
onthe AEP and why APC believes that an18-month extension

is necessary. As youmentioned

in your letters, the PSD permit that EPA issued for the AEP became effective and final on August 18, 2011, and the PSD regulations

at40 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 ormore,orif construction

is not completed within

areasonable time. 40 CFR 52.21 (r)(2) further provides that EPA mayextend the 18- month period upon

a satisfactory showing that anextension

is justified. APC submitted
its requestfor anextension of the final PSD permit’s deadline for commencing construction for the AEP with its proposed justification prior to February 18, 2013, i.e., 18 months after August 18, 2011, the date onwhich APC received

afinal PSD permit and approval
toconstruct the AEP. APC’s letters explained that it has been unable to commenceconstruction
of the AEP due to uncertainty resulting from the litigation challenging EPA’s PSD permit decision for the AEP that is pending before the Ninth Circuit Court of Appeals. You provided information concerning the procedural background involved with this permit decision, including EPA’s decision
to grandfather the permit application for the AEP from demonstrating compliance with newPSD requirements that became applicable morethan one yearafter the PSD permit application wasdetermined

tobe complete. You explained that although the petitions for review werefiled with the NinthCircuit Court of Appeals by November 2011, and the casehad been fully briefed by May 2012, the Court has not yetissued

adecision
in the case,which includes

a challenge
toEPA’s decision
to grandfather the PSD permit for the AEP, and oral argument before the Court has not yetbeen scheduled. While APC is not precluded from commencing construction
by the litigation per Se, yourletters explained that APC cannot enterinto either

a continuous, physical onsite construction programoranirrevocable contractfor such
a programdue to financial, contractual, design, and other constraints associated with thç uncertainty resulting from the ongoing litigation. You also stated that APC would be unable to commence construction immediately upon
afavorable decision from the Court in the challenge
toEPA’s PSD permit decision for the AEP Printed on Recycled Paperand described numerous actions that would be necessary
to complete prior to commencement

of construction after the Court issues such
a ruling. We have considered the information you provided
to support your extension request,
as well as the larger context of EPA’s grandfathering

decision and the associated litigation before the Ninth Circuit Court of Appeals and significant uncertainty regarding the PSD permit’s effectiveness and specific requirements,

in light of the challenge
to the grandfathering

decision. After careful consideration,
we have determined that a satisfactory showing has been made to justif’ an 18-month extension of the final PSD permit’s deadline for commencing construction. Therefore, the deadline for commencing construction under the PSD permit for the AEP is hereby extended by 18 months, until August 18, 2014. Accordingly,

to incorporate this change, this document administratively

amends Condition LA of the PSD permit issued to APC for the AEP as follows: I. PERMIT EXPIRATION As provided
in 40 CFR

§

52.2 1(r), this PSD Permit shall become invalid if construction: A. is not commenced
(as defined in 40 CFR

§

52.2 1(b)(9)) within 36 months after the approval takes effect; or Please note that all of the other conditions of the PSD permit, including Conditions I.B and I.C, are unchanged, and remain in place and effective
as written. We have enclosed

a copy of a document providing

a more detailed discussion of the background and analysis for EPA’s decision. Please do not hesitate to contact Gerardo Rios, Chief of the Region

9 Air Permits Office, at (415) 972-3974,
if you have any questions concerning this response. Sincerely, Deborah Jord Director, Air Division Enclosure cc (w/encl.): David Warner, SJVUAPCD Michael Tolistrup, CARB