MEMORANDUM

TO: EPA Region 9 

Air Permits Office 

DATE: December 7, 2015 

 

FROM: Makram Jaber 

Navajo Generating Station Refined Coal Treatment System - Response to EPA request for 

additional information 

This memorandum supplements the December 7, 2015 response from Mr. Kyle C. 

Heckel, Salt River Project (“SRP”) to the request for additional information from Mr. Laurence 

Maurin, EPA Region 9, Air Permits Office, regarding a minor NSR permit application for a 

proposed Refined Coal Project at the Navajo Generating Station (“NGS”). SRP understands this 

request for information to relate to an evaluation of whether the proposed project should have 

been aggregated with a recently permitted project at NGS, namely the MATS Controls Project. 

This memorandum supplements Mr. Heckel’s response by addressing relevant EPA guidance on 

the issue of aggregation. 

EPA’s guidance with respect to whether the two projects should be aggregated for the 

purpose of NSR permitting (typically, that guidance addresses two projects that together would 

have triggered major NSR, which is not the case here) makes clear that the gravamen of the 

inquiry is an evaluation of the source’s intent—specifically, whether the source intends to 

circumvent NSR permitting—in undertaking two such projects. As EPA explained: 

In the extreme case where the source has made a deliberate effort 

to circumvent PSD review (by the systematic construction of 

carefully sized emissions units which only in the aggregate would 

trigger review) a permitting agency may, however, make a finding 

that PSD applies to the total plant. Such a finding would have to be 

based on clear evidence that the source made a conscious effort to 

escape review by knowingly misrepresenting the intended source 

size through the calculated juggling of actual and scheduled 

construction of emission units. 

EPA Memorandum, “Applicability of PSD to Portions of a Plant Constructed in Phases Without 

Permits” (October 21, 1986). It is clear, however, from the information previously submitted to 

EPA, as well as Mr. Heckel’s response, that SRP has conceived of the two projects as completely 

separate, for two very different business reasons. Certainly, SRP was in no way seeking to 

subdivide a single project into smaller subsets to avoid permitting. There is no evidence that 

SRP was seeking to circumvent the minor NSR permitting rules or the PSD rules (which would 

not apply even if the two projects were considered together). 
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In the 3M Maplewood applicability determination, EPA Memorandum, “Applicability of 

New Source Review Circumvention Guidance to 3M - Maplewood, Minnesota” (June 17, 1993) 

(“3M Maplewood Memorandum”), EPA set forth criteria that it uses to evaluate the source’s 

intent. We address these criteria below. 

1. Filing multiple permit applications within a short period of time. 

At the outset, with respect to this factor, we note that the facts here are very different 

from those in the 3M Maplewood Memorandum. There, 3 M had received 12 minor NSR 

permits and filed several more such applications within the span of 18 months. Here, there are 

only two projects. Furthermore, as the 3M Maplewood letter explains, proximity in time is in no 

way determinative. Rather, it is a reason for further scrutiny (which may well be the reason for 

EPA’s inquiry in this case)—to determine whether the two projects are so interrelated as to 

constitute, in reality, a single project. Indeed, EPA has in the past found that two synthetic minor 

permits for two entire electric generating units at the same site, filed within a year of each other, 

could proceed separately, where the specific facts demonstrated that the projects were in fact 

separate. See Memorandum, “PSD Applicability for Frederickson Power L.P.” (Oct. 12, 2001) 

(“Frederickson Memorandum”). 

In 3M Maplewood, it was not just the sheer number of minor permits that led EPA to 

conclude these projects we interrelated. Rather, it was that “given the nature of this source, 

under normal conditions, a certain level of production or research development of new products 

can be expected.” Because the nominally-separate more than a dozen projects in the span of 18 

months were collectively “consistent with the source’s overall production goals or plans for a 

short planning period,” EPA found those projects interrelated enough to require permitting as a 

single project. Here, as explained more fully in Mr. Heckel’s response, the MATS Controls 

Project was designed and constructed to ensure the plant’s compliance with MATS. The Refined 

Coal Project is being undertaken for a wholly different and independent business purpose: to 

secure federal tax credits for such activities. The MATS Controls Project is arguably related to 

the plant’s production goals, in that it is necessary for continued operations in compliance with 

MATS. The Refined Coal Project has no relationship to, or impact on, the plant’s production of 

electricity, whatsoever. 

2. Application for funding 

The 3M Maplewood Memorandum explains: 

Applications for commercial loans, or, for public utilities, bond 

issues, should be scrutinized to see if the source has treated the 

projects as one modification for financial purposes. If the project 

would not be funded or if it would not be economically viable if 

operated on an extended basis (at least a year) without the other 

projects, this should be considered evidence of circumvention. 

Here, the two projects were conceived separately, and were funded separately. The 

funding of one does not depend on the other, in any way. And the economics of the two projects 

are completely independent. The MATS Controls Project is economically viable, regardless of 

whether the Refined Coal Project is constructed, not just for one year, but for the life of the plant. 

Indeed, it is essential for the plant’s compliance with MATS. The Refined Coal Project is 
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completely independent of MATS compliance. In fact, the Federal tax credit that is the driver 

for that project in no way references MATS or is part of the strategy for MATS compliance. 

Finally, as explained earlier, the economics of the Refined Coal Project are exclusively and 

completely driven by the Federal tax credit. If that credit expires or otherwise terminates, SRP 

would probably discontinue the Refined Coal Project. 

3. Reports on Consumer Demand and Projected Production Levels 

The 3M Maplewood Memorandum explains: 

Stockholder reports, reports to the Securities and Exchange 

Commission, utility board reports, or business permit applications 

should be reviewed for projected operation or production levels. If 

reported levels are necessary to meet projected consumer demand 

but are higher than permitted levels, this is additional evidence of 

circumvention. 

To the extent this factor is applicable here, we note that SRP’s MATS compliance 

strategy in no way relies on the Refined Coal Project. The MATS Controls Project was designed 

and permitted to comply with the MATS Hg limits independently and in the absence of the 

Refined Coal system. In other words, the technical viability of the MATS Controls Project is in 

no way dependent on the Refined Coal Project. No company statements, whether to inside or 

outside entities, would contradict these facts. 

4. Statements of Authorized Representatives of the Source Regarding Plans for Operation 

According to the 3M Maplewood Memorandum, 

Statements by representatives of the source to EPA or to State or 

local permitting agencies about the source's plans for operation can 

be evidence to show intent to circumvent preconstruction review 

requirements. 

This factor presumably applies where the source’s statements regarding its plan for 

operation are inconsistent with a piecemeal permitting approach for the projects needed to 

achieve that plan. That is clearly not the case here. 

5. The economic realities of the projects considered together 

The 3M Maplewood Memorandum explains that this factor considers the “intrinsic 

relationship” of the two projects and “their impact on the economic viability of the plant.” As is 

evident from the discussion above, there is no intrinsic relationship between the two projects. 

They have entirely different drivers and business purposes, and each is economically and 

technically independent of the other. While the MATS Controls Project, in and of itself, is 

essential for the continued compliance of the plant with MATS, the Refined Coal Project has no 

impact whatsoever on the economic viability of the plant, whether considered separately or 

together with the MATS Controls Project. 

* * * * * 
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EPA has repeatedly made clear that “a source’s intent is central to an evaluation of 

whether two projects may be permitted under two minor source permits or whether they must be 

permitted under a single PSD permit.” (Frederickson Memorandum, at 7.) A single permit is 

required only where “clear evidence exists demonstrating an intent” by the source to circumvent 

NSR permitting. Id. (emphasis added). Here there is clear evidence that SRP did not in any way 

intend to circumvent the permit rules. As the analysis above demonstrates, the MATS Controls 

Project and the proposed Refined Coal Project are two separate projects—they have different 

drivers and business purposes; they were planned and funded independently of each other; and 

they are completely independent, both economically and technically. Accordingly, these two 

projects are properly permitted separately, under the minor NSR rules as well as the PSD rules.1

 

1

 The PSD rules would not apply in any event, as the two projects together would result 

in emissions that are substantially less than the PSD significance thresholds. This is a further 

reason for not aggregating the two projects, as BACT would not apply in any event. Cf. 

Frederickson Memo (noting that, in that case, PSD permitting would not result in additional 

controls, as the state minor permits required BACT already, and finding this further supported a 

conclusion that the source had no intent to circumvent).