IN RE HAWAII ELECTRIC LIGHT COMPANY, INC.

PSD Appeal Nos. 97-15 through 97–23

ORDER DENYING REVIEW IN PART
AND REMANDING IN PART

Decided November 25, 1998

Syllabus

The Board has consolidated for decision nine petitions for review of a Clean Air Act ("CAA") Prevention of Significant Deterioration (PSD) permit (the "Permit") issued to Hawaii Electric Light Company, Inc. (“HELCO") by the State of Hawaii Department of Health (“DOH”). The Permit would authorize HELCO to expand its Keahole Generating Station in Kona on the Big Island of Hawaii (the "Station"). The Station currently consists of six 2.5-megawatt diesel engine generators and one 18-megawatt combustion turbine. The proposed expansion consists of constructing and operating two 20-megawatt combustion turbines with heat recovery steam generators, one 16-megawatt steam turbine, and a 235-horsepower emergency diesel fire pump (collectively, the “Project”).

The CAA and its implementing regulations require that new major stationary sources, and “major modifications" of such sources, be carefully reviewed prior to construction to ensure that pollution emissions from such facilities will not cause or contribute to an exceedance of the national ambient air quality standards (“NAAQS") or the applicable PSD ambient air quality "increments." The NAAQS are "maximum concentration ceilings" for particular pollutants, and have been established for sulfur oxides (measured in the air as sulfur dioxide, or “SO2”), particulate matter, nitrogen dioxide, carbon monoxide (“CO”), ozone (“O,”) and lead. The CAA and the regulations require the performance of an ambient air quality and source impact analysis to determine whether the NAAQS or PSD increments will be exceeded as a result of a proposed “major modification" of a facility. The CAA and PSD regulations also require “major modifications” to employ best available control technology, or “BACT,” to minimize emissions of regulated pollutants.

In the present case, DOH determined that no.2 fuel oil would be BACT for controlling SO2 emissions, and that HELCO was not required to use BACT to control emissions of nitrogen oxides (“NO,”), which would contribute to ambient air concentrations of nitrogen dioxide, on the grounds that its Project was not a "major modification" with respect to NO、. This determination was based on a “netting” of the Project's NO、 emission increases with certain "creditable contemporaneous" NO、 emission decreases resulting from HELCO's agreement to shut down or reduce operations of certain diesel generators at the Station. This netting of increases and decreases resulted in a net increase in NO, emissions below the applicable regulatory significance level that would result in the Project being considered a major modification. Several of the petitions request that the Board review DOH's NO, netting analysis. Several petitions also seek Board review of DOH's determination that HELCO would be authorized to use no.2 fuel oil, rather than naphtha fuel, as BACT for controlling SO2 emissions.

Several petitions also seek Board review of various aspects of DOH's ambient air quality and source impact analysis by which DOH determined that the emissions from the Project will not cause or contribute to violations of the NAAQS or the applicable PSD increments. These petitions argue that DOH used background ambient air data that were either out of date or measured at an unrepresentative location. Several petitions also argue that the meteorological data used by DOH and the data regarding other pollution sources were not representative. Finally, one petition argues that DOH was required, but failed, to consult with the local land use planning agency.

Held: (1) Review of DOH's NO, netting analysis is denied. Petitioners have not shown any clear error in DOH's determination that the shutdown and use restrictions placed on certain diesel generators are “creditable contemporaneous” reductions and that such restrictions are federally enforceable. The Board accordingly denies review of DOH's determination that the Project is not a "major modification" with respect to NO, and denies review of the related conditions of the Permit regarding BACT to control NOx.

(2) Review of DOH's determination that no.2 fuel oil is BACT for control of SO2 emissions is denied. The petitioner raising this issue has not shown any clear error in DOH's determination that naphtha fuel is not BACT due to questions regarding its long-term availability.

(3) Review of DOH's ambient air quality and source impact analysis is denied in part and granted in part with a remand to DOH for further proceedings. (a) DOH did not adequately respond to Petitioners' comments made during the public comment period that the data regarding ambient air concentrations of SO, and particulate matter are out of date (the petitioners' data-currentness argument was based on the fact that the data were measured approximately seven years prior to submission of HELCO's application and on an alleged change in volcanic eruption, a source of SO, and particulate matter pollution, after the date when the data were measured). DOH also did not adequately respond to Petitioners' comments that the data for ambient air concentrations of CO and O, were measured at an unrepresentative location. Therefore, the Permit is remanded for DOH to up-date its analysis of ambient air concentrations of SO, and particulate matter and to either supplement its responses to comments or to use representative data for CO and O1. (b) Petitioners have failed to show clear error in DOH's determinations regarding the meteorological data used in the ambient air and source impact analysis, and review of this issue is denied. (c) Petitioners have not shown that DOH failed to include emissions increases from other sources. (d) Petitioners have failed to show that DOH used an improper modeling program.

(4) The Petitioner seeking review on the basis of DOH's alleged failure to consult with the local land use authority has failed to show clear error in DOH's response to comments that land use issues related to "ceded lands” and water rights are outside of the scope and intent of DOH's air permitting requirements and authority.

Before Environmental Appeals Judges Ronald L. McCallum, Edward E. Reich and Kathie A. Stein.

Opinion of the Board by Judge Stein:

Before the Board are nine petitions seeking review of certain conditions of a Prevention of Significant Deterioration ("PSD") permit, Permit No. 0007-01-C (the "Permit"), granted by the State of Hawaii Department

of Health (“DOH").' The Permit was issued to Hawaii Electric Light Company, Inc. (“HELCO”). We have consolidated for decision the petitions for review (collectively, the "Petitions") filed by Peggy J. Ratliff ("Ms. Ratliff"), the Keahole Defense Coalition ("KDC"), Brad Houser ("Mr. Houser"), Hawaii Physicians & Surgeons Assoc., Inc. ("HP & S"), Marie Aguilar ("Ms. Aguilar”), Kawaihae Cogeneration Partners (“KCP”), Jerry Rothstein ("Mr. Rothstein"), Philip Mosher ("Mr. Mosher"), and Richard Tanzella (“Mr. Tanzella”) (collectively, the "Petitioners”).

For the reasons explained below, we deny in part and grant in part the Petitions, and remand the Permit to DOH for further proceedings.

I. BACKGROUND

The Permit was issued by DOH on October 28, 1997, and would authorize HELCO to expand its Keahole Generating Station in Kona on the Big Island of Hawaii (the "Station"). The Station currently consists of six 2.5-megawatt (“MW”) diesel engine generators (called Units D-18, D–19, D–20, D-21, D-22, and D-23), and one 18 MW combustion turbine (“Unit CT-2"). The proposed expansion consists of constructing and operating two 20 MW combustion turbines (“Units CT-4 and CT-5”) with heat recovery steam generators, one 16 MW steam turbine (“Unit ST-7"), and a 235horsepower emergency diesel fire pump (collectively, the "Project").

HELCO submitted its initial application for a PSD permit in 1994.2 HELCO's application was premised on an ambient air quality impact analysis showing that the Project would emit nitrogen oxides (“NO,”) and sulfur dioxide (“SO,”), among other pollutants, at rates qualifying as

'DOH administers the PSD program in Hawaii pursuant to a delegation of authority from U.S. EPA Region IX (the “Region”). Because DOH acts as EPA's delegate in implementing the federal PSD program within the State of Hawaii, the Permit is considered an EPA-issued permit for purposes of federal law, and is subject to review by the Board pursuant to 40 C.F.R. § 124.19. In re Kawaihae Cogeneration Project, 7 E.A.D. 107, 109 n.1 (EAB 1997); In re Commonwealth Chesapeake Corp., 6 E.A.D. 764, 765 n.1 (EAB 1997); In re West Suburban Recycling & Energy Ctr., L.P., 6 E.A.D. 692, 695 n.4 (EAB 1996). Pursuant to the Region's delegation agreement with Hawaii, the Region retains the authority to concur on DOH's determinations of what constitutes “best available control technology” for the control of regulated pollutants in PSD permits issued by DOH, and to concur on DOH's evaluation of air impact modeling analyses. Amended Delegation Agreement, 54 Fed. Reg. 23,978 (June 5, 1989).

2 Pursuant to State law, HELCO submitted a combined PSD and Clean Air Act Title V operating permit application. See Kawaihae Cogeneration, 7 E.A.D. at 110 n.5.

"significant" increases under the terms of the regulations implementing the Clean Air Act. As such, HELCO's application presumed that HELCO would be required to install the best available control technology, or "BACT," for controlling NOx and SO, emissions. HELCO proposed using water injection technology to control NO、 emissions and no.2 fuel oil to control SO, emissions.

Based on data submitted with HELCO's application, DOH prepared an ambient air quality impact report analyzing the background ambient air concentrations, and the impact of the Project on the ambient air concentrations of SO, nitrogen dioxide ("NO,"),' particulate matter ("PM"), carbon monoxide (“CO”) and ozone (“O,”), and concluded that the emissions from the Project would not cause or contribute to any violations of the relevant air quality standards. See Ambient Air Quality Impact Report (Sept. 28, 1995) (the “AAQ Report") at 25-26. DOH also concluded that water injection would be BACT for controlling NOx emissions and no.2 fuel oil would be BACT for controlling SO, emissions as had been requested by HELCO. Id. at 14–15, 17. DOH then prepared a draft permit in August 1994. The public was given notice and an opportunity to comment on both the draft permit and DOH's analysis in September 1994 and again in April 1995.

The comments received by DOH, among other things, objected to (1) the selection of water injection as BACT for controlling NOx, (2) the selection of no.2 fuel oil as BACT for controlling SO, and (3) various aspects of DOH's air quality impacts analysis. Notwithstanding those comments, DOH determined to issue a permit for the Project without material changes on these issues. See Response to Comments from the September 12, 1994 and April 10, 1995 Public Hearings on the Draft Permit for Hawai'i Electric Light Company, Inc. (Sept. 28, 1995) (the “1995 Response to Comments"). In November 1995, however, the Region declined to concur in the proposed use of water injection as BACT for control of NOx emissions. Instead, the Region required that HELCO consider selective catalytic reduction (“SCR") as BACT for control of NOx.

Subsequently, in April 1996, HELCO submitted a revised ambient air quality impact analysis in which HELCO used “emissions netting” to reach

'As explained in more detail below, only pollutants for which potential emissions may exceed certain thresholds set forth at 40 C.F.R. § 52.21(b)(23) are subject to PSD review.

*The Project impacts ambient air concentrations of nitrogen dioxide through emissions of any nitrogen oxides, including nitric oxide and nitrogen dioxide. The preamble to the PSD regulations for nitrogen oxides states that "[clombustion sources emit mostly nitric oxide, with some nitrogen dioxide. Upon entering the atmosphere, the nitric oxide changes rapidly, mostly to nitrogen dioxide." 53 Fed. Reg. 40,656 (Oct. 17, 1988).

the conclusion that the increase of NO, emissions would not be above the significance level for PSD review. By its netting analysis, HELCO proposed that the NO emissions increases from the Project be considered along with certain source-wide "creditable contemporaneous" emissions decreases, and that only the "net" change in emissions be used to determine whether the emissions increase is above the significance level.

In its revised analysis, HELCO achieved NO、 emission reductions by agreeing to the permanent shutdown of Units D-18, D-19, and D-20, and a fuel restriction on Unit D-21. By netting these proposed reductions with the increases resulting from the Project, HELCO's analysis concluded that the net increase in emissions of NO, would be below the PSD significance level for NOx of 40 tons per year and, therefore, it concluded that the Project is not required to use BACT to control NO、 emissions. HELCO continued to propose that it would use no. 2 fuel oil as BACT to control SO, emissions.

DOH reviewed HELCO's proposed netting analysis and, after requiring HELCO to submit more current data regarding the emissions from the generators to be shut down, concluded that the net increases in NOx emissions resulting from the proposed modifications of the Station would not result in a significant net increase in NO, emissions. See AAQ Report, Supplement B (Dec. 18, 1996) and Supplement B.1 (July 30, 1997) (respectively, "Supplement B” and “Supplement B.1”). DOH prepared a draft permit incorporating requirements relating to the netting analysis, including requirements for the permanent shutdown of Units D-18, D-19, and D-20, and the fuel restriction on Unit D-21 (the "Revised Draft Permit"). The Revised Draft Permit did not require the Project to use BACT to control NOx emissions. DOH then gave the public notice and another opportunity to comment on the Revised Draft Permit.

During this third public comment period, each of the Petitioners submitted comments on the Revised Draft Permit. DOH then prepared a summary of the comments and provided responses to the comments. See Public Comment Period & Public Hearing of March 3, 1997, Summary of Public Comments and Testimony Received on the Draft Air Permit for the Keahole Generating Station Units CT-4 & 5 (Aug. 4, 1997) (the "1997 Response to Comments"). In October 1997, DOH prepared its final revisions to the Revised Draft Permit and, with the Region's concurrence, issued the Permit.

The Petitioners then filed their Petitions, principally seeking review of DOH's NO emissions netting analysis, DOH's analysis of ambient air quality and source impacts, and DOH's determination that no.2 fuel oil