DEQ response 3-7-12.docx Golder Associates Inc.

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March 7, 2012 Project No. 113-99739

Ms. Linda Hayes-Gorman Eastern Region Administrator Oregon Department of Environmental Quality 475 NE Bellevue Drive, Suite 110 Bend, Oregon 97701

RE: AIR QUALITY PERMITTING REQUIREMENTS FOR THE PROPOSED COYOTE ISLAND TERMINAL LLC AT THE PORT OF MORROW

Dear Ms. Hayes-Gorman:

Thank you very much for the phone conversation on Tuesday, February 21, 2012, regarding the February 3, 2012 permit application submitted for the proposed coal transloading facility at the Port of Morrow. This letter is to confirm in writing the conclusions from our conversation.

Based on the prior letter you sent to Mr. Clark Moseley, dated February 14, 2012, copying me, it is our understanding that the proposed facility will not require an air quality permit to construct or operate. As we discussed, there are three reasons why an air permit would be necessary for a proposed source of emissions, including:

1. The proposed source would be a named industrial category in Table 1 of the Oregon Administrative Rules 340-216;

2. The proposed source would have maximum uncontrolled actual emissions exceeding 10 tons per year of any single criteria pollutant (Part B of Table 1, criteria 85); or

3. The proposed facility would be a source for which the Department of Environmental Quality (DEQ) determines an air quality concern potentially exists (Part B of Table 1, criteria 84).

It is our understanding that the Department has decided that the proposed facility does not meet any of these criteria. The facility is, therefore, a Type 1 modification in accordance with OAR 340-210-0225 which does not require an air quality permit for construction or operation (as indicated in the February 15, 2012 letter from Mark Fisher in your office to Clark Moseley and John H. Thomas representing Coyote Island Terminal LLC). Our current submitted application will serve as our notice of construction. We appreciate the time spent by the DEQ in reviewing our application to come to this decision.

Sincerely,

GOLDER ASSOCIATES INC.

Brian Patterson, Ph.D. Chad Darby Associate and Senior Consultant Associate and Senior Consultant cc: Al Knapp, Crosswired, LLC

Clark Moseley, Coyote Island Terminal, LLC

)regon 5 John A KltLhaber, MD Governor

July 12, 2012

Department of Environmental Quality Eastern Region Bend Office

475 NE Bellevue Drive, Suite 110 Bend, OR 97701

(541) 388-6146 FAX (541) 388-8283

TTY 711

Clark Moseley The Morrow Pacific Project Coyote Island Terminal, LLC 1211 SW Fifth Ave, Suite 1900 Portland, OR 97204

Re: Coyote Island Terminal, LLC (25-0015) Notice of Intent to Construct No. 26705 Approval to construct rescinded Morrow County

Dear Mr. Mosely,

On February 15, 2012, DEQ provided approval to construct a coal transloading facility/coal export terminal (Coyote Island Terminal) at the Port of Morrow near Boardman, OR. The approval was based on the information provided in Notice of Intent to Construct (NC) number 26705. DEQ understands from the NC that the facility will include enclosed storage and transfer systems with additional emission controls. However, upon further review, DEQ has determined that the "uncontrolled" emissions, which discount the enclosed storage and transfer systems and additional emission controls proposed for the facility could be greater than 10 tons per year of total particulate matter. As such, an Air Contaminant Discharge Permit (ACDP) is required in accordance with OAR 340-216-0020, Table 1, Part B, category 85.

I have calculated the "uncontrolled" emissions from the coal transfer points (10 altogether) using an average wind speed of 7.3 miles per hour and coal moisture content of 20% in accordance with the emission estimation procedures provided by EPA in their compilation of emission factors (AP-42, section 13.2.4). The calculations result in an estimate of 6.8 tons per year of uncontrolled particulate matter emissions (i.e., emissions without enclosures, baghouses, or scrubbers) from the handling of 8.8 million tons of coal per year.

In our first review of the application, DEQ did not account for any uncontrolled emissions from the temporary storage of coal at the facility. This was an oversight because the plans include buildings with vents and scrubbers that will contain, control, or otherwise prevent fugitive emissions from coal storage piles that would typically occur without the buildings in place. Furthermore, the primary purpose of the buildings appears to be to prevent fugitive emissions.

While it is difficult to estimate the "uncontrolled" emissions from coal storage piles without more specific information about the coal storage activities (i.e., size and geometry of the piles, frequency of

disturbances, and methods employed to add coal to the piles and retrieve coal from the piles), I am confident that fugitive emissions from open storage piles would exceed 10 tons per year by themselves without taking into consideration the uncontrolled emissions from the transfer points discussed above. My estimate of the uncontrolled emissions from storage piles is based on the emission estimates for other coal storage activities in Oregon using the wind erosion estimate procedures provided by EPA in AP-42 section 13.2.5.

Attached is a summary of my estimates of the uncontrolled emissions. Based on these estimates, DEQ has determined that an ACDP is required. DEQ agrees that "controlled" emissions from the facility will most likely not exceed the levels provided in the application, which were approximately 200 lbs/yr of PM 1 0. Normally, sources with potential emissions (after controls) at such low levels would only be required to obtain a Simple ACDP. However, to ensure that the emissions will not exceed the levels proposed, the permit will include enforceable conditions for installing, maintaining, and monitoring the control equipment at the facility. In addition, DEQ anticipates that the permitting of this facility will involve considerable public interest. For these reasons, DEQ is requiring a Standard ACDP in accordance with OAR 340-216-0064(1)(c).

DEQ acknowledges that an application for an ACDP was previously submitted for the Coyote Island Terminal project and that the application and fees were returned to you based on our determination that a permit was not required. We apologize for this inconvenience. Please resubmit the application along with the application fees and DEQ will make every effort to issue a permit as expeditiously as possible taking into consideration our legal obligations for public participation.

For Standard ACDPs, DEQ is required to provide 35 days for interested persons to submit written comments and then hold a public hearing if one is requested. DEQ must provide notice of the hearing at least 30 days before the hearing. One way for the permit process to be expedited is for you to request a public hearing in advance. Otherwise, the permit process could be delayed by up to 45 days to schedule and notify the public of a public hearing if the hearing is requested near the end of the public comment period.

In summary, DEQ is rescinding its approval to construct the Coyote Island Terminal until such time that an ACDP is issued. Please note that, in accordance with OAR 340-216-0020(1), no person may construct, install, establish, develop or operate any air contaminant source which is required to obtain a permit without first obtaining the permit from the DEQ.

If you have any questions, please contact me at (541) 633-2022.

Sincerely,

Mark Fisher Senior Permit Writer DEQ Eastern Region - Air Quality Section fisher.mark(deq. state. or.us

cc: Brian Patterson, Golder Associates, 9 Monroe Parkway, Suite 270, Lake Oswego, OR 97035

Attachment: Uncontolled Emission Estimates

Conveyor and Transfer points (coal handling emission calculations (AP-42,13.2.4):

probably low end of range according to this website: http://www.city-

7.3 mph data.com/city/Boardman-Oregon.html 20 % low end of range provided by applicant

8800000 tons/yr capacity provided by applicant

0.000154 lb/ton calculated using equation below

0.678411 ton/yr/transfer point 10 transfer points

6.8 tons/yr

EF = 0.74 X 0.0032 x [(U/5)A1.31/[(M/2)A1 .4)]

Wind speed (mph) Coal moisture (%) Coal handled (to ns/yr) PM emission factor (EF) Uncontrolled emissions Drop points uncontrolled emissions

EF Equation

U = average wind speed (mph) M = average moisture content of coal (%) 0.74 = PM particle size multiplier 0.0032 = conversion constant

Coal storage in open piles:

Estimated emissions from PGE Boardman coal pile = 26 tons/yr (AP-42, 13.2.5, wind erosion) Coal handled at PGE facility = 3,007,000 tons per year Coal handled at Coyote Island Terminal = 8,800,000 tons/yr Estimated emissions = 26 x 8,800,000/3,007,000 = 76 tons per year

Size of coal storage pile at PGE facility = 1,000,000 square feet Estimated size of coal storage pile at Coyote Island Terminal = 360,000 square feet (estimate based on size of proposed buildings) Estimated emissions = 26 x 360,000/1,000,000 = 9.4 tons/yr

Total estimated uncontrolled emissions range: 16 to 83 tons per year.