South Coast Air Quality Management District

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Petition for Regulation XII Hearing on CENCO Refining Company’s Permit Applications

SYNOPSIS: 

Communities for a Better Environment has petitioned the Board to hold a hearing pursuant to District Regulation XII on CENCO Refining Company’s 47 applications for permits to construct. The Board will consider whether or not to set a hearing.

COMMITTEE: 

Not Applicable

RECOMMENDED ACTION:

That the Governing Board exercise its discretion to deny petitioner’s request for a hearing.

Barry R. Wallerstein, D.Env.
Executive Officer

Rule 1201 and Health and Safety Code section 40509 provide that a party may petition the Governing Board to set and hold a hearing on a permit application. The Governing Board has full discretion to decide whether or not to set a public hearing.¹ If it decides to set a hearing, the matter may be heard at the next regular meeting or at a special meeting.

¹ CBE argues that CEQA requires a public hearing, but this is incorrect. According to CEQA Guidelines section 15087(i), "public hearings are encouraged, but not required as an element of the CEQA process."
 

Communities for a Better Environment ("CBE") has petitioned the Governing Board to hold a public hearing on the proposed issuance of 47 permits to construct to CENCO Refining Company.² The permits will allow construction of improvements at the refinery located in Santa Fe Springs. These permits will allow construction of health and safety improvements at the refinery, installation of controls to reduce emissions of oxides of nitrogen, and improvements to make refinery operations more efficient and to reduce the likelihood of odors emanating from the refinery.

² A letter has been received from the Natural Resources Defense Council and Coalition for Clean Air supporting the request for a hearing but "without commenting on the substance" of the petition.
 

The refinery in question began operation in 1936. However, under prior owner Powerine, it suspended operations in July 1995 and in August 1998 sold the facility to CENCO. Powerine had allowed its RECLAIM facility permit, embodying all operating permits, to expire, but timely filed an application to reinstate the permit pursuant to Rule 301(g)(2). In October 1998, CENCO applied for a change of operator to allow it to operate the refinery pursuant to Rule 301(c)(2).

In view of the potential for future operations, staff was concerned about possible violations at the refinery and sought a remedial order from the District Hearing Board. After a 6-hour public hearing on December 10, 1998, the District Hearing Board issued a stipulated order for abatement prohibiting CENCO from operating any refinery equipment until after a noticed public hearing at which it demonstrates it has made needed improvements and that its operation will comply with all District rules. CBE participated in the hearing before the Hearing Board.

Although District rules do not require any notice prior to reinstatement of permits, the District gave notice and a 20-day period for public comment to all addresses within a one-mile radius of the refinery prior to reinstating these permits. The District responded to all public comments prior to reinstatement. On December 29, 1998, the District reinstated Powerine’s expired facility permit (which incorporated individual equipment permits). On January 15, 1999, the District transferred the Powerine permit to the new owner, CENCO.

At the January 9, 1999 Governing Board meeting, CBE requested the Board to hold a hearing on the reinstatement and change of operator. The Board declined to hold a hearing. CBE did not appeal either the reinstatement of the change of operator to the District Hearing Board, nor did it challenge either action in state court.

Nature of Petition

While CBE challenges the proposed issuance of new permits to construct to CENCO, the central basis for its challenge is CBE’s view that the facility permit was improperly reinstated and improperly transferred to CENCO. CBE’s petition repeatedly refers to the impacts of operating the refinery pursuant to the existing permits, rather than the impacts of the new permits, which will be largely beneficial to the environment. These actions occurred over a year and a half ago and were never challenged before the District Hearing Board.

Accordingly, CBE cannot now challenge those decisions in court. (League to Save Lake Tahoe v. Trounday (9^th Cir. 1979) 598 F.2d 1164, 1174 (failure to seek administrative review of indirect source permit bars citizen enforcement action).) Therefore, CBE should not now be able to challenge in a Regulation XII hearing decisions that have already become final and were never challenged before the Hearing Board.

CBE also repeatedly refers to the fact that on May 17, 2000, EPA issued a Notice of Violation to CENCO also challenging the reinstatement and transfer of permits. This notice of violation is based on EPA’s "reactivation policy," which indicates that an existing facility that is required to shut down by economic conditions, and remains shut down for two years, must install current Best Available Control Technology. AQMD discussed this reactivation policy and the facts of this case with EPA before reinstating Powerine’s permits, and EPA did not indicate the refinery must undergo new source review. When the first batch of public notices for the refinery improvement project were issued a year later, EPA commented that it had not decided whether to apply that policy. Moreover, CENCO has sued EPA in the Court of Appeals in Washington, D.C. to invalidate the reactivation policy, on the grounds that it is an unlawful rule being implemented without proper rulemaking procedures. EPA’s new source review rules by their terms apply only to new and modified sources, not existing sources.

Section 40509 and Regulation XII

Health and Safety Code Section 40509 states:

"Any person may petition the south coast district board to hold a public hearing on any application to issue or renew a permit."

The District has adopted Regulation XII to implement this section. Rule 1201 provides that the Governing Board will decide whether or not to set a hearing on a Regulation XII petition.³ Other than the requirement that the matter involve a permit application, the rule does not set any criteria for determining whether or not to set a hearing. The Board thus has full discretion in this matter. If a hearing is scheduled, it may be before the District Board, one or more of its members, or a hearing officer designated by the Board. Such a hearing is "quasi-judicial" in nature, with numerous procedural requirements set forth in District rules. A Regulation XII hearing is not an appeal; rather the Governing Board acts in the place of the Executive Officer in deciding whether to issue a permit, and must apply all applicable District rules. (Rule 1205.) The hearing is a full evidentiary hearing with evidence being presented by sworn testimony and the parties having the right to cross-examine witnesses. (Rule 1219.)

³ According to District records, since the adoption of Regulation XII on April 7, 1978, there have been only ten petitions filed pursuant to Health and Safety Code section 40509. Of these, six were taken off calendar before the Governing Board addressed the issue of whether a public hearing should be held. Hearings were denied in two cases, LAXT and CENCO. The other two cases, both involving petitions filed by parties other than the permit applicants, were granted public hearings. Those cases involved a hazardous waste incinerator and the laying of pipeline through the basin.
 

Petitioners have the right to challenge issuance of the subject permits before the District Hearing Board, regardless of whether the Governing Board holds a hearing. (Health & Safety Code §42302.1.)

Staff believes the AQMD Hearing Board is the appropriate forum for consideration of these issues. The Hearing Board is well-equipped and staffed to handle lengthy public hearings, with judicial-type process. That is its function. The petitioners will have at least two opportunities to testify before the Hearing Board in any appeal of these permits, and in a hearing to determine if CENCO should be allowed to begin operating. Health and Safety Code section 40509, authorizing a petition for a Governing Board hearing, served a more useful purpose prior to the law being amended to allow members of the public to appeal permit decisions to the Hearing Board. (Health & Saf. Code §42302.1.) This law was enacted over ten years ago.

Legal Issues

As more fully set forth in the attached Answer and Opposition to Petition, the reinstatement of operating permits to Powerine and the issuance of a Change of Operator permit to CENCO fully complied with all applicable legal requirements. Moreover, these decisions are not subject to challenge since CBE failed to appeal them to the Hearing Board.

Staff Action to Ensure Public Participation and Compliance with District Rules

As set forth in the attached Answer and Opposition to Petition, staff made a concerted effort to provide public notice and consultation to interested parties and the affected community, even though not legally obligated to do so, prior to reinstatement of Powerine’s permit.

Special notice was given of the intent to reinstate the Powerine permit, and a written response was made to each comment letter. Notice was given to CBE upon both the reinstatement and the change of operator. Upon petitioning the AQMD Hearing Board for a stipulated Order for Abatement, staff sent, via Federal Express, the complete hearing board package to each individual who earlier submitted comments. To accommodate the public, the hearing was held in the evening and CENCO provided free coach service to and from the hearing for members of the community. Petitioner was present at the hearing and provided detailed testimony.

The order issued by the Hearing Board prohibits CENCO from restarting the refinery until a comprehensive compliance demonstration to both the Executive Officer and the Hearing Board is made. The requirements for these demonstrations address all of the concerns raised by staff with the respect to the ability of the refinery to operate in compliance with all applicable rules and regulations. Any decision by the Hearing Board to allow the refinery to resume full operation will be made at a public hearing where interested parties and the affected community will again have the opportunity to testify about the matter.

During the time since the District staff received Powerine’s request for reinstatement, a number of public meetings have been held in the community regarding the CENCO project. The District had held several workshops during the past year regarding the CENCO refinery upgrade project. A townhall meeting was held on October 13, 1999 in the City of Santa Fe Springs, at which time the CENCO project was discussed at length. Another townhall meeting was held on November 10, 1999 at the request of the City of Norwalk for its residents. In addition, a meeting was held on November 11, 1999 between the District and the Whittier Union High School District, South Whittier School District and Little Lake City School District. As the lead agency, the City of Santa Fe Springs has also held several public meetings to consider issuance of Conditional Use Permit and certification of the final CEQA document for the project. In response to a number of public requests, the District held a public consultation meeting on May 16, 2000 to review the permitting process and answer any questions regarding permit issues. Moreover, ample public notice has been provided regarding the 47 new permits to construct. These permits were sent out for 30-day notice and comment in three batches beginning in October 1999. Several newspapers, including a Spanish language paper, were used to provide notice. Due to a change in emission estimates, all permits were renoticed in May 2000. Finally, in response to CBE’s request, the permits were noticed again in August. Each time notice was published notice was also mailed to each address within a quarter mile of the refinery. Of course, CBE can challenge these permits, once they are issued, by appealing to the District Hearing Board pursuant to Health and Safety Code section 42302.1. If such an appeal is filed, a full evidentiary hearing will be held, with sworn testimony and the right to cross-examine witnesses. (District Rule 511.) Members of the public have the right to testify in such an appeal. (District Rule 511.)

Recommended Action

Staff recommends that the Governing Board exercise its discretion to deny the petitioners’ request for a hearing. CBE is essentially seeking to challenge two earlier permit actions which it never challenged before the Hearing Board. The Powerine permit was reinstated as required by Rule 301(g), and transferred to CENCO as required by state law. (Health & Safety Code §42301(f).) The Order for Abatement issued by the AQMD Hearing Board ensures that the facility will operate in compliance with all applicable rules and regulations, or simply not operate. CBE can seek to challenge the new permits before the Hearing Board once they are issued. Moreover, the Hearing Board will retain jurisdiction of this matter until full compliance with its Order for Abatement is achieved.

Attachments

CBE Petition for Hearing
SCAQMD Response

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