PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP MEMORANDUM
FROM: Rafael Dominguez, Lead Associate, Real Estate Practice Group
TO: James Prentice, Responsible Partner
DATE: March 22, 2023
RE: Regulatory Strategy Memorandum — PSD and NPDES Permitting Pathways for Muscatine Expansion Facility
CLIENT: Greenfield Agricultural Partners LLC
MATTER NO.: 1020-00004
This memorandum is prepared at the direction of James Prentice, Responsible Partner, and is protected by the attorney-client privilege and the work product doctrine. This document contains confidential legal analysis and strategy recommendations and should not be disclosed to third parties without prior authorization from the undersigned or the Responsible Partner.
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I. Executive Summary
The purpose of this memorandum is to analyze the federal and Iowa regulatory requirements applicable to Greenfield Agricultural Partners LLC's ("GAP") planned construction of the Muscatine Expansion Facility (the "MEF") and to recommend a comprehensive permitting strategy and timeline for obtaining all required air and water permits necessary to commence construction. This memorandum is intended to serve as the foundational strategy document for our engagement on this matter and to guide the coordinated efforts of Calderwood & Harkness LLP ("C&H"), GAP's internal regulatory and operations teams, and the technical consultants retained by GAP to support the permit applications.
GAP intends to construct a new soybean processing and specialty fertilizer blending facility on a 147-acre greenfield site located at 14800 Highway 61 North, Muscatine, Iowa 52761 (Muscatine County Parcel ID 0735-19-200-004). The facility will include 3,200 tons/day soybean crush capacity and a 450-ton/day granular fertilizer blending line. The total estimated capital cost for the MEF project is $178,000,000, financed by a senior secured term loan from Briarwood Capital Partners LP. As described in greater detail in Section V.C below, the financing structure imposes a critical external deadline on the permitting process that must inform every aspect of our regulatory strategy.
Two principal permits are required from the Iowa Department of Natural Resources ("IDNR") before construction of the MEF can commence: (1) a Prevention of Significant Deterioration ("PSD") construction permit under the Clean Air Act, and (2) an individual National Pollutant Discharge Elimination System ("NPDES") permit under the Clean Water Act. Both of these programs have been delegated to the IDNR by the U.S. Environmental Protection Agency ("EPA"), and all permit applications will be filed with and processed by the IDNR's respective Air Quality Bureau and Water Quality Bureau in Des Moines.
The critical external deadline driving our permitting timeline arises from Briarwood Capital Partners LP's credit agreement (Reference No. BCP-AG-2023-0092, dated February 15, 2023). That agreement requires all material environmental permits to be obtained within 210 calendar days of engagement commencement (i.e., by October 5, 2023), as a condition precedent to the second drawdown tranche of $89,000,000 under the $178,000,000 senior secured term facility. Failure to satisfy this condition precedent by the stated deadline would jeopardize GAP's access to the remaining project financing and could trigger default provisions under the credit agreement.
Based on our analysis of the applicable regulatory requirements, the IDNR's typical processing timelines, and the current status of the technical work being performed by GAP's environmental and engineering consultants, we conclude that the proposed permitting timeline is aggressive but achievable. Our strategy targets PSD permit issuance by late August 2023 and NPDES permit issuance by early September 2023, providing approximately one month of margin before the October 5, 2023 deadline. This margin, while adequate under normal circumstances, leaves limited room for significant delays caused by incomplete applications, extended IDNR review cycles, or contested public comment proceedings. Accordingly, we recommend the mitigation measures detailed in Section VI.B below to manage these risks.
We note that local land-use approval has already been secured. GAP obtained Conditional Use Permit No. MC-2022-041, which was approved on November 15, 2022 by the Muscatine County Board of Supervisors. The CUP authorizes the construction and operation of an agricultural processing and fertilizer blending facility on the subject parcel, subject to conditions that GAP has confirmed it will satisfy during the design and construction process. The underlying site was acquired by GAP from the Reinholt Family Trust on January 20, 2023 for $3,820,000 (approximately $25,986 per acre). Title was handled by Hawkeye Title & Escrow LLC, and site-control documentation, including a copy of the recorded warranty deed and owner's title insurance policy, will be submitted with both permit applications as required by the IDNR.
The balance of this memorandum provides a detailed analysis of each permitting pathway, the applicable regulatory frameworks, key technical and legal issues, coordination requirements with third parties, a proposed timeline with risk mitigation measures, and fee and budget considerations for the engagement.
II. Project Description
A. Facility Overview
Greenfield Agricultural Partners LLC is an Iowa limited liability company (Iowa Secretary of State Filing No. 548213; EIN 46-3827194), with its principal offices located at 4200 Prairie Wind Drive, Suite 300, West Des Moines, Iowa 50266. GAP was founded in 2011 by the Halverson family and has grown to become a significant regional participant in the soybean processing and specialty fertilizer distribution markets. The company currently operates three existing soybean crush facilities in Iowa and Nebraska, and distributes specialty fertilizer products to agricultural customers across the upper Midwest, including Iowa, Nebraska, Minnesota, South Dakota, Illinois, and Wisconsin.
GAP reported 2022 revenues of approximately $485 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $62 million. The company's financial position and growth trajectory have supported its ability to secure the project financing described below, and the MEF represents the single largest capital investment in GAP's corporate history.
The MEF project involves the construction of a new, greenfield soybean processing and specialty fertilizer blending facility. The facility will have a soybean crush capacity of 3,200 tons per day and a granular fertilizer blending line with a capacity of 450 tons per day. These capacities are consistent with modern, commercial-scale operations in the upper Midwest soybean processing industry and will significantly expand GAP's existing processing and distribution capabilities. The MEF is expected to employ approximately 120 full-time workers upon commencement of operations, with additional temporary construction employment during the build-out phase.
The total estimated capital cost for the MEF project is $178,000,000. The project is financed by a senior secured term loan from Briarwood Capital Partners LP, structured at SOFR plus 275 basis points with a five-year term. The financing structure and its implications for the permitting timeline are discussed in detail in Section V.C below.
The project site is located at 14800 Highway 61 North, Muscatine, Iowa 52761, comprising 147 acres identified by Muscatine County Parcel ID 0735-19-200-004. The site is zoned Agricultural-Industrial (AI) under the Muscatine County Zoning Ordinance. As noted above, GAP obtained Conditional Use Permit No. MC-2022-041, approved by the Muscatine County Board of Supervisors on November 15, 2022, which authorizes the proposed facility use on the site. The CUP process included a public hearing at which no significant opposition was raised.
The following GAP personnel have been identified as the key points of contact for permitting coordination throughout this engagement:
• Patricia Caldwell, General Counsel & Vice President of Regulatory Affairs — Ms. Caldwell serves as GAP's principal legal contact and oversees the company's regulatory compliance programs across all facilities. She will be the primary liaison between C&H and GAP's internal teams on legal and regulatory strategy matters.
• Derek Yun, Director of Environmental, Health, and Safety ("EHS") — Mr. Yun manages GAP's environmental compliance programs and will coordinate the flow of technical data, operational parameters, and emissions information from GAP's internal records and from the engineering consultants to C&H and Pinnacle Environmental.
• Margaret Solberg, Vice President of Operations / Muscatine Project Lead — Ms. Solberg has been designated by GAP as the overall project lead for the MEF construction and will be responsible for coordinating construction scheduling and operational readiness with the permitting timeline.
B. Key Emission Units and Process Description
The MEF will contain the following principal emission units, as identified in GAP's preliminary facility design documents prepared by Ridgeline Engineering Group LLC. These emission units are referenced throughout the air permitting analysis in Section III below and form the basis of the emissions inventory and BACT analysis to be prepared by Pinnacle Environmental Consultants Inc.
EU-01 — Natural Gas-Fired Process Heater. The facility will include a natural gas-fired process heater rated at 120 MMBtu/hr. This unit provides thermal energy for the soybean crush process, including seed conditioning and oil extraction operations. The process heater will operate continuously during production periods and is expected to be the single largest source of nitrogen oxide (NOx) emissions at the facility.
EU-02 — Soybean Dryer. The soybean dryer is a natural gas-fired unit rated at 80 MMBtu/hr. This unit is used to reduce the moisture content of incoming soybeans to the level required for efficient crush processing. Emissions from this unit include NOx, carbon monoxide (CO), and particulate matter (PM) from the combustion process, as well as volatile organic compounds (VOC) from the drying of soybean material.
EU-03 — Fertilizer Granulation Dryer. The fertilizer granulation dryer is a natural gas-fired unit rated at 60 MMBtu/hr. This unit is part of the granular fertilizer blending line and is used to dry and condition the blended fertilizer granules before packaging and distribution. Emissions from this unit include NOx, CO, PM, and trace amounts of ammonia (NH₃) associated with the fertilizer product.
EU-04 — Material Handling and Storage. This emission unit encompasses the facility's grain elevators, conveyors, transfer points, fertilizer storage buildings, and fertilizer loadout operations. Particulate matter emissions, including PM₁₀ and PM₂.₅, are the principal pollutants of concern from these operations. Material handling and storage operations are anticipated to be a significant contributor to the facility's overall particulate matter emissions inventory.
EU-05 — Emergency Diesel Generator. The facility will include a 2,000 kW emergency diesel generator to provide backup electrical power in the event of grid power interruptions. Operation of this unit will be limited to 500 hours per year, consistent with EPA's Reciprocating Internal Combustion Engine (RICE) regulations at 40 C.F.R. Part 63, Subpart ZZZZ. Although the annual emissions from this unit are relatively modest given the operational hour restriction, it must be included in the facility's potential to emit calculations.
EU-06 — Cooling Towers. The facility will include two cooling tower cells with a combined circulation rate of 18,000 gallons per minute (gpm). The cooling towers support the soybean crush process and the fertilizer blending line. Emissions from the cooling towers consist primarily of particulate matter resulting from drift (evaporation of circulating water carrying dissolved solids). The cooling towers also generate a continuous blowdown stream that is part of the facility's process wastewater, as discussed in Section IV below.
C. Wastewater and Stormwater Sources
The MEF will generate both process wastewater and stormwater discharges. These discharge streams require authorization under the NPDES program, as discussed in detail in Section IV below.
Process Wastewater. The facility's process wastewater will consist primarily of soybean wash water generated during the initial cleaning and conditioning of incoming soybeans, and cooling tower blowdown generated from the continuous operation of the facility's two-cell cooling tower system. The combined process wastewater stream will contain organic matter (measured as biochemical oxygen demand, or BOD₅), total suspended solids (TSS), oils and greases from the soybean processing operations, ammonia-nitrogen (NH₃-N), and total phosphorus. These constituents will require treatment before discharge to the receiving water.
Stormwater. The facility's stormwater discharges will include runoff from paved areas (including parking lots, access roads, and the truck staging area), the fertilizer loadout pad, and the truck wash facility. Stormwater from the fertilizer loadout pad area is of particular concern because it may contain elevated concentrations of nutrients (nitrogen and phosphorus) from incidental contact with fertilizer materials. The truck wash facility will generate washwater that is collected and routed to the stormwater management system.
Receiving Water. All facility discharges will be directed to Sweetland Creek, a perennial tributary of the Mississippi River. Sweetland Creek flows generally southeastward through Muscatine County before entering the Mississippi River approximately four miles downstream of the proposed discharge point. The water quality characteristics and designated uses of Sweetland Creek are discussed in Section IV.C below.
D. Technical Support Team
GAP has retained two external technical firms to provide engineering and environmental consulting support for the MEF project and the associated permit applications. C&H will coordinate with both firms in the preparation of the permit application narratives, but the technical work product of each firm is directed by and is the responsibility of GAP.
Pinnacle Environmental Consultants Inc. ("Pinnacle"), located at 1120 Ingersoll Avenue, Suite 210, Des Moines, Iowa 50309, has been retained by GAP to prepare the technical work product supporting both the PSD and NPDES permit applications. Pinnacle's scope of work includes preparation of the facility's emissions inventories, air dispersion modeling using the AERMOD model, Best Available Control Technology ("BACT") analyses, process wastewater characterization studies, and the Stormwater Pollution Prevention Plan ("SWPPP"). The key Pinnacle personnel assigned to this engagement are Dr. Leonard Fisk, P.E., Principal of Pinnacle's Air Quality Practice, who will lead the air quality technical work, and Karen Ott, Senior Water Quality Scientist, who will lead the water quality and stormwater technical work. C&H will coordinate with Dr. Fisk and Ms. Ott to ensure that the technical appendices are complete, consistent with regulatory requirements, and integrated into the permit application narratives, but C&H does not direct Pinnacle's technical work and is not responsible for the accuracy of Pinnacle's technical analyses or conclusions.
Ridgeline Engineering Group LLC ("Ridgeline"), located at 7700 Pioneers Boulevard, Suite 105, Lincoln, Nebraska 68506, is the process and civil engineering firm designing the MEF. Ridgeline is responsible for the facility's process design, civil site design, and stormwater infrastructure, and provides the process flow diagrams, mass-balance data, and stormwater management plans that are referenced in the permit applications. The key Ridgeline personnel assigned to the MEF project is Thomas Novak, P.E., Project Manager. Ridgeline's work is directed by GAP, and C&H will reference Ridgeline's design documents in the permit applications as supporting technical information but does not direct Ridgeline's engineering work.
III. Air Permitting — Prevention of Significant Deterioration (PSD) Construction Permit
A. Regulatory Framework
The federal Clean Air Act, 42 U.S.C. §§ 7470–7492, establishes the Prevention of Significant Deterioration program as a preconstruction review requirement for new major stationary sources and major modifications of existing major stationary sources located in areas designated as attainment or unclassifiable for any National Ambient Air Quality Standard ("NAAQS"). The implementing regulations for the federal PSD program are codified at 40 C.F.R. § 52.21 and set forth the substantive and procedural requirements that must be satisfied before a PSD permit can be issued, including the requirement to apply Best Available Control Technology for each regulated pollutant subject to PSD review, the requirement to demonstrate that the proposed source will not cause or contribute to a violation of any NAAQS or applicable PSD increment, and the requirement for a public notice and comment period on the draft permit.
In Iowa, the PSD program has been delegated by EPA to the Iowa Department of Natural Resources, and the state's PSD regulations are codified in the Iowa Administrative Code at 567—Chapter 33. The IDNR Air Quality Bureau administers the PSD permitting program and is responsible for reviewing PSD applications, issuing draft permits for public notice and comment, preparing responsiveness summaries, and issuing final permits. The IDNR's PSD regulations are substantively consistent with the federal PSD requirements at 40 C.F.R. § 52.21, and the IDNR applies the same major source thresholds, BACT analysis methodology, air quality impact analysis requirements, and public participation procedures as the federal program.
The IDNR permit reviewer assigned to the MEF project's air permit application is Jonathan Kreske, P.E., Environmental Engineer, Air Quality Bureau, located at the IDNR's main offices at 502 East 9th Street, Des Moines, Iowa 50319. We have had prior experience working with Mr. Kreske on industrial air permitting matters in Iowa, and he is generally responsive and thorough in his review of PSD applications. We recommend scheduling a pre-application conference with Mr. Kreske during the week of March 27, 2023, as discussed in Section VIII below.
B. Attainment Status and PSD Applicability
The threshold determination for whether PSD review or Nonattainment New Source Review ("NNSR") applies to a proposed new source depends on the attainment status of the area in which the source will be located. Muscatine County, Iowa is currently designated as attainment for all six criteria pollutants for which NAAQS have been established: ozone (O₃), particulate matter less than 2.5 micrometers (PM₂.₅), particulate matter less than 10 micrometers (PM₁₀), nitrogen dioxide (NO₂), sulfur dioxide (SO₂), carbon monoxide (CO), and lead (Pb). Because the area is in attainment for all criteria pollutants, the PSD program — rather than Nonattainment New Source Review — is the applicable preconstruction review program for the MEF.
The PSD program establishes different major source thresholds depending on whether the proposed source falls within one of 28 specifically listed source categories or within the general "unnamed" source category. The MEF does not fall within any of the 28 specifically listed source categories, which include sources such as fossil fuel-fired steam electric plants, petroleum refineries, chemical process plants, and other specified industrial operations. As a soybean processing and fertilizer blending facility, the MEF is classified under the unnamed source category, for which the major source threshold is 250 tons per year ("tpy") for any single regulated New Source Review ("NSR") pollutant. As discussed in Section III.C below, the facility's potential to emit for NOx exceeds this 250 tpy threshold, thereby triggering PSD review.
C. Potential to Emit (PTE) Analysis
Pinnacle Environmental has prepared a preliminary emissions inventory for the MEF based on the facility design parameters provided by Ridgeline Engineering and on emission factors derived from EPA's AP-42 compilation, manufacturer performance data, and Pinnacle's experience with similar soybean processing and fertilizer blending operations. The following table summarizes the facility-wide potential to emit for each regulated NSR pollutant:
These PTE values represent the maximum annual emissions the facility could produce when operating at full design capacity for the maximum number of hours per year, taking into account any physical or operational limitations inherent in the facility's design but without crediting any add-on pollution control equipment that has not yet been installed or any voluntary emission limitations that have not yet been made federally enforceable. The PTE values will be refined during the BACT analysis process, as the selection of control technologies may result in lower permitted emission levels, but the uncontrolled PTE values are the appropriate basis for the applicability determination.
Based on these PTE values, PSD review is triggered as follows:
NOx (312 tpy). The facility's NOx PTE of 312 tpy exceeds the 250 tpy major source threshold for unnamed source categories. This is the principal pollutant that triggers PSD applicability for the MEF. NOx emissions are generated primarily by the natural gas combustion in EU-01 (process heater), EU-02 (soybean dryer), and EU-03 (fertilizer granulation dryer), with additional contributions from EU-05 (emergency diesel generator). PSD review, including the BACT analysis and air quality impact analysis requirements, is triggered for NOx.
Greenhouse Gases / CO₂e (148,600 tpy). Once PSD review is triggered for at least one regulated NSR pollutant (here, NOx), the facility's greenhouse gas emissions must also be evaluated under the "anyway source" provision of the PSD regulations. Under this provision, a source that is otherwise subject to PSD review for at least one non-GHG pollutant must also undergo PSD review for greenhouse gases if its GHG emissions (measured as CO₂ equivalent, or CO₂e) equal or exceed 75,000 tpy. The MEF's GHG PTE of 148,600 tpy CO₂e significantly exceeds this 75,000 tpy CO₂e threshold, and accordingly, PSD review for GHG is also triggered. GHG emissions are generated primarily by the combustion of natural gas in EU-01, EU-02, and EU-03, with a smaller contribution from diesel combustion in EU-05.
PM₁₀ (196 tpy). The facility's PM₁₀ PTE of 196 tpy does not independently exceed the 250 tpy major source threshold for unnamed source categories. However, because PSD has already been triggered by the facility's NOx emissions, PM₁₀ must be evaluated against its applicable significant emission rate. The significant emission rate for PM₁₀ under the PSD regulations is 15 tpy. Because the facility's PM₁₀ PTE of 196 tpy significantly exceeds this 15 tpy significant emission rate, PSD review — including the BACT analysis requirement — is triggered for PM₁₀ as well. PM₁₀ emissions are generated primarily by EU-04 (material handling and storage), EU-06 (cooling towers), and to a lesser extent by the combustion units.
PM₂.₅ (87 tpy). Similarly, the facility's PM₂.₅ PTE of 87 tpy exceeds the significant emission rate for PM₂.₅, which is 10 tpy. PSD review, including the BACT analysis requirement, is therefore triggered for PM₂.₅. PM₂.₅ emissions are a subset of PM₁₀ emissions and are generated by the same emission units, with a greater proportional contribution from combustion sources relative to material handling operations.
CO (245 tpy). The facility's CO PTE of 245 tpy is below the 250 tpy major source threshold and therefore does not independently trigger PSD review. The significant emission rate for CO is 100 tpy, and the facility's CO PTE of 245 tpy exceeds this rate. However, because PSD has been triggered by NOx, the question arises whether a BACT analysis is required for CO. We note that CO PSD increments may apply to the air quality impact analysis, and CO emissions should be included in the AERMOD dispersion modeling. That said, the BACT requirement for CO is only triggered if PSD review is independently required for CO as a regulated NSR pollutant for which the facility's emissions exceed the significant emission rate — which they do. On further reflection, we believe BACT for CO will likely be required and recommend monitoring this issue during the application process and confirming with the IDNR during the pre-application conference. We do not currently anticipate that the CO BACT analysis will present significant technical challenges, as the use of good combustion practices and properly tuned low-NOx burners typically constitutes BACT for CO from natural gas combustion units.
SO₂ (28 tpy) and VOC (164 tpy). The facility's SO₂ PTE of 28 tpy is below both the 250 tpy major source threshold and the 40 tpy significant emission rate for SO₂. Accordingly, PSD review is not triggered for SO₂. The facility's VOC PTE of 164 tpy exceeds the significant emission rate of 40 tpy for VOC. VOC is treated as a precursor to ozone under the PSD regulations. Given the area's attainment status for ozone, the extent to which a BACT analysis is required for VOC should be assessed carefully. We recommend discussing this issue with IDNR during the pre-application conference to confirm whether the IDNR will require a BACT analysis for VOC as part of the PSD application.
Summary of BACT Requirements. Based on the foregoing analysis, a BACT analysis is confirmed to be required for the following pollutants: NOx, PM₁₀, PM₂.₅, and CO₂e. Additionally, BACT may be required for CO and VOC, and we will confirm this with the IDNR during the pre-application conference. The BACT analyses for each of these pollutants are summarized in Section III.D below.
D. Best Available Control Technology (BACT) Analysis Summary
The PSD regulations require that each proposed new major stationary source apply Best Available Control Technology for each regulated pollutant subject to PSD review. BACT is defined as an emission limitation based on the maximum degree of reduction of each pollutant subject to regulation, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs. EPA has established a "top-down" methodology for conducting BACT analyses, which involves the following five steps:
Step 1: Identify all available control technologies for the emission unit and pollutant under review, including control technologies applied to similar sources in other jurisdictions.
Step 2: Eliminate technically infeasible control options based on the physical, chemical, or engineering limitations of the specific source and the control technology.
Step 3: Rank the remaining technically feasible control options in order of control effectiveness (most effective first).
Step 4: Evaluate the most effective control option first, considering energy, environmental, and economic impacts (including cost-effectiveness, typically expressed in dollars per ton of pollutant removed).
Step 5: Select BACT — if the top-ranked option is not eliminated based on energy, environmental, or economic impacts, it is selected as BACT. If it is eliminated, proceed to the next most effective option.
Pinnacle Environmental will prepare the full BACT analysis for each applicable pollutant, incorporating a review of the EPA RACT/BACT/LAER Clearinghouse, recent PSD permits issued for comparable soybean processing and fertilizer blending facilities, vendor data, and cost-effectiveness calculations. The following is a summary of the preliminary BACT controls and emission limits that Pinnacle has identified based on its initial analysis:
EU-01 and EU-02 (Process Heater and Soybean Dryer) — NOx BACT. Pinnacle's preliminary analysis indicates that the installation of low-NOx burners with flue gas recirculation ("FGR") represents BACT for NOx from these natural gas-fired combustion units. The proposed NOx emission limit is 0.036 lb/MMBtu, which is consistent with recent PSD permits for soybean processing facilities identified in the EPA RACT/BACT/LAER Clearinghouse. Selective catalytic reduction ("SCR") and selective non-catalytic reduction ("SNCR") were evaluated as potential top-ranked technologies but are expected to be eliminated based on cost-effectiveness considerations, given the relatively low NOx emission rates achievable from natural gas combustion with low-NOx burners and FGR. The full cost-effectiveness analysis will be developed by Pinnacle and included in the application narrative.
EU-04 (Material Handling and Storage) — PM₁₀ and PM₂.₅ BACT. Pinnacle's preliminary analysis indicates that baghouse filters represent BACT for particulate matter emissions from the facility's material handling and storage operations. The proposed PM outlet concentration is 0.005 grains per dry standard cubic foot ("gr/dscf"), corresponding to a control efficiency of approximately 99.5%. This level of control is consistent with current BACT determinations for grain handling and fertilizer material handling operations and is achievable with modern fabric filter technology. Additional fugitive dust control measures, including enclosed conveyors, covered transfer points, and paved haul roads with watering, will be incorporated as supplemental BACT for fugitive particulate matter emissions.
EU-06 (Cooling Towers) — PM₁₀ and PM₂.₅ BACT. The installation of high-efficiency drift eliminators with a drift rate of 0.0005% is proposed as BACT for particulate matter emissions from the cooling towers. This drift rate is consistent with current industry practice for new cooling tower installations and is achievable with commercially available drift eliminator technology. The resulting PM emissions from the cooling towers are expected to be relatively minor and well within the levels necessary to demonstrate compliance with the applicable NAAQS and PSD increments.
CO₂e — GHG BACT. Consistent with EPA guidance, the BACT analysis for greenhouse gas emissions from the MEF will be framed as an energy efficiency BACT analysis. The proposed GHG BACT measures include the use of natural gas as the primary fuel (natural gas being the lowest carbon-intensity fossil fuel), implementation of energy-efficient equipment (including high-efficiency motors, variable frequency drives, and heat recovery systems where feasible), and adoption of operational practices designed to minimize energy consumption. EPA has generally recognized that for GHG BACT at combustion sources, the use of natural gas combined with energy efficiency measures constitutes BACT in most cases, and we do not anticipate significant challenges in this aspect of the analysis. Pinnacle will prepare the full GHG BACT analysis for inclusion in the application.
The complete BACT analysis for each applicable pollutant and emission unit will be developed by Pinnacle Environmental and incorporated into the PSD application narrative. C&H will review the BACT analysis for legal sufficiency and consistency with EPA guidance and recent precedent before the application is filed.
E. Air Dispersion Modeling
The PSD regulations require that the applicant demonstrate, through air quality impact modeling, that the proposed source will not cause or contribute to a violation of any applicable NAAQS or PSD increment. This requirement is satisfied through the use of an EPA-approved atmospheric dispersion model to predict the maximum ambient air quality impacts of the proposed source's emissions at receptor locations surrounding the facility.
Pinnacle Environmental will prepare the air quality impact analysis for the MEF using AERMOD Version 23.1, which is the current EPA-preferred model under the Guideline on Air Quality Models (40 C.F.R. Part 51, Appendix W). AERMOD is a steady-state plume model that incorporates planetary boundary layer turbulence structure and scaling concepts, including treatment of both surface and elevated sources, and is the standard model used for PSD air quality impact analyses.
The modeling analysis will utilize a five-year meteorological dataset consisting of surface observations from Muscatine Municipal Airport (station identifier KMUT) and upper-air data from the nearest representative upper-air station, covering the period from 2018 through 2022. The use of a five-year dataset is consistent with EPA's recommendation for ensuring that the modeling results capture the range of meteorological conditions that may affect ambient air quality impacts from the proposed source.
The receptor grid for the modeling analysis will employ 50-meter spacing extending out to a distance of five kilometers from the facility in all directions. This receptor grid density and extent are consistent with IDNR and EPA guidance for PSD modeling analyses and will ensure that the maximum predicted ambient air quality impact is captured at the appropriate receptor location.
The nearest sensitive receptor to the proposed facility is a residence located approximately 0.42 miles (2,218 feet) east-northeast of the proposed main stack location. This receptor will receive particular attention in the modeling analysis to confirm that ambient air quality impacts at this location comply with all applicable NAAQS and PSD increments.
Pinnacle has provided preliminary modeling results for PM₁₀, which indicate the following:
These preliminary results indicate that the facility's PM₁₀ emissions, when combined with the existing background concentration, will be in compliance with the 24-hour PM₁₀ NAAQS with a substantial margin of 39.8 µg/m³. This is an encouraging preliminary result, and we anticipate that the full modeling analysis will demonstrate compliance with all applicable NAAQS and PSD increments for all pollutants subject to PSD review.
Modeling for the remaining pollutants subject to PSD review — including NOx, SO₂, PM₂.₅, and CO — and the PSD increment consumption analysis will be completed by Pinnacle and included in the PSD application. The PSD increment consumption analysis will evaluate whether the facility's emissions will cause the ambient concentration of any pollutant to exceed the applicable PSD Class II increment (Muscatine County is classified as a Class II area for PSD increment purposes). We do not currently anticipate any increment consumption issues given the facility's relatively modest emissions in the context of a Class II area.
F. PSD Application Filing Fee
The IDNR charges a filing fee of $7,500 for PSD construction permit applications, pursuant to Iowa Administrative Code 567—30.5. This fee is required to be submitted with the application at the time of filing. C&H will advance this fee as a client disbursement and include it in our regular billing statements to GAP.
G. Public Notice and Comment Process (Air)
Under Iowa Administrative Code 567—Chapter 33, the IDNR is required to provide a 30-day public notice and comment period on the draft PSD permit before a final permit can be issued. The public notice must be published in a newspaper of general circulation in the county in which the proposed source is located — in this case, Muscatine County. The public notice will describe the proposed facility, the draft permit conditions, and the procedures for submitting public comments and requesting a public hearing.
Any person may submit written comments on the draft PSD permit during the 30-day comment period. Additionally, any person may request a public hearing on the draft permit. The IDNR has discretion to grant a public hearing request if it determines that significant public interest exists in the proposed permit action. Public hearings are not automatically granted and, in our experience, are relatively uncommon for industrial PSD permits in attainment areas in Iowa, unless the proposed project generates unusual or significant public opposition.
Risk Assessment. We note that neighboring landowners and local advocacy groups may submit comments on the draft PSD permit for the MEF. In particular, we are aware that the Heartland Environmental Alliance ("HEA"), a local environmental advocacy organization based in Muscatine County, has been active in industrial permitting matters in the county in recent years. HEA has submitted comments on several recent IDNR air permit actions in the Muscatine area and has requested public hearings on certain controversial projects. While we do not currently have information indicating that HEA has specific objections to the MEF project, we recommend monitoring HEA's activities and public statements regarding the project as the permitting process progresses. If HEA or other parties submit substantive comments on the draft PSD permit, C&H will coordinate with Pinnacle Environmental to prepare thorough technical responses and will work with the IDNR to ensure that the responsiveness summary adequately addresses all comments raised. We discuss the public comment risk and our proposed mitigation strategy further in Section VI.B below.
IV. Water Permitting — NPDES Individual Permit
A. Regulatory Framework
The federal Clean Water Act, 33 U.S.C. § 1342, establishes the National Pollutant Discharge Elimination System program, which requires any person who discharges pollutants from a point source into waters of the United States to obtain an NPDES permit. The NPDES permit sets forth effluent limitations and monitoring requirements designed to ensure that the discharge does not cause or contribute to a violation of applicable water quality standards in the receiving water.
In Iowa, the NPDES program has been delegated by EPA to the Iowa Department of Natural Resources, and the state's NPDES regulations are codified in the Iowa Administrative Code at 567—Chapter 64. The IDNR Water Quality Bureau administers the NPDES permitting program in Iowa and is responsible for receiving and reviewing NPDES applications, establishing technology-based and water quality-based effluent limitations, issuing draft permits for public notice and comment, preparing responsiveness summaries, and issuing final permits.
The IDNR permit reviewer assigned to the MEF project's NPDES application is Amy Lindstrom, Environmental Specialist Senior, Water Quality Bureau, located at the IDNR's main offices at 502 East 9th Street, Des Moines, Iowa 50319. We have not previously worked with Ms. Lindstrom and accordingly recommend scheduling a pre-application conference with her during the week of March 27, 2023, to introduce the project, discuss application requirements, and confirm anticipated review timelines and the applicability of Iowa's antidegradation policy.
B. Permit Type Determination
NPDES permits may be issued as either individual permits or as coverage under a general permit. General permits are issued by the IDNR for categories of discharges that involve similar operations, similar types of pollutants, and similar treatment requirements. Individual permits are required for discharges that do not fall within the scope of an existing general permit or that involve discharges of sufficient complexity or environmental concern that individual permitting is warranted.
For the MEF, an individual NPDES permit is required because the facility will discharge treated process wastewater — specifically, soybean wash water and cooling tower blowdown — in addition to industrial stormwater. The IDNR's General Permit No. 2 (industrial stormwater) provides coverage for facilities that discharge only stormwater associated with industrial activity, but it does not authorize the discharge of process wastewater. Because the MEF's discharge will include both process wastewater and stormwater, the facility cannot be covered under General Permit No. 2 alone and must obtain an individual NPDES permit that authorizes both discharge streams.
The individual NPDES permit will establish specific effluent limitations and monitoring requirements for each discharge point (outfall) based on the characteristics of the wastewater discharged and the water quality standards applicable to the receiving water.
C. Discharge Points and Receiving Water
The MEF will have two permitted discharge points (outfalls) to the receiving water:
Outfall 001 — Treated Process Wastewater. This outfall will discharge treated process wastewater consisting of soybean wash water and cooling tower blowdown. The process wastewater will be routed through the facility's treatment system (described in Section IV.D below) before discharge. The design flow for Outfall 001 is 0.38 million gallons per day ("MGD"), representing the combined maximum daily flow of the treated process wastewater stream during full facility operation.
Outfall 002 — Industrial Stormwater. This outfall will discharge industrial stormwater from the facility's paved areas, fertilizer loadout pad, and truck wash facility. This discharge is intermittent and will occur only during and after precipitation events. The stormwater discharge will be subject to best management practices ("BMPs") as specified in the facility's Stormwater Pollution Prevention Plan ("SWPPP"), and the individual NPDES permit will include monitoring requirements and benchmark values for stormwater discharges from this outfall.
Receiving Water — Sweetland Creek. All discharges from both outfalls will be directed to Sweetland Creek, a perennial tributary of the Mississippi River. The Iowa DNR has classified Sweetland Creek with the following designated uses under the Iowa Water Quality Standards:
• Class A1 — Primary Contact Recreation. This designation indicates that the waters are used for, or have the potential for, full-body contact recreation activities such as swimming. The primary water quality parameter associated with this designated use is fecal coliform bacteria.
• Class B(WW) — Warm Water Aquatic Life. This designation indicates that the waters are capable of supporting and maintaining a balanced, integrative community of warm water aquatic organisms. The water quality parameters associated with this designated use include dissolved oxygen, pH, ammonia-nitrogen, total suspended solids, and temperature, among others.
The water quality standards applicable to these designated uses will govern the derivation of water quality-based effluent limitations in the individual NPDES permit. The effluent limitations will be established to ensure that the facility's discharge does not cause or contribute to a violation of the applicable water quality standards in Sweetland Creek, including both numeric criteria and narrative criteria.
D. Treatment System Design
The process wastewater treatment system for the MEF has been designed by Ridgeline Engineering Group LLC to achieve compliance with the anticipated effluent limitations under the individual NPDES permit. The treatment train consists of the following unit processes:
1. Equalization Basin. Incoming process wastewater is collected in an equalization basin that dampens flow and concentration variations in the influent stream, providing a consistent, steady flow to the downstream treatment units. The equalization basin will be sized to accommodate peak flow conditions and will include mixing equipment to prevent settling of solids.
2. Dissolved Air Flotation ("DAF"). The equalized wastewater is routed to a dissolved air flotation unit, which removes oils, greases, and suspended solids from the wastewater stream. The DAF unit operates by dissolving air into the wastewater under pressure and then releasing the air at atmospheric pressure, causing fine bubbles to form that attach to suspended particles and float them to the surface for removal by skimming.
3. Three-Cell Aerated Lagoon. Following DAF treatment, the wastewater flows through a three-cell aerated lagoon system with a total surface area of 4.2 acres and an 18-day hydraulic retention time. The aerated lagoon provides biological treatment of the organic matter in the wastewater, reducing BOD₅ and ammonia-nitrogen concentrations through aerobic microbial degradation. The three-cell configuration provides sequential treatment and polishing to achieve consistent effluent quality.
4. UV Disinfection. The treated effluent from the aerated lagoon system passes through an ultraviolet disinfection system to reduce fecal coliform bacteria levels to below the applicable water quality standard for the Class A1 (Primary Contact Recreation) designated use of the receiving water.
5. Discharge to Sweetland Creek via Outfall 001. The fully treated and disinfected effluent is discharged to Sweetland Creek through Outfall 001.
The treatment system has been designed to achieve the following proposed effluent limits for Outfall 001, which are anticipated to be consistent with the technology-based and water quality-based effluent limitations that the IDNR will establish in the individual NPDES permit:
These proposed effluent limits are consistent with secondary treatment standards established under 40 C.F.R. Part 133 and with Iowa water quality standards for the receiving water's designated uses (Class A1 and Class B(WW)). The seasonal ammonia-nitrogen limits reflect the temperature-dependent toxicity of ammonia to aquatic life, with more stringent limits during the warmer months (April through October) when aquatic organisms are more sensitive to ammonia exposure. The total phosphorus limit of 1.0 mg/L monthly average reflects the IDNR's current approach to phosphorus control for new industrial discharges to Iowa waterways and is consistent with the nutrient reduction goals established in the Iowa Nutrient Reduction Strategy.
Ridgeline Engineering has confirmed that the proposed treatment system design is capable of consistently achieving these effluent limits under the full range of anticipated operating conditions at the MEF. Pinnacle Environmental is currently conducting process wastewater characterization studies to confirm the influent wastewater quality assumptions that underlie the treatment system design and to provide the supporting data required for the NPDES application.
E. Stormwater Pollution Prevention Plan (SWPPP)
As a condition of the authorization to discharge industrial stormwater through Outfall 002, the individual NPDES permit will require the facility to develop, implement, and maintain a Stormwater Pollution Prevention Plan. The SWPPP is a comprehensive, site-specific plan that identifies the potential sources of stormwater contamination at the facility, describes the best management practices ("BMPs") that will be implemented to prevent or minimize the discharge of pollutants in stormwater, and establishes monitoring and inspection procedures to verify the effectiveness of the BMPs.
The SWPPP for the MEF will be prepared by Pinnacle Environmental under the direction of Karen Ott, Senior Water Quality Scientist. C&H will review the SWPPP for legal sufficiency and consistency with the requirements of the IDNR's NPDES regulations and the anticipated permit conditions. The SWPPP will address the following key elements:
• Best management practices for controlling stormwater runoff from the fertilizer loadout pad area, including containment berms, covered storage areas, and regular housekeeping procedures to minimize the accumulation of fertilizer materials on outdoor surfaces.
• Management of truck wash water, including collection and routing of washwater to the facility's stormwater management system and, where appropriate, to the process wastewater treatment system.
• Construction-phase erosion and sediment controls, including silt fencing, sediment basins, stabilized construction entrances, and temporary seeding, to prevent sedimentation of Sweetland Creek during the facility construction period.
• Routine facility inspections, quarterly visual monitoring of stormwater discharges, and annual comprehensive site inspections to verify BMP effectiveness and identify corrective actions as needed.
F. Antidegradation Review
Iowa's antidegradation policy, codified at Iowa Administrative Code 567—61.2(2), implements the federal antidegradation requirements of the Clean Water Act and requires a tiered review of new or increased discharges to surface waters. The antidegradation review is a critical component of the NPDES permitting process and must be completed by the IDNR before an individual NPDES permit can be issued.
Iowa's antidegradation policy establishes three tiers of protection:
Tier 1 applies to all surface waters and requires that existing uses and the level of water quality necessary to protect those existing uses be maintained and protected. Under Tier 1, a new discharge must not cause or contribute to the impairment of the existing uses of the receiving water.
Tier 2 applies to waters where the existing water quality exceeds the levels necessary to support the propagation of fish, shellfish, and wildlife and recreation in and on the water. Where Tier 2 applies, water quality shall be maintained and protected unless the IDNR determines, after a full intergovernmental review and opportunity for public participation, that allowing lower water quality is necessary to accommodate important economic or social development in the area in which the waters are located. Tier 2 review requires a rigorous alternatives analysis, including consideration of non-discharge alternatives.
Tier 3 applies to Outstanding Iowa Waters and prohibits the lowering of water quality in such waters.
Based on our preliminary review, we expect the IDNR to apply a Tier 1 antidegradation analysis to the MEF's proposed discharge to Sweetland Creek. Under Tier 1, the key determination is whether the proposed discharge will cause or contribute to impairment of the existing uses of the receiving water. Given the treatment system design described in Section IV.D and the proposed effluent limits that are consistent with or more stringent than applicable water quality standards, we believe the Tier 1 analysis should be straightforward and should not present a significant barrier to permit issuance.
No Tier 2 alternatives analysis is expected to be required because the discharge is not anticipated to lower the water quality of Sweetland Creek below the level necessary to maintain existing uses. The proposed effluent limits are designed to be protective of the designated uses of the receiving water, and the treatment system has been designed with adequate capacity and treatment efficiency to consistently achieve these limits.
Key Risk. If the IDNR determines that Sweetland Creek is a "high quality water" for which Tier 2 review applies, a significantly more rigorous alternatives analysis would be required, including consideration of non-discharge alternatives (such as land application of treated wastewater, connection to a municipal wastewater treatment system, or zero-liquid-discharge treatment technologies). A Tier 2 determination would also require an economic justification demonstrating that allowing lower water quality is necessary to accommodate important economic or social development. While we believe such a determination is unlikely based on our preliminary review of available water quality data for Sweetland Creek — and we note that Sweetland Creek is not designated as an Outstanding Iowa Water — we recommend confirming the applicable antidegradation tier with Amy Lindstrom at the IDNR Water Quality Bureau during the pre-application conference. If a Tier 2 analysis were required, it would add significant time and complexity to the permitting process and could jeopardize our ability to meet the October 5, 2023 Briarwood milestone deadline.
G. NPDES Application Filing Fee
The IDNR charges a filing fee of $3,600 for individual NPDES permit applications, pursuant to Iowa Administrative Code 567—64.16. This fee is required to be submitted with the application at the time of filing. C&H will advance this fee as a client disbursement.
The total IDNR filing fees for both permit applications are summarized as follows:
Both filing fees will be advanced by C&H and billed to GAP as disbursements on C&H's regular billing statements.
H. Public Notice and Comment Process (Water)
Under Iowa Administrative Code 567—Chapter 64, the IDNR is required to provide a 30-day public notice and comment period on the draft individual NPDES permit before a final permit can be issued. The public notice will be published in a newspaper of general circulation in Muscatine County and will describe the proposed facility, the draft permit conditions and effluent limitations, and the procedures for submitting public comments and requesting a public hearing.
Public comments on the draft NPDES permit may be submitted by any interested party, including downstream landowners, agricultural interest groups, environmental advocacy organizations, and members of the general public. Based on our assessment of the project's location and the characteristics of the surrounding community, we anticipate that the following groups may be interested in and potentially submit comments on the draft NPDES permit:
• Downstream landowners who use Sweetland Creek or the Mississippi River for agricultural irrigation, livestock watering, or recreational purposes and who may have concerns about the effects of the facility's discharge on water quality.
• Agricultural interest groups, such as the Prairie Farmers Coalition, which represents agricultural producers in the Muscatine County area and has historically been attentive to water quality issues affecting agricultural water supplies.
• Environmental advocacy organizations, such as the Heartland Environmental Alliance ("HEA"), which, as noted in Section III.G above, has been active on industrial permitting matters in Muscatine County.
If public comments raise issues regarding downstream agricultural water quality or the potential effects of the facility's discharge on the aquatic ecosystem of Sweetland Creek, we should be prepared to respond with technical data from Pinnacle's wastewater characterization studies and Ridgeline's treatment system design specifications. We recommend that C&H work closely with Pinnacle and Ridgeline to prepare comprehensive technical responses to any substantive comments received during the comment period.
V. Coordination with Third Parties
The permitting process for the MEF requires close coordination among C&H, GAP's internal teams, the retained technical consultants, and the lender and its counsel. This section describes the coordination framework and the respective roles and responsibilities of each party.
A. Pinnacle Environmental Consultants Inc.
Pinnacle Environmental is responsible for all technical work product supporting the PSD and NPDES permit applications. Pinnacle's scope of work encompasses the preparation of emissions inventories for all emission units at the MEF, air dispersion modeling using the AERMOD model, BACT analyses for each pollutant subject to PSD review, process wastewater characterization studies, and the SWPPP. These technical work products will be submitted to C&H as appendices to the permit application narratives and will constitute the core technical basis for the applications.
C&H will coordinate with Dr. Leonard Fisk, P.E. (air quality) and Karen Ott (water quality) at Pinnacle to ensure that the technical appendices are complete, responsive to all IDNR application requirements, and consistent with applicable regulatory standards and EPA guidance. However, as noted in Section II.D above, C&H does not direct Pinnacle's technical work and is not responsible for the accuracy of Pinnacle's technical analyses, conclusions, or professional opinions. Pinnacle's consulting fees are estimated at approximately $210,000 for the full scope of air and water technical work, and these fees are GAP's direct cost, outside the scope of C&H's engagement and budget.
Deliverable Schedule. The critical path for the permitting timeline requires that Pinnacle deliver draft technical appendices for both the air and water permit applications to C&H by approximately April 14, 2023. This delivery date allows two weeks for C&H's legal review and integration of the technical materials into the application narratives before the target air permit filing date of April 28, 2023. Any delay in Pinnacle's delivery of the technical appendices will directly compress C&H's review period and could delay the filing of the applications, thereby increasing the risk of missing the October 5, 2023 Briarwood milestone deadline. We recommend confirming this deliverable schedule with Dr. Fisk and Ms. Ott as one of the first action items following the kick-off meeting.
B. Ridgeline Engineering Group LLC
Ridgeline Engineering provides the process flow diagrams, mass-balance data, and stormwater management plans that are referenced in the permit applications. These engineering documents describe the facility's process design, material flows, wastewater generation rates, stormwater management infrastructure, and treatment system design parameters. Thomas Novak, P.E., is the Ridgeline project manager for the MEF project.
C&H will reference Ridgeline's design documents in the permit applications as supporting technical information and will coordinate with Mr. Novak as needed to obtain clarifications or additional data required for the application narratives. Ridgeline's work is directed by GAP, and C&H's role is limited to reviewing and incorporating Ridgeline's work product into the regulatory applications.
C. Briarwood Capital Partners LP / Trask Whitfield & Coe LLP
The relationship between the permitting timeline and GAP's project financing structure is of paramount importance to this engagement and must be at the forefront of our strategic thinking throughout the permitting process.
The Briarwood Capital Partners LP credit agreement (Reference No. BCP-AG-2023-0092, dated February 15, 2023) provides for a $178,000,000 senior secured term facility to finance the MEF project. The credit agreement includes environmental permit milestones as conditions precedent to certain drawdowns under the facility. Specifically, all material environmental permits must be obtained within 210 calendar days of engagement commencement (March 9, 2023), which results in a deadline of October 5, 2023, as a condition precedent to the second drawdown tranche of $89,000,000. The second drawdown tranche represents fifty percent of the total facility commitment and is essential to fund the construction of the MEF. Failure to satisfy this condition precedent by the stated deadline would prevent GAP from drawing the second tranche and could trigger cross-default provisions under the credit agreement, potentially accelerating the entire facility and jeopardizing the project.
As a condition of the credit agreement, C&H is required to provide permitting status certifications to the lender's counsel, Trask Whitfield & Coe LLP, confirming the status of the permit applications and, ultimately, confirming that all material environmental permits have been obtained. The senior partner at Trask Whitfield handling this matter is Martin Eggers, Partner, located at 200 South LaSalle Street, Suite 2700, Chicago, Illinois 60604. The senior lender contact at Briarwood Capital is Christine Malloy, Managing Director, Agribusiness Lending.
We anticipate that C&H will need to provide interim permitting status certifications to Trask Whitfield & Coe LLP at periodic intervals during the permitting process, and a final certification upon issua