PUBLIC PARTICIPATION DOCUMENTS For Flakeboard America Limited, dba ARAUCO North America Grayling, Michigan

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1 STATE OF MICHIGAN Rick Snyder, Governor DEPARTMENT OF ENVIRONMENTAL QUALITY AIR QUALITY DIVISION CONSTITUTION HALL 525 WEST ALLEGAN STREET P.O. BOX LANSING, MICHIGAN PUBLIC PARTICIPATION DOCUMENTS For Flakeboard America Limited, dba ARAUCO North America Grayling, Michigan PERMIT APPLICATION NUMBER July 14, 2016

2 Flakeboard America Limited, dba ARAUCO North America Page 1 Purpose and Summary FACT SHEET July 14, 2016 Flakeboard America Limited, dba ARAUCO North America (Arauco) is proposing to install and operate a medium density particleboard plant at 5851 Arauco Road, Grayling, Michigan. The proposed facility would be located on Four Mile Road, across from the Weyerhaeuser NR Company facility and next to the Grayling Generating Station. This project is addressed in Permit to Install (PTI) Application No The proposed project is subject to the permitting requirements of the Michigan Department of Environmental Quality s (MDEQ) Rules for Air Pollution Control and state and federal Prevention of Significant Deterioration (PSD) regulations. The MDEQ s Air Quality Division (AQD) has evaluated this proposal and made a preliminary determination that the project would not violate any of the MDEQ s rules, the health protective National Ambient Air Quality Standards (NAAQS), nor the PSD air quality increments. The PSD air quality increments are intended to allow industrial growth in an area while ensuring the area will continue to meet the NAAQS. Prior to acting on this application, the AQD is holding a public comment period and a public hearing, if requested in writing, to allow all interested parties the opportunity to comment on the proposed PTI. All relevant information received during the comment period and hearing, if held, will be considered by the decision maker prior to taking final action on the application. Proposed Facility Arauco is proposing to install and operate a medium density particleboard plant with a design capacity of 750,000 cubic meters (424 million square feet, ¾ inch basis) per year. As proposed, the facility would receive whole logs as well as wood chips and other wood residuals, such as saw dust. Raw wood materials would have a typical moisture content of around 50 percent. The logs would be debarked and chipped. Bark would be shredded and stored in a silo to be used as fuel in the facility s thermal energy plant. Wood chips would be sliced into small pieces and the resulting flakes would be dried in two single pass rotary dryers. The dryers would be heated by natural gas and the exhaust from the thermal energy plant. The dried flakes would then be screened to separate out over size and fine material and to separate the properly sized flakes into core and surface material. Oversized flakes would be sent to mills to reduce the size; the milled flakes would then be rescreened. Fine material would be stored in a silo to be used as fuel for the thermal energy plant.

3 Flakeboard America Limited, dba ARAUCO North America Page 2 Core and surface material would be cleaned in sifters and then blended with the appropriate urea-formaldehyde resins, catalysts, wax emulsions, and urea as needed. Resin coated material from the blenders would then be formed into core and surface mats. These mats would then be fed to a continuous press where heat and pressure would form the mats into raw particle board. The raw board would then be cut into panels. After being cut, the panels would be sent to the board cooling system where air would be circulated to prevent the panels from warping as they cool. Cooled panels would then be sanded and cut to the final product size. Some panels would be packaged and shipped off site while others would be sent for further processing. Rejected panels would be broken up and the resulting material either stored to be used as fuel for the thermal energy plant or sent to the raw material sawdust silo. Two paper treating lines would use web based coaters to coat paper (purchased from a third party vendor) with a urea formaldehyde base coat and a paper formaldehyde top coat. Each coater would be followed by a natural gas fired dryer. The coated paper would then be applied to particleboard panels in three thermally fused lamination lines. The finished boards would be packaged and shipped off site. The facility s thermal energy plant would combust wood derived fuel (such as sander dust, fines from screening, material from the board breaker, and bark), clean cellulosic biomass, and natural gas in a biomass burner. The biomass burner would have suspension burners to burn fine material, such as sander dust, and grates to burn large material, such as bark. In addition, natural gas burners would be used during startup of the biomass burner to minimize emissions. The heat generated in the thermal energy plant would be used in the flake dryers. The facility would have two natural gas fired thermal oil heaters to supply heat to the continuous press and the thermally fused lamination lines, natural gas fired air management units to provide comfort heat, a diesel fired emergency generator engine, and a diesel fired fire pump engine. The facility would also have storage tanks for resins and other materials used in the particleboard process and the paper treating lines, as well as diesel fuel storage tanks for the emergency engines and mobile equipment. In addition, the facility would have silos to store wood materials and paved roadways for facility truck traffic. Present Air Quality The facility would be located in Crawford County, which is currently classified as attainment for all of the NAAQS set by the United States Environmental Protection Agency (USEPA). These air quality standards are for particulate matter equal to or less than 10 microns in diameter (PM10), particulate matter equal to or less than 2.5 microns in diameter (PM2.5), ozone, carbon monoxide (CO), sulfur dioxide (SO 2 ), nitrogen dioxide (NO 2 ), and lead. These standards are set at levels designed to protect the public health.

4 Flakeboard America Limited, dba ARAUCO North America Page 3 Pollutant Emissions The proposed facility s potential NOx and volatile organic compound (VOC) emissions are each over 250 tons per year (tpy). Therefore, the facility would be a new major stationary source and is subject to the PSD regulations in Part 18 of the Michigan Air Pollution Control Rules and 40 CFR Once a facility is a major source for one pollutant, other pollutants are subject to the PSD regulations if the emissions are over the PSD significant emission rates. The potential to emit of CO, PM10, PM2.5, and greenhouse gases (GHGs) expressed in terms of carbon dioxide equivalents (CO 2 e) exceed the PSD significant emission rates. Therefore, the proposed facility is also subject to the PSD regulations for these pollutants. Tables A and B provide the estimated emissions for each criteria pollutant: Table A Total Project Emissions and PSD Major Source Threshold Pollutant Total Emissions PSD Major Source (tpy) Threshold (tpy) Subject to PSD? NO x Yes VOC Yes Table B Total Project Emissions and PSD Significant Emission Rates Pollutant Total Emissions PSD Significant (tpy) Emission Rate (tpy) Subject to PSD? PM Yes PM Yes PM Yes SO No CO Yes Lead 2.37 x No GHG as CO 2 e* 257,768 75,000 Yes * A recent decision by the Supreme Court (Utility Air Regulatory Group v. U.S. EPA), No (June 23, 2014)) determined that PSD review for GHGs is only required if one or more of the other regulated pollutants exceeds a PSD threshold. Key Permit Review Issues Staff evaluated the proposed facility to identify all state rules and federal regulations which are, or may be, applicable. The tables in Appendix 1 summarize these rules and regulations. Prevention of Significant Deterioration (PSD) Regulations The PSD major source threshold is 250 tpy for each criteria pollutant, unless the source is one of 28 source categories listed in the regulations for which the major source threshold is 100 tpy. Once a source is major for a single criteria pollutant, it is major for other criteria pollutants at their significant emission rates. Based on the potential emissions, summarized in Tables A and B above, the proposed facility is subject to PSD review for NOx, CO, PM, PM10, PM2.5, VOC, and GHGs. Review under the PSD regulations requires application of Best Available Control Technology (BACT), an air quality impact analysis, and an additional impact analysis for each regulated air pollutant for which the project emissions exceed the significant emission rate.

5 Flakeboard America Limited, dba ARAUCO North America Page 4 Arauco conducted a top-down BACT analysis for each emission unit for NOx, CO, PM, PM10, PM2.5, VOC, and GHG as CO 2 e. The BACT emission limits and control device requirements are summarized in the Key Aspects of Draft Permit Conditions below. More detailed information on the PSD BACT analysis is provided in Appendix 2. Minor/Major Modification Determination for Nonattainment Pollutants Crawford County is in attainment for all criteria pollutants, so the proposed facility is not subject to nonattainment new source review. Federal NSPS Regulations New Source Performance Standards (NSPS) were established under Title 40 of the Code of Federal Regulations (40 CFR) Part 60. The proposed emergency generator diesel engine and emergency fire pump diesel engine associated with the project are subject to the NSPS for Stationary Compression Ignition Internal Combustion Engines, 40 CFR Part 60 Subpart IIII. Subpart IIII contains NO x, CO, PM, and VOC emission limits, an hours of operation limit, and associated compliance requirements. Federal NESHAP Regulations - National Emission Standards for Hazardous Air Pollutants (NESHAP) were established under 40 CFR Part 61 and Part 63. Part 61 standards apply to specific pollutants emitted from specific processes at the source. There are no Part 61 regulations associated with the proposed facility. Part 63 regulations are dependent upon the potential hazardous air pollutant (HAP) emissions from the facility. A facility is a major source if the potential to emit of a single HAP is 10 tpy or more and/or the potential to emit of all HAPs combined is 25 tpy or more. Formaldehyde is a HAP and the potential formaldehyde emissions from the proposed facility are more than 10 tpy. Therefore, the facility would be a major source and subject to the applicable Part 63 NESHAP regulations. The proposed dryers, blenders, formers, presses, board coolers, and other process units associated with particleboard manufacturing are subject to the NESHAP for Plywood and Composite Wood Products, 40 CFR Part 63 Subpart DDDD. In addition, because the exhaust from the thermal energy plant would be routed to the dryers, the thermal energy plant is also subject to Subpart DDDD. The facility would comply with Subpart DDDD for the combined press and cooling system exhaust as follows: Using the production based compliance option, with a total HAP emission limit of pound per thousand square feet (lb/msf), ¾ inch basis. Using an enclosure around the press and cooling system. Maintaining, on a daily basis, the process operating parameters within the ranges established during the required performance test. The facility would comply with Subpart DDDD for the dryers as follows: Using a regenerative thermal oxidizer (RTO) operated as required by Table 2 of Subpart DDDD. Meeting the applicable work practice standards.

6 Flakeboard America Limited, dba ARAUCO North America Page 5 The proposed paper treating lines are subject to the NESHAP for Paper and Other Web Coating, 40 CFR Part 63 Subpart JJJJ. The facility would comply with Subpart JJJJ by using coatings with an organic HAP content less than 1.6 percent by weight, as purchased, or using coatings with an organic HAP content less than 8 percent by weight of the coating solids, and not adding any HAP to the coatings before they are applied. The proposed emergency engines are subject to the NESHAP for Stationary Reciprocating Internal Combustion Engines, 40 CFR Part 63 Subpart ZZZZ. Compliance with Subpart ZZZZ is demonstrated by complying with NSPS Subpart IIII. The proposed natural gas fired thermal oil heaters and paper treating line dryers are subject to the NESHAP for Industrial, Commercial, and Institutional Boilers and Process Heaters that are at Major Sources, 40 CFR Part 63 Subpart DDDDD. These new natural gas fired process heaters must comply with work practice standards, but do not have emission or operating limits. The work practice standards consist of boiler tune-ups every year for the thermal oil heaters and boiler tune-ups every five years for the paper treating line dryers. Rule 224 T-BACT Analysis Rule (Rule 224) applies to any proposed, new, or modified process or process equipment for which a PTI application is required and which emits a toxic air contaminant (TAC). A TAC is defined in the Michigan rules as: Any air contaminant for which there is no National Ambient Air Quality Standard (NAAQS) and which is or may become harmful to public health or the environment when present in the outdoor atmosphere in sufficient quantities and duration. Rule 224 requires that emissions of TACs do not exceed the maximum allowable emission rate that results from the application of Best Available Control Technology for Toxics (T-BACT). However, 224(2)(c) states that the T-BACT requirement does not apply to the following: An emission unit or units which only emits toxic air contaminants that are particulates or VOCs and which is in compliance with BACT or Lowest Achievable Emission Rate (LAER) requirements for particulates and VOCs. As discussed previously, the proposed facility is subject to PSD BACT for PM and VOC. Therefore, the Rule 224 T-BACT requirement does not apply to the PM and VOC emissions from the proposed facility because these emissions would be in compliance with PSD BACT. The only TAC at the facility that is not a particulate or a VOC is acetone. However, acetone would be controlled by the same control devices used to control the VOC emissions and the proposed acetone emissions are low, 3.57 tpy, compared to the proposed VOC emissions of tpy. Therefore, since each proposed emission unit would be in compliance with PSD BACT for VOC, each emission unit would also meet T-BACT for acetone. Rule 225 Toxics Analysis The MDEQ Rules for Air Pollution Control require the ambient air concentrations of TACs proposed to be emitted from the facility be less than the health-based screening levels established by the AQD.

7 Flakeboard America Limited, dba ARAUCO North America Page 6 The TAC evaluation showed the proposed emission rates of most TACs are less than their Allowable Emission Rates (AER) determined according to Rule 227(1)(a) and, therefore, comply with the requirements of Rule 225. For those TACs with proposed emission rates that exceed their AERs, Arauco conducted air dispersion modeling to determine the predicted ambient impacts (PAI) for those TACs. The AQD confirmed the results of Arauco s modeling, which showed the impacts to be less than the established health-based screening levels. Therefore, the emissions of these TACs comply with the requirements of Rule 225. In addition, the proposed facility would emit some TACs that do not have established health-based screening levels. The AQD Toxics Unit evaluated the predicted impacts of these TACs and determined that the emissions would not result in unacceptable health effects. The AQD staff reviewed Arauco s TAC evaluation and air dispersion modeling and found that all TACs would comply with the requirements of Rule 225. The TACs with predicted impacts greater than 10 percent of at least one of their screening levels are listed in Table C. TAC Table C TAC Modeling Results Averaging Screening Time Level Screening (µg/m 3 ) A Level Type Facility PAI (µg/m 3 ) Percent of Screening Level Acetaldehyde Annual 9 ITSL B % Annual 0.5 IRSL C % Acrolein 1-hr 5 ITSL % Annual 0.16 ITSL % Annual 0.1 IRSL % Benzene Annual 30 ITSL % 24 hour 30 ITSL % Cadmium Annual IRSL % Cumene Formaldehyde 24 hour 400 ITSL % Annual 1 IRSL % 24 hour 30 ITSL % Annual 0.8 SRSL D % Annual 8 10 x SRSL E % Polycyclic Aromatic Hydrocarbons Annual IRSL % Total Turpentine and Monoterpenes F 8 hour 1120 ITSL % 1,2 Dichloroethane Annual 0.04 IRSL % Soluble Silver 8 hour 0.1 ITSL % A µg/m 3 refers to micrograms per cubic meter. B C D E F ITSL refers to the initial threshold screening level. IRSL refers to the initial risk screening level. SRSL refers to the secondary risk screening level. Impacts on industrial property cannot exceed 10 times the SRSL. Total impact of a-pinene, b-pinene, and d-carene combined. Rule 702 VOC Emissions This rule requires an evaluation to determine the lowest maximum allowable emission rate of VOCs. Since each proposed emission unit meets PSD BACT for VOC, each emission unit also meets the requirements of Rule 702. See Appendix 2 for more detailed information.

8 Flakeboard America Limited, dba ARAUCO North America Page 7 Criteria Pollutants Modeling Analysis and Preconstruction Monitoring The goal of an air quality impact analysis is to determine if the proposed facility would cause or contribute to a violation of the NAAQS or the PSD increments. The NAAQS are intended to protect public health. The PSD increments are intended to allow industrial growth in an area, while ensuring that the area will continue to meet the NAAQS. The first step in an air quality impact analysis is to use computer dispersion modeling to determine the NO x, CO, PM10, PM2.5, and SO 2 predicted impacts from the proposed facility. After the impacts are determined, they are compared to the applicable PSD Significant Impact Levels (SILs). If the project impacts are less than the SIL, then no further review is required. The proposed facility was modeled at the worst-case operating scenario, when emissions would be the highest. This included assuming that all equipment, including the emergency engines, would operate at the same time, as well as assuming that the flaker emissions would not be routed to the dryer RTO. The impacts of CO and SO 2 for all averaging periods were determined to be below their respective SILs. Therefore, it is not anticipated that the CO and SO 2 emissions from the proposed facility would cause or contribute to a violation of any NAAQS or PSD increment. Table D shows the results of the CO and SO 2 SIL analysis: Table D Significant Impact Level Modeling Results Pollutant Averaging Time PSD SIL Facility PAI Percent of SIL (µg/m 3 )* (µg/m 3 )* (%) CO 1-hour 2, CO 8-hour SO 2 1-hour SO 2 3-hour SO 2 24-hour SO 2 Annual The impacts of NOx, PM10, and PM2.5 for all averaging periods were determined to be above their respective SILs, so additional modeling is required. Compliance with the PSD increments must be determined by adding the proposed facility ambient impact to the predicted ambient impacts of other nearby sources and comparing the combined impact to the PSD increment. The facility impacts of NOx, PM10, and PM2.5 plus the impacts of nearby sources are below the PSD increments. Table E shows the results of the PSD increment analysis: Pollutant Averaging Time Table E - PSD Increment Modeling Results PSD Increment (µg/m 3 ) Facility PAI + Nearby Facilities (µg/m 3 ) Percent of Increment (%) NO 2 Annual PM10 24-hour PM10 Annual PM hour PM2.5 Annual

9 Flakeboard America Limited, dba ARAUCO North America Page 8 Compliance with the NAAQS must be determined by adding the proposed facility ambient impact to the predicted ambient impacts of other nearby sources as well as the monitored background concentration, and comparing the combined impact to the NAAQS. The combined impacts of the facility, plus the impacts of nearby sources, plus the background concentration are below the NAAQS for NOx, PM10, PM2.5, and lead. NO x refers specifically to nitrogen oxide and nitrogen dioxide (NO 2 ), with the larger portion being NO 2. NO 2 is one of the pollutants for which the USEPA has established NAAQS under the Clean Air Act. Table F shows the results of the NAAQS analysis: Table F - National Ambient Air Quality Standards (NAAQS) Modeling Results Pollutant Averaging Time NAAQS Facility + Nearby + Percent of (µg/m 3 ) Background (µg/m 3 ) NAAQS (%) NO 2 1-hr NO 2 Annual PM10 24-hr PM10 Annual PM hr PM2.5 Annual Lead 3-month rolling Preconstruction monitoring is required for at least one year for each criteria pollutant proposed to be emitted that is subject to PSD review. Through guidance, the USEPA allows the use of existing regional data, if representative, as an alternative to preconstruction monitoring. Arauco requested to use existing data and to receive a waiver from the preconstruction monitoring requirement. The AQD determined that the existing data is representative and granted the waiver request. Secondary Impacts Analysis for PM2.5 Secondary formation of PM2.5 from emissions of NOx and SO 2 can contribute to regional PM2.5 concentrations downwind from the release site. Arauco evaluated secondary PM2.5 formation through a qualitative evaluation. The evaluation used ambient PM2.5 monitoring data from Houghton Lake, which is near the facility, and Sault St. Marie, which is downwind of the facility. The Houghton Lake data includes the chemical composition of the PM2.5. The evaluation also compared the proposed NOx and SO 2 emissions from the facility to the total NOx and SO 2 emissions from the counties around the proposed facility (Crawford, Otsego, Kalkaska, Missaukee, Roscommon, Oscoda, Montmorency, and Ogemaw Counties). Based on dispersion modeling, the maximum ambient impacts of the direct PM2.5 emissions from the proposed facility occur at the facility boundary. These maximum impacts meet the PM2.5 NAAQS and PSD increment. The maximum secondary impacts from NO x emissions would take place at a considerable distance from the facility boundary due to the time needed for the NOx gas to be chemically converted to nitrate particles.

10 Flakeboard America Limited, dba ARAUCO North America Page 9 Arauco made the following observations from the ambient monitoring and area emission data: The ambient PM2.5 design values at the Houghton Lake monitor are well below the NAAQS, at 48 percent of the 24-hr NAAQS and 47 percent of the annual NAAQS. The proposed NOx emissions from the facility only represent 2.6 percent of total area emissions. Nitrates account for less than 14 percent of the ambient PM2.5 in the area. Sulfates account for a higher percentage of the PM2.5 in the area than do nitrates, while the NOx emissions in the area are 23 times higher than the SO 2 emissions. This suggests that the measured PM2.5 in the area is not greatly affected by the area NOx emissions. Based on the modeling, the monitoring data, and the emission data, the NOx emissions from the proposed facility would not be expected to contribute to PM2.5 concentrations in the area. VOC and NOx Project Emissions and Ozone Formation - The effects of the proposed facility on area-wide ozone was evaluated using a qualitative method by correlating measured ozone concentrations with area-wide VOC and NO x emission levels, and factoring in the proposed increase in emissions due to the new facility. Monitored ozone levels in the area are about 9 percent below the parts per million (ppm) NAAQS. The proposed facility would increase NOx and VOC emissions in the area by about 1.24 percent. Assuming a linear relationship, the percentage increase in NO x and VOC emissions due to the proposed facility would not be expected to significantly affect area ozone concentrations. Additional Impact Analysis An additional impact analysis is required for new major sources pursuant to 40 CFR Part 52.21(o) and Michigan Rule This analysis is necessary to evaluate the impacts from the proposed facility of soils, vegetation, visibility and growth. An additional impact analysis is required because the facility would be a new major stationary source. As discussed further below, the facility is not expected to result in degradation of the existing air quality in the area. Soils, Vegetation, and Wildlife To evaluate the impacts on soils and vegetation, Arauco compared the predicted air quality impacts from the proposed facility against screening concentrations developed by the USEPA. This evaluation showed that the impacts from the project are below their respective screening concentrations, so no adverse impacts are expected due to emissions from the proposed new facility. Visibility A visibility analysis commonly includes an assessment of the visual quality of the area and a review of emissions from the proposed facility to consider the possibility of visual impairment. However, assessments for visibility impacts are required only for Class I areas. The nearest Class I area is in Seney, Michigan, approximately 220 kilometers away from the proposed facility (the next closest Class I area is Isle Royale National Park at 500 kilometers away). Arauco conducted a visibility analysis according to the USEPA s Workbook for Plume Visual Screening and Analysis (Revised) using USEPA s VISCREEN model and a regional background visual range for the Grayling and Houghton Lake areas of 25 kilometers. The results of the Level-1 screening analysis did not exceed the screening values for a sky background inside or outside of the sensitive locations (assumed to be Houghton Lake Airport), so no visibility impairment is expected as a result of the proposed new facility.

11 Flakeboard America Limited, dba ARAUCO North America Page 10 Growth The growth analysis is a projection of the commercial, residential, industrial, and other growth that would occur in the area due to the construction and operation of the proposed facility. The construction of the new facility would create approximately 260 new jobs. To the extent possible, these jobs would be filled from the local labor pool. Consequently, no increase in residential or commercial construction is expected in the area surrounding the facility and no additional automobile roadways are planned for the facility. No new localized industrial/institutional growth is anticipated in the immediate area directly as a result of the proposed facility. Therefore, no additional growth impacts are expected as a result of the proposed facility. Key Aspects of Proposed Draft Permit Conditions Emission Limits (By Pollutant) and Control Technologies PSD BACT dictates emission limits and the associated control technology required to achieve these limits. As such, the draft permit includes PSD BACT limits for NO x, CO, VOC, PM10, PM2.5, and GHGs as CO 2 e for all proposed equipment. Flakers The flakers would be required to have baghouse control and to exhaust through the thermal energy plant dry electrostatic precipitator (ESP) and the dryer RTO for all but 460 hours per year. The proposed PSD BACT emission limits are: VOC = 76 pounds per hour during RTO bypass (limited to 460 hours per year) PM = grains per dry standard cubic foot (gr/dscf) during RTO bypass (limited to 460 hours per year) PM, PM10, and PM2.5 = 1.08 lb/hr during RTO bypass (limited to 460 hours per year) Combined Flaker/Thermal Energy Plant/Dryers/RTO Exhaust The flakers, thermal energy plant, dryers, and dryer RTO would exhaust through a common stack when the emissions are being controlled by the RTO. In addition, the flakers and thermal energy plant would also be controlled by the ESP when the emissions are being controlled by the RTO. There would be no add-on control for CO, NOx, or GHG. The proposed PSD BACT emission limits for the combined exhaust, controlled by the RTO, are: CO = 36.3 lb/hr and 0.43 pound per oven dried ton (lb/odt) NOx = 95 lb/hr and 1.1 lb/odt PM = 29.1 lbhr VOC = 7.1 lb/hr PM10 = 28.4 lb/hr GHG = 205,655 tpy PM2.5 = lb/hr

12 Flakeboard America Limited, dba ARAUCO North America Page 11 Material Handling, Finishing Operations, and Thermally Fused Lamination Lines The oversized flake mills, sifters, flying cut off saw, sanding, cut to panel saw line, conveyance of material to the raw material sawdust silo, conveyance of material to the bark silo, conveyance of fine material to the thermal energy plant dust silo, and each of the three thermally fused lamination lines would all be controlled with baghouse dust collectors. Each baghouse would have a PM emission limit of gr/dscf. Some of these processes would also emit small amounts of VOC without add-on control. The proposed PSD BACT emission limits are: Equipment VOC PM PM10 PM2.5 Combined overs mills Conveyance of fine material to the thermal energy plant dust silo Sifters N/A Conveyance of material to the bark silo Flying cutoff saw Sanding Cut to panel saw Conveyance of material to the raw material sawdust silo Each thermally fused lamination line Each thermally fused lamination line Blending and Forming Operations The blending emissions would be controlled by a baghouse and the forming emissions would be controlled by two baghouses. Each baghouse would have a PM emission limit of gr/dscf. In addition, these processes would also emit small amounts of VOC without add-on control. The proposed PSD BACT emission limits are: Equipment VOC PM PM10 PM2.5 Blending Combined forming emissions 9.34 N/A N/A N/A Forming emissions vented through SV 12 N/A Forming emissions vented through SV 13 N/A Combined Press and Board Cooling The press and board cooling would exhaust through a common stack. A wet scrubber would be used to control particulate; there would be no add-on control for VOC, CO, or NOx. The proposed PSD BACT emission limits for the combined exhaust, controlled by the wet scrubber, are: CO = 2.85 lb/hr, 12.5 tpy, lb/1000 ft 2, ¾ basis PM = 12.2 lb/hr NOx = 2.5 lb/hr, 11 tpy, 0.04 lb/1000 ft 2, ¾ basis PM10 = 2.2 lb/hr VOC = 49.5 lb/hr, tpy, lb/1000 ft 2, ¾ basis PM2.5 = 2.2 lb/hr

13 Flakeboard America Limited, dba ARAUCO North America Page 12 Thermal Oil Heaters and Paper Treating Lines The press and thermally fused lamination lines thermal oil heaters and the paper treating lines dryers would be equipped with low NOx burners. There would be no other add-on control. The proposed PSD BACT emission limits are: CO = pound per million British Thermal Unit (lb/mmbtu) NOx = 0.05 lb/mmbtu PM10 = lb/mmbtu VOC = lb/mmbtu PM2.5 = lb/mmbtu PM = lb/mmbtu Equipment CO (tpy) NOx (tpy) VOC (tpy) PM (tpy) PM10 (tpy) PM2.5 (tpy) GHG (tpy) Press heater ,438 Lamination lines heater ,254 Each paper treating line N/A Combined paper treating lines N/A N/A N/A N/A N/A N/A 3,502 Emergency Engines The 1600 kilowatt emergency diesel generator engine and 400 kilowatt diesel fire pump engine would be subject to the NSPS for Stationary Compression Ignition Internal Combustion Engines (40 CFR Part 60 Subpart IIII). There would be no add-on control. The proposed PSD BACT emission limits are: Engine CO NOx PM PM10 PM2.5 GHG (tpy) Emergency fire pump Emergency generator The proposed NSPS emission limits are: Engine CO (gram/kilowatt-hour) Non-methane Hydrocarbon + NOx (gram/kilowatt-hour) PM (gram/kilowatt-hour) Emergency fire pump Emergency generator Opacity In addition to the PSD BACT emission limits, each proposed baghouse would be limited to 10 percent opacity and other equipment (fugitive sources, the dryer RTO, and the combined press/board cooling exhaust) would be limited to 20 percent opacity.

14 Flakeboard America Limited, dba ARAUCO North America Page 13 Formaldehyde Much of the proposed equipment would have formaldehyde emission limits for Rule 225 compliance, as follows: Equipment Flakers during RTO bypass Combined flaker/thermal energy plant/dryer/rto exhaust Blending Combined forming emissions Combined press/board cooling exhaust Press thermal oil heater Thermally fused lamination lines thermal oil heater Flying cutoff saw Sanding Cut to panel saw Each paper treating line Each thermally fused lamination line Formaldehyde Emission Limit lb/hr 0.78 lb/hr 0.19 lb/hr 0.73 lb/hr 8.8 lb/hr 0.01 tpy tpy 0.15 lb/hr 0.22 lb/hr 0.15 lb/hr 1.36 lb/hr 0.05 lb/hr Storage Tanks There are no proposed emission limits for storage tanks. Each tank would be required to have conservation valves and submerged fill piping, which is industry standard and best practices for this type of storage tank. Material Limits Fuels The draft permit limits the fuel used in the facility s thermal energy plant biomass burner to wood derived fuel (such as sander dust, fines from screening, material from the board breaker, and material reject) and clean cellulosic biomass, as defined by the Wood Fuel Procurement and Monitoring Plan, and natural gas. The draft permit also limits the thermal oil heaters, paper treating line dryers, flake dryers, dryer RTO, and air management units to natural gas only. The draft permit limits the sulfur content of the diesel fuel used in the emergency engines to percent by weight. Process Materials The draft permit limits the HAP content of the coatings used in the paper treating lines to 1.6 percent by weight of the coating or 8 percent by weight of the coating solids. Particleboard Production The draft permit limits the amount of particleboard that can be produced in the press to 595,680,000 square feet on a ¾ inch basis. Process/Operational Restrictions - The draft permit limits operation of the flakers without emissions being controlled by the RTO to 460 hours per year. The draft permit also limits operation of the emergency engines to 80 minutes per day, the emergency fire pump engine to 500 hours per year, and the emergency generator engine to 200 hours per year. Plans - The draft permit requires Arauco to develop and follow a Malfunction Abatement Plan (MAP) for the facility. The MAP would include a preventative maintenance program and corrective procedures in the event of an equipment malfunction or failure. The MAP would also include operating ranges for process equipment and pollution control devices to ensure proper operation.

15 Flakeboard America Limited, dba ARAUCO North America Page 14 The draft permit requires Arauco to develop and follow a plan that describes how emissions would be minimized during startup, shutdown, and malfunction of the thermal energy plant. The plan would incorporate procedures recommended by the equipment manufacturer as well as incorporate standard industry practices. The draft permit requires Arauco to develop and follow a nuisance minimization plan for fugitive dust for the facility to ensure proper operation of equipment that could generate fugitive dust as well as sweeping and/or watering of facility roads. The draft permit requires Arauco to develop and follow a Wood Fuel Procurement and Monitoring Plan (WFPMP) for the facility s thermal energy plant that would include a description of wood derived fuel (such as sander dust, fines from screening, material from the board breaker, and material reject) and clean cellulosic biomass to be burned and odor minimization measures to be taken for fuel stored outdoors. Design Parameters - The draft permit limits the heat input of the proposed equipment as follows: Equipment Heat Input Limit (MMBtu/hr) Thermal energy plant 110 Each flake dryer burner Dryer RTO burner 25 Press thermal oil heater 34 Thermally fused lamination lines heater 10.2 Each paper treating line dryer 3.4 In addition, the draft permit limits the maximum rated power output of the fire pump engine to 400 kilowatts and the emergency generator engine to 1600 kilowatts. The draft permit also requires Arauco to pave plant roadways that are routinely travelled by trucks delivering material to the facility, including chemicals, logs, and wood chips as well as trucks hauling finished product from the facility. Testing and Monitoring Requirements - The draft permit includes emissions testing, monitoring, and recordkeeping requirements for all emission units, as follows: Flakers Testing for VOC, PM, PM10, PM2.5, and/or formaldehyde emission rates prior to the ESP upon request from the AQD. Monitoring and recording of the baghouse pressure drop and the RTO combustion chamber temperature. Monitoring and recording of the time and duration each bypass of the RTO. Thermal Energy Plant Monitoring and recording of the ESP secondary voltage or total voltage and the RTO combustion chamber temperature. Monitoring and recording of the time and duration of each bypass of the ESP and RTO. Records of the amount of natural gas and solid biomass burned. Records of the VOC, PM, PM10, and PM2.5 emissions due to bypass of the ESP and RTO.

16 Flakeboard America Limited, dba ARAUCO North America Page 15 Air Management Units Records of the amount of natural gas burned. Records of the CO, NOx, VOC, PM, PM10, PM2.5, and GHG emissions. Combined Flaker/Thermal Energy Plant/Dryers/RTO Exhaust Testing for CO, NOx, VOC, PM, PM10, PM2.5, and formaldehyde emission rates every five years. Testing for GHG emission rates upon request from the AQD. Conduct performance tests and establish each site-specific operating requirement according to 40 CFR 63 Subpart DDDD. Operate and maintain each continuous parameter monitoring system according to 40 CFR 63 Subpart. Monitoring and recording of the RTO combustion chamber temperature. Records of the amount of natural gas burned in the dryers and RTO. Records of the GHG emissions. Material Handling and Finishing Operations The oversized flake mills, sifters, flying cut off saw, sanding, cut to panel saw line, conveyance of material to the raw material sawdust silo, conveyance of material to the bark silo, and conveyance of fine material to the thermal energy plant dust silo. Testing for VOC, PM, PM10, PM2.5, and/or formaldehyde emission rates upon request from the AQD. Monitoring and recording of the pressure drop of each baghouse. Blending and Forming Operations Testing for VOC, PM, PM10, PM2.5, and formaldehyde emission rates every five years for forming operations. Testing for VOC, PM, PM10, PM2.5, and formaldehyde emission rates upon request from the AQD for blending operations. Monitoring and recording of the pressure drop of each baghouse. Records of the VOC and formaldehyde content of each resin and scavenger used. Combined Press and Board Cooling Testing for CO, NOx, VOC, PM, PM10 and formaldehyde emission rates every five years. Conduct performance tests and establish each site-specific operating requirement according to 40 CFR 63 Subpart DDDD. Monitoring and recording of the wet scrubber water flow rate. Records of the particleboard production rate. Thermal Oil Heaters Testing for CO, NOx, VOC, PM, PM10, PM2.5, formaldehyde and/or GHG emissions rates upon request from the AQD. Records of the amount of natural gas burned.

17 Flakeboard America Limited, dba ARAUCO North America Page 16 Paper Treating Lines Testing for VOC and formaldehyde emission rates every five years. Testing for CO, NOx, PM, PM10, PM2.5, and/or GHG emissions rates upon request from the AQD. Records of the amount of natural gas burned. Records of the VOC and formaldehyde content of each resin used. Thermally Fused Lamination Lines Testing for VOC, PM, PM10, PM2.5, and/or formaldehyde emission rates upon request from the AQD. Monitoring and recording of the pressure drop of each baghouse. Emergency Engines Vendor emission guarantees or testing is required for NOx, CO, PM10, or PM2.5 emission rates for 40 CFR 60 Subpart IIII. Testing for NOx, CO, PM, PM10, PM2.5, and/or formaldehyde emission rates upon request from the AQD. Records of the hours of operation. Opacity The draft permit requires verification of compliance with the opacity limits. Federal Regulations The proposed facility would be subject to the following federal standards and the requirements listed below: Plywood and Composite Wood Products NESHAP, 40 CFR 63 Subpart DDDD Total HAP emissions from the flake dryers would be reduced by 90 percent using the RTO, verified by emission testing and monitoring of operating parameters. Total HAP emissions from the press and board cooler combined would be limited to lb/1000 ft 2, ¾ basis, verified by emission testing and monitoring of operating parameters. The press and board cooler would be enclosed. Arauco is required to develop a written startup, shutdown, malfunction plan according to the provisions in 40 CFR 63.6(e)(3). Paper and Other Web Coating NESHAP, 40 CFR 63 Subpart JJJJ HAP content of each coating used in the paper treating lines would be limited to 1.6 percent by weight of the coating or 8 percent by weight of the coating solids, verified by Method 311, Method 24, or manufacturer formulation data. No HAP can be added to the coating after purchase. Stationary Reciprocating Internal Combustion Engines NESHAP, 40 CFR 63 Subpart ZZZZ Compliance with the NSPS for Stationary Compression Ignition Internal Combustion Engines, 40 CFR Part 60 Subpart IIII, satisfies 40 CFR 63 Subpart ZZZZ. Arauco intends to purchase engines that are certified by the manufacturer to comply with 40 CFR Part 60 Subpart IIII.

18 Flakeboard America Limited, dba ARAUCO North America Page 17 Industrial, Commercial, and Institutional Boilers and Process Heaters NESHAP, 40 CFR 63 Subpart DDDDD The thermal oil heaters and paper treating line dryers can only burn natural gas. The thermal oil heaters require annual tune-ups. The paper treating line dryers require tune-ups every five years. Other The draft permit requires Arauco to submit compliance demonstration methods, including emission factors, for emission limits that are not required to be verified by emission testing. Conclusion Based on the analyses conducted to date, the AQD staff concludes that the proposed facility would comply with all applicable state and federal air quality requirements. The AQD staff also concludes that this facility, as proposed, would not violate the federal NAAQS or the state and federal PSD increments. Based on these conclusions, the AQD staff has developed draft permit terms and conditions which would ensure that the proposed facility design and operation are enforceable and that sufficient monitoring, recordkeeping, and reporting would be performed by Arauco to determine compliance with these terms and conditions. If the permit application is deemed approvable, the delegated decision maker may determine a need for additional or revised conditions to address issues raised during the public participation process. If you would like additional information about this proposal, please contact Mr. Andrew Drury, AQD, at

19 Flakeboard America Limited, dba ARAUCO North America Page 18 State Rule R R R R to R R to R R R R R and R R to R R R R R Appendix 1 STATE AIR REGULATIONS Description of State Air Regulations Requires an Air Use Permit for new or modified equipment that emits, or could emit, an air pollutant or contaminant. However, there are other rules that allow smaller emission sources to be installed without a permit (see Rules through below). Rule also states that the Department can add conditions to a permit to assure the air laws are met. Outlines the permit conditions that are required by the federal Prevention of Significant Deterioration (PSD) Regulations and/or Section 112 of the Clean Air Act. Also, the same types of conditions are added to their permit when a plant is limiting their air emissions to legally avoid these federal requirements. (See the Federal Regulations table for more details on PSD.) New or modified equipment that emits toxic air contaminants must use the Best Available Control Technology for Toxics (T-BACT). The T-BACT review determines what control technology must be applied to the equipment. A T-BACT review considers energy needs, environmental and economic impacts, and other costs. T-BACT may include a change in the raw materials used, the design of the process, or add-on air pollution control equipment. This rule also includes a list of instances where other regulations apply and T-BACT is not required. The ambient air concentration of each toxic air contaminant emitted from the project must not exceed health-based screening levels. Initial Risk Screening Levels (IRSL) apply to cancer-causing effects of air contaminants and Initial Threshold Screening Levels (ITSL) apply to non-cancer effects of air contaminants. These screening levels, designed to protect public health and the environment, are developed by Air Quality Division toxicologists following methods in the rules and U.S. EPA risk assessment guidance. These rules list equipment to processes that have very low emissions and do not need to get an Air Use permit. However, these sources must meet all requirements identified in the specific rule and other rules that apply. Limits how air emissions are allowed to look at the end of a stack. The color and intensity of the color of the emissions is called opacity. The particulate emission limits for certain sources are listed. These limits apply to both new and existing equipment. Material collected by air pollution control equipment, such as dust, must be disposed of in a manner, which does not cause more air emissions. Limit the sulfur dioxide emissions from power plants and other fuel burning equipment. Volatile organic compounds (VOCs) are a group of chemicals found in such things as paint solvents, degreasing materials, and gasoline. VOCs contribute to the formation of smog. The rules set VOC limits or work practice standards for existing equipment. The limits are based upon Reasonably Available Control Technology (RACT). RACT is required for all equipment listed in Rules through New equipment that emits VOCs is required to install the Best Available Control Technology (BACT). The technology is reviewed on a case-by-case basis. The VOC limits and/or work practice standards set for a particular piece of new equipment cannot be less restrictive than the Reasonably Available Control Technology limits for existing equipment outlined in Rules through Nitrogen oxide emission limits for larger boilers and stationary internal combustion engines are listed. Prohibits the emission of an air contaminant in quantities that cause injurious effects to human health and welfare, or prevent the comfortable enjoyment of life and property. As an example, a violation may be cited if excessive amounts of odor emissions were found to be preventing residents from enjoying outdoor activities. Air pollution control equipment must be installed, maintained, and operated properly.

20 Flakeboard America Limited, dba ARAUCO North America Page 19 State Rule R R R to R R to R Prevention of Significant Deterioration (PSD) Regulations Best Available Control Technology (BACT) R to R and R STATE AIR REGULATIONS Description of State Air Regulations When requested by the Department, a facility must develop and submit a malfunction abatement plan (MAP). This plan is to prevent, detect, and correct malfunctions and equipment failures. A facility is required to notify the Department if a condition arises which causes emissions that exceed the allowable emission rate in a rule and/or permit. Allow the Department to request that a facility test its emissions and to approve the protocol used for these tests. The PSD rules allow the installation and operation of large, new sources and the modification of existing large sources in areas that are meeting the National Ambient Air Quality Standards (NAAQS). The regulations define what is considered a large or significant source, or modification. In order to assure that the area will continue to meet the NAAQS, the permit applicant must demonstrate that it is installing the BACT. By law, BACT must consider the economic, environmental, and energy impacts of each installation on a case-by-case basis. As a result, BACT can be different for similar facilities. In its permit application, the applicant identifies all air pollution control options available, the feasibility of these options, the effectiveness of each option, and why the option proposed represents BACT. As part of its evaluation, the Air Quality Division verifies the applicant s determination and reviews BACT determinations made for similar facilities in Michigan and throughout the nation. Applies to new major stationary sources and major modifications as defined in R These rules contain the permitting requirements for sources located in nonattainment areas that have the potential to emit large amounts of air pollutants. To help the area meet the NAAQS, the applicant must install equipment that achieves the Lowest Achievable Emission Rate (LAER). LAER is the lowest emission rate required by a federal rule, state rule, or by a previously issued construction permit. The applicant must also provide emission offsets, which means the applicant must remove more pollutants from the air than the proposed equipment will emit. This can be done by reducing emissions at other existing facilities. As part of its evaluation, the AQD verifies that no other similar equipment throughout the nation is required to meet a lower emission rate and verifies that proposed emission offsets are permanent and enforceable. Citation Section 109 of the Clean Air Act National Ambient Air Quality Standards (NAAQS) FEDERAL AIR REGULATIONS Description of Federal Air Regulations or Requirements The United States Environmental Protection Agency has set maximum permissible levels for seven pollutants. These NAAQS are designed to protect the public health of everyone, including the most susceptible individuals, children, the elderly, and those with chronic respiratory ailments. The seven pollutants, called the criteria pollutants, are carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter less than 10 microns (PM10), particulate matter less than 2.5 microns (PM2.5), and sulfur dioxide. Portions of Michigan are currently in non-attainment for either lead or sulfur dioxide. Further, in Michigan, State Rules to are used to ensure the public health is protected from other compounds.