ULTRAPOWER OPERATES AN ELECTRICITY PRODUCING, WOOD-FIRED BOILER LOCATED ON COURTY ROAD A-21, 1/2 MILE WEST OF WEST- WOOD IN LASSEN COUNTY, CALIFORNIA. TESTS CONDUCTED BY ENERGY SYSTEMS ASSOCIATES ON JULY 18 AND 19, 1985 SHOWED THAT THE WOOD-FIRED BOILER WAS EMITTING 403 TONS PER YEAR OF CARBON MONOXIDE. THIS AMOUNT GREATLY EXCEEDS THE THRESHOLD OF CO EMISSIONS LEVEL THAT IS PERMISSIBLE FOR A SOURCE TO CONSTRUCT WITHOUT A PREVENTION OF SIGNIFICANT DETERIORATION PERMIT FORM EPA. ULTRAPOWER DID NOT OBTAIN A PSD PERMIT PRIOR TO CONSTRUCTION OF THE ULTRAPOWER 2 FACILITY. IN ADDITION, THE SOURCE TESTS WERE CONDUCTED WITH THE FACILITY RUNNING AT 80% OF ITS CAPACITY. ULTRAPOWER EXPECTS CO EMISSIONS TO GREATLY EXCEED THIS AMOUNT WHEN THE FACILITY IS RUNNING AT 100% CAPACITY. EPA REGION 9 LEARNED OF THE RESULTS OF THE SOURCE TEST IN THE FALL OF 1985. ON NOVEMBER 14, 1985, EPA SENT ULTRAPOWER A NOV STATING THAT ULTRAPOWER HAD CONSTRUCTED AND WAS OPERATING THE FACILITY WITHOUT A PSD PERMIT IN VIOLATION OF THE CAA. REPRESENTATIVES FOR ULTRAPOWER MET WITH EPA PERSONNEL ON DECEMBER 10, 1985. THEY DID NOT DISPUTE ULTRAPOWER'S VIOLATION BUT STATED THAT ULTRAPOWER SHOULD NOT BE PENALIZED BECAUSE THE MANUFACTURER OF THE BOILER USED AT THE FACILITY HAD GUARANTEED EMISSIONS BELOW THE PSD THRESHOLD LEVELS AND BECAUSE A VALID PSD PERMIT COULD AND S