EPA Proposal Could Mean $1.1B in New Emissions Controls for Arizona Coal Plant

A proposal released by the Environmental Protection Agency (EPA) on Friday could require owners of the 2.3-GW coal-fired Navajo Generating Station (NGS) near the Arizona-Utah state line to install emission controls worth $1.1 billion to improve visibility at 11 national parks and wilderness areas in the Southwest.

The EPA’s Jan. 18 proposal, which cites requirements by Congress under the Clean Air Act, claims the power plant is "one of the largest sources of harmful nitrogen oxide emissions in the country." It calls for the installment of selective catalytic reduction (SCR) technology, which, along with existing low-NOx burners voluntarily installed at the plant over the past three years, would reduce emissions by 84%, or a total of 28,500 tons per year, by 2018. The proposal gives owners of the plant an extra five years, until 2023, to install the new controls—an unexpected flexibility that recognizes the "importance of [the Navajo plant] to numerous tribes, and the environmental benefits provided by the early installation of low-NOx burners in 2009."

In its proposal, the federal agency also asked for comments on other options that could set longer timeframes for installing pollution controls if the facility could achieve other emission reductions. "EPA is prepared to issue a supplemental proposal if other approaches satisfy the Clean Air Act requirements and meet the stakeholders’ needs," it said.

The 1974-completed Navajo Generating Station is operated and partly owned by Arizona-based Salt River Project (SRP), the Arizona Public Service Co., the Los Angeles Department of Water & Power, Tucson Electric Power Co., and NV Energy. A portion of the electricity generated by the plant is also committed to federal purposes, including operation of the Central Arizona Project and financial support of certain Arizona Indian water settlements. Managed by the U.S. Bureau of Reclamation, the federal interest represents a 24.3% stake in the plant—making the government the plant’s largest single owner.

On Friday, the Department of the Interior, the Department of Energy, and the EPA also released a joint federal agency statement outlining the goals of the three agencies with respect to the Navajo station and energy production in the region served by the coal plant. Measures include working with stakeholders, including Indian communities, to develop a roadmap to accomplish goals while allowing the plant to comply with Clean Air Act emission requirements.

The EPA’s proposal is the latest development in a heated dispute between the plant’s owners and the federal agency. The EPA calls for a Best Available Retrofit Technology (BART), but plant owners believe that the previous voluntary installation of low-NOx burners—at a cost of nearly $45 million, and which they say has resulted in the reduction of NOx by more than 40%—represents BART.

The plant’s stakeholders on Friday said in a statement that the EPA’s proposal was "complicated and lengthy" and would take some time to assess. "We appreciate that the EPA appears to have attempted to take into consideration the complex timing issues that this decision creates for the NGS owners," said John Sullivan, chief resources executive at SRP, which manages NGS. "Unfortunately, the proposal may not allow the owners enough time to resolve uncertainties facing the plant before they will be required to make a significant financial commitment."

Installation of new emissions controls worth $1.1 billion as called for in the EPA’s proposal would hinge on the resolution of several factors, Sullivan said. One issue is that the initial term of the plant site lease and other critical agreements are slated to expire starting in 2019. "The extension of the agreements will trigger reviews under several federal environmental regulations," he said. "These federal reviews will require at least five years to complete, and likely will be followed by lengthy litigation."

Meanwhile, the plant’s owners are renegotiating the site lease agreement with the Navajo Nation. "A new lease agreement that authorizes operation beyond 2019 cannot be issued until it is approved by the Secretary of Interior, which is not a certainty and which cannot occur until the federal environmental reviews are completed and a Record of Decision (ROD) has been issued," Sullivan added.

These issues underline the plant’s owners’ concerns that the EPA proposal to install additional controls may not allow enough time to get through the federal environmental review process and anticipated litigation, as well as to secure the necessary air permits and complete the design and construction of the additional controls. "The NGS owners are concerned that compliance may not be achievable with the stringent emission limits in EPA’s proposal, particularly in a retrofit application," they said in a joint statement on Friday. "A preliminary review suggests that the proposal limit is one of the most stringent in the nation. This issue will need to be further evaluated in the coming weeks."

Then there are economic implications that will need to be assessed as required under the proposal’s new regulatory requirements, as the SRP’s Sullivan pointed out. The SRP cited a commissioned study from W.P. Carey School of Business at Arizona State University, which suggested that closure of the Navajo plant—combined with the potential impact on the nearby Kayenta Mine, the plant’s coal supplier—could result in an annual loss of nearly 3,400 jobs and more than $20 billion in economic contributions throughout the state for a period measured from 2011 to 2044.

U.S. Sen. John McCain (R-Ariz.) in a statement on Friday stressed the economic fallout that could result from implementation of the EPA’s proposal. "It is disturbing that the Environmental Protection Agency’s proposed regulations for the NGS power plant will leave Arizonans vulnerable to higher water and electricity costs. Forcing Arizona’s water and utility companies to spend up to $1 billion on plant upgrades that would negligibly improve visibility makes little economic or environmental sense," he said. McCain said he would work with Arizona congressional delegates, the plant’s owners, and Arizona water users to examine "the EPA’s claims that the proposed rule is ‘flexible’ enough to meet these new requirements.”

"As we all know, the issues surrounding the plant are numerous and complex and we look forward to continuing a constructive dialogue with the EPA and other stakeholders to resolve the issues in a way that accomplishes the objectives of the regional haze rule while avoiding negative impacts to the millions of people who benefit from NGS," Sullivan said.

More than four million people annually visit Grand Canyon National Park, which is about 80 miles from the Navajo plant, the EPA said in a statement, but "many visitors cannot fully appreciate the spectacular vistas because of the veil of white or brown haze that hangs in the air, reducing visibility and dulling the natural beauty." The proposal seeks to curb the visibility impact from the station by an average of 73% at nearby national parks and wilderness areas.

But SRP and the plant’s other owners have contended, citing "monitoring data," that a majority of the visibility impairment in nearby parks and wilderness areas is caused by wildfires, controlled burns, windblown dust, and emissions from metropolitan areas. They say that NOx emissions from all sources, including motor vehicles, industrial facilities, and fires generally account for less than 10% of regional haze. Meanwhile, air quality in the region meets all National Ambient Air Quality Standards, which were established by the EPA to protect public health, the plant’s owners claim.

A 90-day public comment period will begin upon publication of the notice in the Federal Register. During that time, the EPA will hold public hearings in Arizona.

Sources: POWERnews, EPA, SRP, DOI, DOE

—Sonal Patel, Senior Writer (@POWERmagazine)

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