The U.S. Environmental Protection Agency (EPA) extended until Nov. 29 an administrative stay of a federal implementation plan to address regional haze under the Clean Air Act at PNM Resources’ 1,800-MW San Juan Generating Station near Farmington, N.M. The agency’s action last week  gave the utility 45 more days to consider an alternative proposed by the New Mexico Environment Department (NMED), but did  not extend the current September 2016 compliance date of the federal implementation plan.

As proposed earlier this month, NMED urged PNM to retire two units at the San Juan plant by Dec. 17 and install selective noncatalytic reduction equipment—which it says is a less-costly air emissions control technology than one proposed by the EPA—on two other units, Units 3 and 4. The proposal sought to settle a long-standing dispute between the EPA and the utility.

At issue is an August 2011 EPA mandate that would require PNM to install selective catalytic reduction equipment at all four units at the San Juan plant. PNM has argued—with the backing of the NMED and New Mexico Gov. Susana Martinez (R)—that the federal agency’s mandate would cost New Mexico’s electric ratepayers at least $750 million. The EPA’s estimate was $345 million. The parties contend that a technology proposed by the NMED, selective noncatalytic reduction, could meet the same federal visibility rules for $77 million—or about one-tenth of the cost.

"We are encouraged to hear that the EPA is interested in considering the recently proposed state alternative," said Pat Collawn, PNM Resources chairman, president, and CEO, in a statement on Monday. "We have supported efforts over the past 90 days to explore alternatives that could provide environmental benefits, while also reducing costs for customers. We think the proposed state alternative offers a potential way forward to achieving this goal."

However, wary of the unchanged compliance deadline, PNM said it is finalizing an agreement with an engineering, procurement and construction contractor to install SCR technology. “The contract will include termination provisions in the event that SCR technology is determined in the future to be unnecessary,” it said.

The EPA in July—at the request of Gov. Martinez—granted PNM a 90-day stay in the effective date of the federal plan while it explored viable alternatives.

Meanwhile, New Mexico’s governor and Environment Department have also appealed in federal court the EPA’s decision to adopt a federal implementation plan, and a statement issued by the NMED indicates their appeals will continue. Oral arguments before the 10th Circuit in Denver, Colo., are scheduled for Oct. 23.

“PNM will continue pursuing its appeal of the federal implementation plan. There is no deadline for a decision from the court following the arguments,” the utility said.

Sources: POWERnews, PNM, NMED

—Sonal Patel, Senior Writer (@POWERmagazine)