A federal appeals court on Thursday ruled that Albuquerque, N.M.–based PNM could not delay enforcement of an Environmental Protection Agency (EPA) mandate that would force it to install pollution controls at its 1,800-MW coal-fired San Juan Generating Station near Farmington, N.M., while the issue is considered by the court.

PNM is appealing an EPA ruling made in August 2011 that would require the San Juan plant to install selective catalytic reduction equipment to address regional haze by September 2016.

PNM has argued—with the backing of the New Mexico Environment Department and New Mexico Gov. Susana Martinez (R)—that the federal agency’s mandate would cost New Mexico’s electric ratepayers about $750 million or more. The EPA’s estimate was $345 million. The parties contend that a technology proposed by the New Mexico Environment Department, selective non-catalytic reduction, could meet the same federal visibility rules for just $77 million—or about one-tenth of the cost.

“The EPA decision is flawed, significantly underestimating the cost of installation while overestimating the benefits,” PNM says on its website. “EPA’s aggressive, five-year compliance deadline for the San Juan plant to install the agency’s chosen technology, selective catalytic reduction (SCR), requires PNM to begin preparing to install that technology now even though the court ultimately could find it unnecessary.”

PNM had asked the U.S. Court of Appeals for the 10th Circuit in Denver to put a hold on the EPA’s mandate until the court could consider the merit of appeals of the requirement.

“We remain committed to resolving this issue and, ultimately, to installing the most cost-effective, new visibility controls on the San Juan power plant,” said Pat Vincent-Collawn, chairman, president and CEO of PNM parent company PNM Resources. “In the meantime, we have a strong case to make that EPA violated the Clean Air Act and its own regulations in determining the best available retrofit technology for the plant.”

PNM would now increase focus on convincing the EPA to quickly approve the New Mexico plan, Vincent-Collawn added. Before the EPA could approve the plan, it could put its mandate on hold. “These actions are consistent with the Clean Air Act and EPA’s regulations and will serve interests of New Mexico’s economy and its electric consumers,” he said. “The EPA has full, discretionary authority to grant that stay today.”

In a statement on Thursday reacting to the court’s decision, PNM said a Jan. 27 request for proposals for design and construction of SCR technology at San Juan showed about $246 million of the total expected project cost would be spent through 2013—a timeframe in which the matter could still be pending in court. As owner of 46% of the plant, PNM’s portion of these initial SCR costs total about $22 million through the end of this year and about $113 million in total through the end of 2013.

Sources: POWERnews, PNM, EPA