PNM, New Mexico, EPA Settle Coal-Fired San Juan NOx Technology Dispute

An agreement reached on Friday between PNM, New Mexico’s largest electricity provider, the New Mexico Environment Department (NMED), and the U.S. Environmental Protection Agency (EPA) calls for the retirement of two units at the 1,800-MW coal-fired San Juan Generating Station by 2017 to comply with federal visibility rules. The remaining two units will be retrofitted with selective noncatalytic reduction technology by 2016, a nitrogen-oxide reducing technology.

The terms agreed to "would result in a less costly solution that provides broader environmental benefits than the current federal plan," the Albuquerque-based utility said in a statement. "The plan balances cost impacts to customers while resulting in significant environmental benefits."

The nonbinding agreement could resolve a long-standing dispute between the state and the federal agency. At issue is an August 2011–finalized EPA federal implementation plan that would have required PNM to install selective catalytic reduction equipment at all four units at the San Juan plant to meet regional haze standards. But PNM 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 contended that selective noncatalytic reduction, a technology proposed by the NMED’s state implementation plan (SIP), would meet the same federal visibility rules for $77 million—or about one-tenth of the cost.

Before it becomes final, the agreement reached on Friday will require the NMED to file a revised SIP. That plan would then require formal adoption by the New Mexico Environmental Improvement Board (EIB) and, ultimately, final approval from the EPA. The state Public Regulation Commission also would have to approve retirement of the two units and plans to acquire replacement power. EIB approval is projected for late October 2013, with EPA action projected in late 2014.

The agreement also calls for a natural gas plant to be built at San Juan to partially replace the capacity from the retired coal units. Detailed replacement power strategies would be finalized separately from the haze agreement.

"This agreement is a significant milestone in our efforts to implement an alternative compliance plan that reduces the cost impact to our customers and has broad environmental benefits," said Patricia Vincent-Collawn, PNM chairman, president, and CEO. "The plan positions us for an improved environmental future by reducing not only haze-forming emissions but also carbon emissions, water usage and coal combustion byproducts."

Sources: POWERnews, PNM, EPA
—Sonal Patel, Senior Writer (@POWERmagazine)