1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

UNITED STATES OF AMERICA, ) ) Plaintiff, ) CIVIL ACTION NO. ) v. ) CV 08-1479-PHX-JAT ) SALT RIVER PROJECT AGRICULTURAL ) CONSENT DECREE IMPROVEMENT AND POWER DISTRICT ) ) Defendant. ) ) Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 1 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

2 TABLE OF CONTENTS I. JURISDICTION AND VENUE ..................5 II. APPLICABILITY ......................6 III. DEFINITION S.......................7 IV. NO xEMISSION REDUCTIONS AND CONTROLS . . . . . . . . . . 13 V. SO 2 EMISSION REDUCTIONS AND CONTROLS . . . . . . . . . . 15 VI. PM EMISSION REDUCTIONS AND CONTROLS . . . . . . . . . . 21 VII. PROHIBITION ON NETTING CREDITS OR OFFSETS . . . . . . 26 VIII. ENVIRONMENTAL PROJECT S . . . . . . . . . . . . . . . . 27 IX. CIVIL PENALTY . . . . . . . . . . . . . . . . . . . . . 29 X. RESOLUTION OF PAST CIVIL CLAIM S . . . . . . . . . . . . . 30 XI. PERIODIC REPORTIN G . . . . . . . . . . . . . . . . . . . 30 XII. REVIEW AND APPROVAL OF SUBMITTAL S . . . . . . . . . . . 33 XIII. STIPULATED PENALTIE S . . . . . . . . . . . . . . . . . 33 XIV. FORCE MAJEUR E . . . . . . . . . . . . . . . . . . . . . 44 XV. DISPUTE RESOLUTIO N . . . . . . . . . . . . . . . . . . . 47

XVI. PERMIT S . . . . . . . . . . . . . . . . . . . . . . . . 49 XVII. INFORMATION COLLECTION AND RETENTIO N . . . . . . . . . 52 XVIII. NOTICE S . . . . . . . . . . . . . . . . . . . . . . . 53 XIX. SALES OR TRANSFERS OF OWNERSHIP INTEREST S . . . . . . . 55 XX. EFFECTIVE DAT E . . . . . . . . . . . . . . . . . . . . . 56 XXI. RETENTION OF JURISDICTIO N . . . . . . . . . . . . . . . 56 XXII. MODIFICATIO N . . . . . . . . . . . . . . . . . . . . . 57 XXIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . 57 XXIV. SIGNATORIES AND SERVICE . . . . . . . . . . . . . . . 59 XXV. PUBLIC COMMEN T . . . . . . . . . . . . . . . . . . . . . 60 XXVI. CONDITIONAL TERMINATION OF ENFORCEMENT UNDER CONSENT DECREE . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 2 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

3 XXVII. FINAL JUDGMENT . . . . . . . . . . . . . . . . . . . 61 Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 3 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

4 WHEREAS, Plaintiff, the United States of America (“the United States”), on behalf of the United States Environmental Protection Agency (“EPA”) is concurrently filing a complaint for injunctive relief and civil penalties pursuant to Sections 113(b)(2) and 167 of the Clean Air Act (the “Act”), 42 U.S.C. §§ 7413(b)(2) and 7477, alleging that Defendant, Salt River Project Agricultural Improvement and Power District (“SRP”) has undertaken construction projects at a major emitting facility in violation of the Prevention of Significant Deterioration (“PSD”) provisions of Part C of Subchapter I of the Act, 42 U.S.C. §§ 7470-7492, and in violation of the federally approved and enforceable Arizona State Implementation Plan (“SIP”); WHEREAS, in its complaint, the United States alleges, inter alia, that SRP failed to obtain the necessary permits and install the controls necessary under the Act to reduce sulfur dioxide (“SO 2 ”), oxides of nitrogen (“NO x ”), and particulate matter (“PM”), and that SRP failed to obtain an operating permit under Title V of the Act that reflects applicable requirements imposed under Part C of Subchapter I of the Act for its Coronado Generating Station (“CGS”) located near St. Johns, Arizona; WHEREAS, the complaint alleges claims upon which relief can be granted against SRP under Sections 113 and 167 of the Act, 42 U.S.C. §§ 7413 and 7477; WHEREAS, the United States provided SRP and the State of Arizona actual notice of alleged violations in accordance with Section 113(a)(1) and (b) of the Act, 42 U.S.C. § 7413(a)(1) and (b); WHEREAS, the United States and SRP (collectively, the Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 4 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

5 “Parties”) have agreed that settlement of this action is in the best interest of the Parties and in the public interest, and that entry of this Consent Decree without further litigation is the most appropriate means of resolving this matter; WHEREAS, the Parties recognize, and the Court by entering this Consent Decree finds, that this Consent Decree has been negotiated in good faith and at arm’s length and that this Consent Decree is fair, reasonable, consistent with the goals of the Act, and in the public interest; WHEREAS, SRP has cooperated in the resolution of this

matter; WHEREAS, SRP denies the violations alleged in the complaint, and nothing herein shall constitute an admission of liability; WHEREAS, SRP maintains that its agreement in this Consent Decree to install, correlate, maintain, and operate PM CEMS shall not prevent SRP in any future proceedings from challenging the relationship between the data generated from such PM CEMS, including the averaging period for which such data is reported pursuant to Paragraph 71, and the results of performance tests for PM (e.g. , Method 5, 5B, 5I, or 17); and WHEREAS, the Parties have consented to entry of this Consent Decree without trial of any issues; NOW, THEREFORE, without any admission of fact or law, it is hereby ORDERED, ADJUDGED, AND DECREED as follows: **I. JURISDICTION AND VENUE** 1. This Court has jurisdiction over this action, the subject matter herein, and the Parties consenting hereto, pursuant to 28 U.S.C. §§ 1331, 1345, 1355, and 1367, and pursuant Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 5 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

6 to Sections 113 and 167 of the Act, 42 U.S.C. §§ 7413 and 7477. Venue is proper under Section 113(b) of the Act, 42 U.S.C. § 7413(b), and under 28 U.S.C. § 1391(b) and (c). Solely for the purposes of this Consent Decree and the underlying complaint, and for no other purpose, SRP waives all objections and defenses that it may have to the Court’s jurisdiction over this action, to the Court’s jurisdiction over SRP, and to venue in this district. SRP consents to and shall not challenge entry of this Consent Decree or this Court’s jurisdiction to enter and enforce this Consent Decree. Except as expressly provided for herein, this Consent Decree shall not create any rights in or obligations of any party other than the Parties to this Consent Decree. Except as provided in Section XXV (Public Comment) of this Consent Decree, the Parties consent to entry of this Consent Decree without further notice.

**II. APPLICABILITY** 2. Upon entry, the provisions of this Consent Decree shall apply to and be binding upon the Parties, their successors and assigns, and upon SRP’s directors, officers, employees, servants and agents solely in their capacities as such. 3. SRP shall provide a copy of this Consent Decree to all vendors, suppliers, consultants, contractors, agents, and any other company or other organization retained to perform any of the work required by this Consent Decree. Notwithstanding any retention of contractors, subcontractors, or agents to perform any work required under this Consent Decree, SRP shall be responsible for ensuring that all work is performed in accordance with the requirements of this Consent Decree. In any action to Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 6 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

7 enforce this Consent Decree, SRP shall not assert as a defense the failure of its officers, directors, employees, servants, agents, or contractors to take actions necessary to comply with this Consent Decree, unless it is determined to be a Force Majeure Event as governed by Section XIV of this Consent Decree.

**III. DEFINITIONS** 4. Every term expressly defined by this Section shall have the meaning given that term herein. Every other term used in this Consent Decree that is also a term used under the Act or in a federal regulation implementing the Act shall mean in this Consent Decree what such term means under the Act or those regulations. 5. A “30-Day Rolling Average NO xEmission Rate” for a Unit shall be expressed in lb/mmBtu and calculated in accordance with the following procedure: first, sum the total pounds of NO x emitted from the Unit during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days; second, sum the total heat input to the Unit in mmBtu during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days; and third, divide the total number of pounds of NO xemitted during the thirty (30) Unit Operating Days by the total heat input during the thirty (30) Unit Operating Days. A new 30-Day Rolling Average NO x Emission Rate shall be calculated for each new Unit Operating Day. Each 30-Day Rolling Average NO xEmission Rate shall include all emissions that occur during all periods within any Unit Operating Day, including emissions from startup, shutdown, and malfunction. 6. A “365-Day Plant-Wide Rolling NO xTonnage Limitation” Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 7 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

8 means the limitation, as specified in this Consent Decree, on the total number of tons of NO xemitted from CGS Units 1 and 2 during a 365-day period beginning on June 1, 2014, and continuing each day thereafter, and shall include all emissions during startup, shutdown, and malfunction, unless the malfunction is determined to be a Force Majeure Event as defined in Section XIV. 7. A “30-Day Rolling Average SO 2 Removal Efficiency” means the percent reduction in the mass of SO 2 achieved by a Unit’s FGD system over a thirty (30) Unit Operating Day period and shall be calculated as follows: step one, sum the total pounds of SO 2 emitted as measured at the outlet of the FGD system for the Unit during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days as measured at the outlet of the FGD system for that Unit; step two, sum the total pounds of

SO 2 delivered to the inlet of the FGD system for the Unit during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days as measured at the inlet to the FGD system for that Unit (this shall be calculated by measuring the ratio of the lb/mmBtu SO 2 inlet to the lb/mmBtu SO 2 outlet and multiplying the outlet pounds of SO 2 by that ratio); step three, subtract the outlet SO 2 emissions calculated in step one from the inlet SO 2 emissions calculated in step two; step four, divide the remainder calculated in step three by the inlet SO 2 emissions calculated in step two; and step five, multiply the quotient calculated in step four by 100 to express as a percentage of removal efficiency. A new 30-day Rolling Average SO 2 Removal Efficiency shall be calculated for each new Unit Operating Day, and shall include all emissions that occur during all periods within each Unit Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 8 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

9 Operating Day, including emissions from startup, shutdown, and malfunction. 8. A “30-Day Rolling Average SO 2 Emission Rate” for a Unit shall be expressed in lb/mmBtu and calculated in accordance with the following procedure: first, sum the total pounds of SO 2 emitted from the Unit during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days; second, sum the total heat input to the Unit in mmBtu during the current Unit Operating Day and the previous twenty-nine (29) Unit Operating Days; and third, divide the total number of pounds of SO 2 emitted during the thirty (30) Unit Operating Days by the total heat input during the thirty (30) Unit Operating Days. A new 30-Day Rolling Average SO 2 Emission Rate shall be calculated for each new Unit Operating Day. Each 30-Day Rolling Average SO 2 Emission Rate shall include all emissions that occur during all periods within any Unit Operating Day, including emissions from startup, shutdown, and malfunction. 9. “Affirmative Defense,” as used in this Consent Decree, means the Affirmative Defense approved by EPA into the Arizona SIP Rule 18-2-310, “Affirmative Defenses for Excess Emissions Due to Malfunction, Startup, and Shutdown,” which provides an owner or operator of a source an Affirmative Defense in a civil or administrative action, other than a judicial action for injunctive relief, if the owner or operator of the source has emissions in excess of an applicable emission limitation due to malfunction, startup, or shutdown, has complied with the reporting requirements of Rule 18-2-310.01, and satisfies additional requirements of Rule 18-2-310. Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 9 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

10 10. “Arizona DEQ” means the Arizona Department of Environmental Quality. 11. “Arizona SIP” means the Arizona State Implementation Plan, and any amendments thereto, as approved by EPA pursuant to Section 110 of the Act, 42 U.S.C. § 7410. 12. “CEMS” or “Continuous Emission Monitoring System,” means, for obligations involving the monitoring of NO xand SO 2 emissions under this Consent Decree, the devices defined in 40 C.F.R. § 72.2, the inlet SO 2 lb/mmBtu monitors, and the computer system for recording, calculating, and storing data and equations required by this Consent Decree. 13. “CGS” means SRP’s Coronado Generating Station consisting of two Riley turbo-fired boilers (designated as Unit 1 and Unit 2) and related equipment, which is located near St. Johns, Arizona. 14. “Clean Air Act” or “Act” means the federal Clean Air Act, 42 U.S.C. §§ 7401-7671q, and its implementing regulations. 15. “Consent Decree” means this Consent Decree and the Appendix hereto, which is incorporated into the Consent Decree. 16. “Day” means calendar day unless otherwise specified in this Consent Decree. 17. “Electrostatic Precipitator” or “ESP” means a device for removing particulate matter from combustion gases by imparting an electric charge to the particles and then attracting them to a metal plate or screen of opposite charge before the combustion gases are exhausted to the atmosphere. 18. “Emission Rate” for a given pollutant means the number of pounds of that pollutant emitted per million British thermal Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 10 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

11 units of heat input (lb/mmBtu), measured in accordance with this

Consent Decree. 19. “EPA” means the United States Environmental Protection Agency. 20. “Flue Gas Desulfurization System” or “FGD” means a pollution control device that employs flue gas desulfurization technology, including an absorber utilizing lime, fly ash, or limestone slurry, for the reduction of sulfur dioxide emissions. 21. “Fossil Fuel” means any hydrocarbon fuel, including coal, petroleum coke, petroleum oil, or natural gas. 22. “lb/mmBtu” means one pound of a pollutant per million British thermal units of heat input. 23. “Low NO xCombustion System” means burners and associated combustion air control equipment, including overfire air, for combusting pulverized coal, which control mixing characteristics of the pulverized coal and oxygen, lower the combustion rate, lower oxygen concentration and heat temperature during the initial phase of combustion, and thereby restrain the formation of NO xcreated by both the nitrogen content of the pulverized coal and by heat. 24. “Netting” shall mean the process of determining whether a particular physical change or change in the method of operation of a major stationary source results in a net emissions increase, as that term is defined at 40 C.F.R. § 52.21(b)(3)(i) and at Section R9-3-101 of the Arizona SIP. 25. “NO x ” means oxides of nitrogen, measured in accordance with the provisions of this Consent Decree. 26. “Ownership Interest” means part or all of SRP’s legal Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 11 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

12 or equitable ownership interest in CGS. 27. “Parties” means the United States of America on behalf of EPA and SRP. “Party” means one of the named “Parties.” 28. “PM” means total filterable particulate matter, measured in accordance with the provisions of this Consent

Decree. 29. “PM CEMS” or “PM Continuous Emission Monitoring System” means, for obligations involving the monitoring of PM emissions under this Consent Decree, the equipment that samples, analyzes, measures, and provides, by readings taken at frequent intervals, an electronic and/or paper record of PM emissions. 30. “Prevention of Significant Deterioration” or “PSD” means the prevention of significant deterioration of air quality program under Part C of Subchapter I of the Clean Air Act, 42 U.S.C. §§ 7470 - 7492, and 40 C.F.R. § 52.21. It also includes the prevention of significant deterioration of air quality program as approved into the Arizona SIP, Arizona Administrative Code R9-3-101, R9-3-301, R9-3-304, and R9-3-305. 31. “Project Dollars” means SRP’s expenditures and payments incurred or made in carrying out the Environmental Projects identified in Section VIII (Environmental Projects) of this Consent Decree to the extent that such expenditures or payments both: (a) comply with the requirements set forth in Section VIII and Appendix A of this Consent Decree, and (b) constitute SRP’s direct payments for such projects, or SRP’s external costs for contractors, vendors, and equipment. 32. “Removal Efficiency” for a given pollutant means the percentage of that pollutant removed by the applicable emission Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 12 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

13 control device, measured in accordance with the provisions of this Consent Decree. 33. “SCR” means a pollution control device for reducing NO x emissions through the use of selective catalytic reduction technology. 34. “SO 2 ” means sulfur dioxide, measured in accordance with the provisions of this Consent Decree. 35. “SO 2 Allowance” means “allowance” of SO 2 as defined at 42 U.S.C. § 7651a(3): “an authorization, allocated to an affected Unit by the Administrator of EPA under Subchapter IV of the Act, to emit, during or after a specified calendar year, one ton of sulfur dioxide.” 36. “State” means the State of Arizona. 37. “Super-Compliant SO 2 Allowance” means an SO 2 Allowance attributable to reductions beyond the requirements of this

Consent Decree. 38. “Title V Permit” means the permit required of SRP’s CGS under Subchapter V of the Act, 42 U.S.C. §§ 7661-7661e. 39. “Unit” means CGS Unit 1 or Unit 2. 40. “Unit Operating Day” means, for Unit 1, any calendar day on which Unit 1 fires fossil fuel, and, for Unit 2, any calendar day on which Unit 2 fires fossil fuel.

**IV. NO x** **EMISSION REDUCTIONS AND CONTROLS A. NO**  **x Emission Controls**  1. **Low-NO x** **Combustion System Installation and Performance Requirements**  41. SRP shall install a Low NO xCombustion System on one Unit no later than June 1, 2009 and on the other Unit by no later Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 13 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

14 than June 1, 2011. Commencing on the earlier of ninety (90) Unit Operating Days or one hundred eighty (180) calendar days after the Low NO xCombustion System installation date and continuing thereafter, each Unit shall achieve and maintain a 30-Day Rolling Average NO xEmission Rate of no greater than 0.320 lb/mmBtu. 2. **SCR Installation and Performance Requirements** 42. SRP shall install an SCR on one Unit no later than June 1, 2014. Beginning on June 1, 2014, and continuing thereafter, SRP shall commence continuous operation of the SCR installed on that Unit so as to achieve and maintain a 30-Day Rolling Average

NO xEmission Rate of no greater than 0.080 lb/mmBtu. 3. **Continuous Operation of NO x** **Controls** 43. SRP shall continuously operate each NO xcontrol covered under this Consent Decree at all times that the Unit it serves is in operation, consistent with the technological limitations, manufacturers’ specifications, and good engineering and maintenance practices for minimizing emissions to the extent practicable. 4. **365-Day Plant-Wide Rolling NO x** **Tonnage Limitation** 44. Beginning on June 1, 2014, and continuing thereafter, SRP shall not exceed a 365-Day Plant-Wide Rolling NO xTonnage Limitation at CGS Units 1 and 2 of 7,300 tons. 5. **Monitoring of NO x** **Emissions A. 30-Day Rolling Average NO**  **x Emission Rate**  45. In determining the 30-Day Rolling Average NO xEmission Rate, SRP shall use CEMS in accordance with the procedures of 40 C.F.R. Part 75, except that: (1) NO xemissions data need not be bias adjusted, (2) for any CEMS with a span less than 100 parts Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 14 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

15 per million (“ppm”), the calibration drift and out-of-control criteria in Procedure 1, section 4.3 of Part 60, Appendix F shall apply in lieu of the low emitter specifications in Part 75, Appendix B, section 2.1, (3) for any CEMS with a span less than or equal to 30 ppm the exemption from the Part 75 linearity check will not apply and either the Part 75 linearity check or the cylinder gas audit described in Procedure 1, section 5.1.2 of Part 60, Appendix F shall be performed on a quarterly basis, and (4) for the Unit controlled by SCR, an annual relative accuracy test audit shall meet, at a minimum, a relative accuracy of less than 20% or an accuracy of less than 0.016 lb/mmBtu (expressed as the difference between the monitor mean and the reference value mean).

**B. 365-Day Plant-Wide Rolling NO**  **x Tonnage Limitation**  46. For purposes of calculating the 365-day Plant-Wide Rolling NO xTonnage Limitation, SRP shall use CEMS in accordance with the procedures specified in 40 C.F.R. Part 75.

**V. SO 2**  **EMISSION REDUCTIONS AND CONTROLS A. Best Management Practices for Existing SO**  **2 Controls**  47. Beginning thirty (30) days after entry of this Consent Decree, SRP shall continuously operate and maintain, to the maximum extent practicable, its existing FGDs on CGS Unit 1 and Unit 2 in a manner consistent with good engineering and maintenance practices for minimizing SO 2 emissions.

**B. SO 2**  **Emission Controls 1. New FGD Installations at First Unit**  48. SRP shall install a new FGD on one Unit no later than January 1, 2012. Beginning on January 1, 2012, and continuing Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 15 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

16 thereafter, SRP shall commence continuous operation of the FGD so as to achieve and maintain a 30-Day Rolling Average SO 2 Removal Efficiency at this Unit of at least 95.0% or a 30-Day Rolling Average SO 2 Emissions Rate of no greater than 0.080 lb/mmBtu. **2. New FGD Installation at Second Unit** 49. SRP shall install a new FGD on the Unit not selected pursuant to Paragraph 48 no later than January 1, 2013. Beginning on January 1, 2013, and continuing thereafter, SRP shall commence continuous operation of the FGD so as to achieve and maintain a 30-Day Rolling Average SO 2 Removal Efficiency at this second Unit of at least 95.0% or a 30-Day Rolling Average

SO 2 Emissions Rate of no greater than 0.080 lb/mmBtu. **3. Continuous Operation of SO 2**  **Controls** 50. SRP shall continuously operate each FGD covered under this Consent Decree at all times that the Unit it serves is in operation, consistent with the technological limitations, manufacturers’ specifications, and good engineering and maintenance practices for the FGDs for minimizing emissions to the extent practicable. **C. Surrender of SO 2**  **Allowances** 51. For purposes of this Subsection, “surrender” means, with regard to SO 2 Allowances, permanently surrendering so that such SO 2 Allowances can never be used to meet any compliance requirement under the Clean Air Act or the Arizona SIP. 52. Except as provided in Paragraph 59, SRP shall not sell, trade, or transfer any SO 2 Allowances allocated to CGS that would otherwise be available for sale, trade, or transfer as a result of the actions taken by SRP to comply with the requirements of Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 16 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

17 this Consent Decree. 53. Beginning with calendar year 2012, SRP shall surrender to EPA, or transfer to a non-profit third party selected by SRP for purposes of surrender, all SO 2 Allowances that have been allocated to CGS in excess of the amount needed to meet its own federal and/or State Clean Air Act regulatory requirements at CGS and Springerville Unit 4, which is located at the Springerville Generating Station.54. If SRP commences operation of one or more new coalfired units that it owns in whole or in part, as further described in this Paragraph, in the Western Electricity Coordinating Council Region no earlier than five (5) years and no later than fourteen (14) years from the date this Consent Decree is entered by this Court, then SRP may also use SO 2 Allowances, as limited by this Paragraph, allocated to CGS to meet the federal and/or state Clean Air Act regulatory requirements for certain SO 2 emissions from such new coal-fired unit(s). SRP may only use such SO 2 Allowances pursuant to this Paragraph if such new coal-fired unit(s) is equipped with the Best Available Control Technology (if the new coal-fired unit(s) will be emitting any of the pollutants set forth at 40 C.F.R. § 52.21(b)(50) and the new coal-fired unit(s) will be located in an attainment area for those pollutants) and/or the Lowest Achievable Emission Rate (if the new coal-fired unit(s) will be emitting any of the pollutants set forth at 40 C.F.R. § 51.165(a)(xxxvii) and the new coal-fired unit(s) will be located in a nonattainment area for those pollutants). SRP may only use SO 2 Allowances for the SO 2 emissions associated with a Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 17 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

18 total of 400 megawatts (MW) that it owns at such new coal-fired unit(s), whether at one new coal-fired unit (e.g. , SRP owns a total of at least 400 MW at one new coal-fired unit) or in the aggregate at multiple new coal-fired units (e.g. , SRP owns 100 MW at four new coal-fired units for an aggregate total of 400 MW). To determine the number of SO 2 Allowances SRP may use pursuant to this Paragraph, SRP may use no more than that number of SO 2 Allowances that cover the same percentage of total SO 2 emissions from such new coal-fired unit(s) as the percentage of SRP’s ownership in such new coal-fired unit(s), on a MW basis. Thus, for example, if SRP owns 400 MW of a new 800 MW coal-fired unit that otherwise meets the requirements of this Paragraph, SRP may

use excess SO 2 Allowances allocated to CGS to cover no more than fifty (50) percent of the total SO 2 emissions from such new coalfired unit. This reduction in the amount of SO 2 Allowances surrendered by or on behalf of SRP would start with the year this new Unit(s) commences operation. 55. SRP shall make its surrender of SO 2 Allowances annually, within forty-five (45) days of its receipt from EPA of the Annual Deduction Reports for SO 2 . Any surrender need not include the specific SO 2 Allowances that were allocated to CGS, so long as SRP surrenders SO 2 Allowances that are from the same year and that are equal to the number required to be surrendered under this Subsection. 56. If any SO 2 Allowances are transferred directly to a non-profit third party for surrender to EPA, SRP shall include a description of such transfer in the next report submitted to EPA pursuant to Section XI (Periodic Reporting) of this Consent Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 18 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

19 Decree. Such report shall: (i) provide the identity of the non-profit third-party recipient(s) of the SO 2 Allowances and a listing of the serial numbers of the transferred SO 2 Allowances; and (ii) include a certification by the non-profit third-party recipient(s) stating that the recipient(s) will not sell, trade, or otherwise exchange any of the SO 2 Allowances and will not use any of the SO 2 Allowances to meet any obligation imposed by any environmental law. No later than the third periodic report due after the transfer of any SO 2 Allowances, SRP shall include a statement that the non-profit third-party recipient(s) surrendered the SO 2 Allowances for permanent surrender to EPA in accordance with the provisions of Paragraph 57 within one (1) year after SRP transferred the SO 2 Allowances to them. SRP shall not have complied with the SO 2 Allowance surrender requirements of this Subsection until all non-profit third-party recipient(s) shall have actually surrendered the transferred SO 2 Allowances to

EPA. 57. For all SO 2 Allowances surrendered to EPA, SRP or the non-profit third-party recipient(s) (as the case may be) shall first submit an SO 2 Allowance transfer request form to EPA’s Office of Air and Radiation’s Clean Air Markets Division directing the transfer of such SO 2 Allowances to the EPA Enforcement Surrender Account or to any other EPA account that EPA may direct in writing. As part of submitting these transfer requests, SRP or the non-profit third-party recipient(s) shall irrevocably authorize the transfer of these SO 2 Allowances and identify – by name of account and any applicable serial or other identification numbers or station names – the source and location Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 19 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

20 of the SO 2 Allowances being surrendered. **D. Monitoring of SO 2**  **Emissions** 58. In determining the 30-Day Rolling Average SO 2 Emission Rate and the 30-Day Rolling Average SO 2 Removal Efficiency, SRP shall use CEMS in accordance with the procedures of 40 C.F.R. Part 75, except that: (1) SO 2 emissions data need not be bias adjusted; (2) inlet pounds of SO 2 will be calculated as described in Paragraph 7 in lieu of installing an inlet flow monitor, (3) on any CEMS with a span less than 100 ppm, the calibration drift and out-of-control criteria in Procedure 1, section 4.3 of Part 60, Appendix F shall apply in lieu of the low emitter specifications in Part 75, Appendix B, section 2.1, (4) on any CEMS with a span less than or equal to 30 ppm the exemption from the Part 75 linearity check will not apply and either the Part 75 linearity check or the cylinder gas audit described in Procedure 1, section 5.1.2 of Part 60, Appendix F shall be performed on a quarterly basis, and (5) an annual relative accuracy test audit shall meet, at a minimum, a relative accuracy of less than 20% or an accuracy of less than 0.016 lb/mmBtu (expressed as the difference between the monitor mean and the reference value mean). **E. General SO 2**  **Provisions** 59. Provided that SRP is in compliance with all SO 2 emission limitations established in this Consent Decree, nothing in this Consent Decree shall preclude SRP from using, selling, or transferring Super-Compliant SO 2 Allowances that may arise as a result of achieving and maintaining SO 2 emission rates or removal efficiencies at Unit 1 and Unit 2 below the emission limits Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 20 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

21 required in this Consent Decree, so long as SRP timely reports the generation of such Super-Compliant SO 2 Allowances in accordance with Section XI (Periodic Reporting) of this Consent

Decree. 60. SRP shall not use SO 2 Allowances to comply with any requirement of this Consent Decree, including by claiming compliance with any emission limitation required by this Consent Decree by using, tendering, or otherwise applying SO 2 Allowances to offset any excess emissions (i.e. , emissions above the limits specified in Paragraphs 48 and 49). 61. Nothing in this Consent Decree shall prevent SRP from purchasing or otherwise obtaining SO 2 Allowances from another source for purposes of complying with state or federal Clean Air Act requirements to the extent otherwise allowed by law. 62. The requirements in Paragraphs 52 through 57 and 59 of this Consent Decree pertaining to SRP’s surrender of SO 2 Allowances are permanent injunctions not subject to any termination provision of this Consent Decree.

**VI. PM EMISSION REDUCTIONS AND CONTROLS A. Optimization of Existing ESPs**  63. Beginning thirty (30) days after entry of this Consent Decree, and continuing thereafter, SRP shall operate each ESP on each Unit at CGS at all times when the Unit is in operation to maximize PM emission reductions, provided that such operation of the ESP is consistent with the technological limitations, manufacturers’ specifications and good engineering and maintenance practices for the ESP. Except as required during correlation testing under 40 C.F.R. Part 60, Appendix B, Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 21 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

22 Performance Specification 11, and Quality Assurance Requirements under Appendix F, Procedure 2, as required by this Consent Decree, SRP shall, at a minimum, to the extent reasonably practicable: (a) fully energize each section of the ESP for each unit, and repair any failed ESP section at the next planned or unplanned Unit outage of sufficient length; (b) operate automatic control systems on each ESP to maximize PM collection efficiency; (c) maintain power levels delivered to the ESPs, consistent with manufacturers’ specifications, the operational design of the Unit, and good engineering practices; (d) inspect for and repair during the next planned or unplanned Unit outage of sufficient length any openings in ESP casings, ductwork and expansion joints to minimize air leakage; and (e) optimize the plate-cleaning and discharge-electrode-cleaning systems for the ESPs at each Unit by varying the cycle time, cycle frequency, rapper-vibrator intensity, and number of strikes per cleaning event. **B. PM Emission Rate and Monitoring Requirements** 64. Upon installation and commencement of operation of a FGD system for a Unit as required by Paragraphs 48 and 49, and continuing thereafter, that Unit shall achieve and maintain a PM Emission Rate no greater than 0.030 lb/mmBtu. 65. Within one hundred eighty (180) days after each date established by this Consent Decree for SRP to achieve and maintain a PM Emission Rate, and continuing annually thereafter, SRP shall conduct a stack test for PM. To determine compliance with the PM Emission Rate established in Paragraph 64, SRP shall use the reference methods and procedures (filterable portion only) specified in 40 C.F.R. Part 60, App. A-3, Method 5, Method Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 22 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

23 5B, or Method 5I, App. A-6, Method 17, or alternative stack tests or methods that are requested by SRP and approved by EPA and Arizona DEQ. Each test shall consist of three separate runs performed under representative operating conditions not including periods of startup, shutdown, or malfunction. The sampling time for each run shall be at least 120 minutes and the volume of each run shall be 1.70 dry standard cubic meters (60 dry standard cubic feet). SRP shall calculate the PM Emission Rate from the stack test results in accordance with 40 C.F.R. § 60.8(f). The results of each PM stack test shall be submitted to EPA and Arizona DEQ within forty-five (45) days of completion of each

test. 66. When SRP submits the application for amendment to its Title V permit pursuant to Paragraph 134, that application shall include a Compliance Assurance Monitoring (“CAM”) plan, under 40 C.F.R. Part 64, for the PM Emission Rate in Paragraph 64. The PM CEMS required under Paragraph 67 may be used in that CAM plan.

**C. PM CEMS** 67. SRP shall install, correlate, maintain, and operate PM CEMS on Unit 1 and Unit 2 as specified below. The PM CEMS shall comprise a continuous particle mass monitor measuring particulate matter concentration, directly or indirectly, on an hourly average basis and a diluent monitor used to convert the concentration to units expressed in lb/mmBtu. The PM CEMS installed at each Unit must be appropriate for the anticipated stack conditions and capable of measuring PM concentrations on an hourly average basis. SRP shall maintain, in an electronic database, the hourly average emission values of all PM CEMS in Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 23 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

24 lb/mmBtu. Except for periods of monitor malfunction, maintenance, or repair, SRP shall continuously operate the PM CEMS at all times when the Unit it serves is operating. 68. No later than January 1, 2010, SRP shall submit to EPA and Arizona DEQ for review and approval pursuant to Section XII (Review and Approval of Submittals) of this Consent Decree a plan for the installation and correlation of the PM CEMS for Unit 1 and Unit 2. 69. No later than one hundred twenty (120) days prior to the deadline to commence operation of the PM CEMS as set forth in Paragraph 71, SRP shall submit to EPA and Arizona DEQ for review and approval pursuant to Section XII (Review and Approval of Submittals) of this Consent Decree a proposed Quality Assurance/Quality Control (“QA/QC”) protocol that shall be followed for such PM CEMS. 70. In developing both the plan for installation and correlation of the PM CEMS and the QA/QC protocol, SRP shall use the criteria set forth in 40 C.F.R. Part 60, Appendix B, Performance Specification 11, and Appendix F, Procedure 2. Following EPA’s and Arizona DEQ’s approval of the plan described in Paragraph 68 and the QA/QC protocol described in Paragraph 69, SRP shall thereafter operate the PM CEMS in accordance with the approved plan and QA/QC protocol. 71. Within one hundred eighty (180) calendar days following commencement of operation of each FGD, SRP shall install, correlate, maintain, and operate a PM CEMS on the Unit being controlled by the new FGD, conduct performance specification tests on that PM CEMS, and demonstrate compliance with the PM Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 24 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

25 CEMS installation and correlation plan submitted to and approved by EPA and Arizona DEQ in accordance with Paragraphs 68 and 69. SRP shall report, pursuant to Section XI (Periodic Reporting), the data recorded by the PM CEMS, expressed in lb/mmBtu on a rolling average 3-hour, 6-hour, 24-hour, 30-day, and 365-day basis in electronic format to EPA and Arizona DEQ and identify in the report any PM concentrations measured by the PM CEMS that are greater than 125% of the highest PM concentration level used in the most recent correlation testing performed pursuant to Performance Specification 11. 72. SRP shall operate the PM CEMS for at least two (2) years. If, after two (2) years of operation, SRP believes that it is infeasible to continue operation of the PM CEMS, SRP may submit a demonstration of infeasibility to EPA. As part of that demonstration, SRP shall submit an alternative PM monitoring plan for review and approval by EPA. If EPA disapproves the alternative monitoring plan, or if EPA rejects SRP’s assertion that it is infeasible to continue operating the PM CEMS, such disagreement is subject to dispute resolution as specified in this Consent Decree. 73. Operation of a PM CEMS shall be considered “infeasible” if, by way of example, the PM CEMS: (a) cannot be kept in proper condition for sufficient periods of time to produce reliable, adequate, or useful data; or (b) SRP demonstrates that recurring, chronic, or unusual equipment adjustment or servicing needs in relation to other types of continuous emission monitors cannot be resolved through reasonable expenditures of resources; or (c) chronic and difficult operational issues at Unit 1 or Unit 2 Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 25 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

26 cannot be resolved through reasonable expenditure of resources; or (d) the data produced by the CEMS cannot be used to assess PM emissions from Unit 1 or Unit 2 or performance of that Unit’s control devices. If EPA determines that SRP has demonstrated infeasibility pursuant to this Paragraph, SRP shall be entitled to discontinue operation of and remove the PM CEMS. **D. General PM Provisions** 74. Although stack testing shall be used to determine compliance with the PM Emission Rate established by this Consent Decree, data from PM CEMS shall be used, at a minimum, to monitor progress in reducing PM emissions. 75. Nothing in this Consent Decree is intended to, or shall, alter or waive any applicable law (including but not limited to any defenses, entitlements, challenges, or clarifications related to the Credible Evidence Rule, 62 Fed. Reg. 8314 (Feb. 24, 1997)) concerning the use of data for any purpose under the Act. **VII. PROHIBITION ON NETTING CREDITS OR OFFSETS** 76. Emission reductions at CGS that result from actions to be taken by SRP after entry of this Consent Decree to comply with the requirements of this Consent Decree shall not be considered as a creditable contemporaneous emission decrease for the purpose of obtaining a netting credit or offset under the Clean Air Act’s Nonattainment New Source Review and PSD programs. 77. The limitations on the generation and use of netting credits and offsets set forth in the previous Paragraph do not apply to emission reductions achieved at CGS that are greater than those required under this Consent Decree. For purposes of Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 26 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

27 this Paragraph, emission reductions at CGS are greater than those required under this Consent Decree if they result from CGS’s compliance with federally-enforceable emission limits that are more stringent than those limits imposed on CGS Unit 1 and Unit 2 under this Consent Decree and under applicable provisions of the Clean Air Act or the Arizona SIP. 78. Nothing in this Consent Decree is intended to preclude the emission reductions generated under this Consent Decree from being considered by the State or EPA as creditable contemporaneous emission decreases for the purpose of attainment demonstrations submitted pursuant to § 110 of the Act, 42 U.S.C. § 7410, or in determining impacts on National Ambient Air Quality Standards, PSD increment, or air quality related values, including visibility, in a Class I area.

**VIII. ENVIRONMENTAL PROJECTS** 79. SRP shall implement the Environmental Projects (“Projects”) described in Appendix A to this Consent Decree in compliance with the approved plans and schedules for such Projects and other terms of this Consent Decree. In implementing the Projects, SRP shall spend no less than $4,000,000 in Project Dollars. SRP shall not include its own personnel costs in overseeing the implementation of the Projects as Project Dollars. 80. SRP shall maintain, and present to EPA upon request, all documents to substantiate the Project Dollars expended to implement the Projects described in Appendix A, and shall provide these documents to EPA within thirty (30) days of a request for the documents. 81. All plans and reports prepared by SRP pursuant to the Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 27 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

28 requirements of this Section of the Consent Decree and required to be submitted to EPA shall be publicly available from SRP without charge. 82. SRP shall certify, as part of each plan submitted to EPA for any Project, that SRP is not otherwise required by law to perform the Project described in the plan, that SRP is unaware of any other person who is required by law to perform the Project, and that SRP will not use any Project, or portion thereof, to satisfy any obligations that it may have under other applicable requirements of law, including any applicable renewable or energy efficiency portfolio standards. 83. SRP shall use good faith efforts to secure as much benefit as possible for the Project Dollars expended, consistent with the applicable requirements and limits of this Consent

Decree. 84. If SRP elects (where such an election is allowed) to undertake a Project by contributing funds to another person or entity that will carry out the Project in lieu of SRP, but not including SRP’s agents or contractors, that person or instrumentality must, in writing: (a) identify its legal authority for accepting such funding; and (b) identify its legal authority to conduct the Project for which SRP contributes the funds. Regardless of whether SRP elects (where such election is allowed) to undertake a Project by itself or to do so by contributing funds to another person or instrumentality that will carry out the Project, SRP acknowledges that it will receive credit for the expenditure of such funds as Project Dollars only if SRP demonstrates that the funds have been actually spent by Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 28 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

29 either SRP or by the person or instrumentality receiving them, and that such expenditures met all requirements of this Consent

Decree. 85. SRP shall comply with the reporting requirements described in Appendix A. 86. Within sixty (60) calendar days following the completion of each Project required under this Consent Decree (including any applicable periods of demonstration or testing), SRP shall submit to the United States a report that documents the date that the Project was completed, SRP’s results of implementing the Project, including the emission reductions or other environmental benefits achieved, and the Project Dollars expended by SRP in implementing the Project.

**IX. CIVIL PENALTY** 87. Within thirty (30) calendar days after entry of this Consent Decree, SRP shall pay to the United States a civil penalty in the amount of $950,000. The civil penalty shall be paid by Electronic Funds Transfer (“EFT”) to the United States Department of Justice, in accordance with current EFT procedures, referencing USAO File Number 2008V00564 and DOJ Case Number 90-5- 2-1-09174 and the civil action case name and case number of this action. The costs of such EFT shall be SRP’s responsibility. Payment shall be made in accordance with instructions provided to SRP by the Financial Litigation Unit of the U.S. Attorney’s Office for the District of Arizona. Any funds received after 2:00 p.m. EDT shall be credited on the next business day. At the time of payment, SRP shall provide notice of payment, referencing the USAO File Number, the DOJ Case Number, and the civil action Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 29 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

30 case name and case number, to the Department of Justice and to EPA in accordance with Section XVIII (Notices) of this Consent

Decree. 88. Failure to timely pay the civil penalty shall subject SRP to interest accruing from the date payment is due until the date payment is made at the rate prescribed by 28 U.S.C. § 1961, and shall render SRP liable for all charges, costs, fees, and penalties established by law for the benefit of a creditor or of the United States in securing payment. 89. Payments made pursuant to this Section are penalties within the meaning of Section 162(f) of the Internal Revenue Code, 26 U.S.C. § 162(f), and are not tax-deductible expenditures for purposes of federal law. **X. RESOLUTION OF PAST CIVIL CLAIMS** 90. Entry of this Consent Decree shall resolve all civil claims of the United States arising under Part C of Subchapter I of the Clean Air Act, 42 U.S.C. §§ 7470 to 7492, under the modification provisions of the Clean Air Act's Standards of Performance for New Stationary Sources program, 42 U.S.C. § 7411 and 40 C.F.R. § 60.14, and under Subchapter V of the Clean Air Act, §§ 7661 to 7661f, that arose from modifications that commenced at CGS prior to the date of lodging of this Consent

Decree. **XI. PERIODIC REPORTING** 91. After entry of this Consent Decree, SRP shall submit to the United States a periodic report, within sixty (60) days after the end of each half of the calendar year (January through June and July through December). The report shall include the Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 30 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

31 following information: a. all information necessary to determine compliance with the requirements of the following Paragraphs of this Consent Decree: Paragraphs 41 through 46 concerning

NO xemissions and monitoring; Paragraphs 47 through 58 concerning SO 2 emissions and monitoring, and the surrender of SO 2 Allowances; and Paragraphs 63 through 66 concerning PM emissions and monitoring; b. all data recorded by the PM CEMS as required by Paragraph 71, and all periods of monitor malfunction, maintenance, and/or repair as provided in Paragraph 67; c. all information relating to Super-Compliant SO 2 Allowances that SRP claims to have generated in accordance with Paragraph 59 through compliance beyond the requirements of this Consent Decree; d. all information relating to the NO xOffset Requirement pursuant to Paragraphs 98 and 99; and e. all information indicating that the installation and commencement of operation for a pollution control device may be delayed, including the nature and cause of the delay, and any steps taken by SRP to mitigate such delay. 92. In any periodic report submitted pursuant to this Section, SRP may incorporate by reference information previously submitted under its Title V permitting requirements, provided that SRP attaches the Title V permit report (or the pertinent portions of such report) and provides a specific reference to the provisions of the Title V permit report that are responsive to Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 31 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

32 the information required in the periodic report. 93. In addition to the reports required by Paragraph 91, if SRP violates or deviates from any provision of this Consent Decree, SRP shall submit to the United States a report on the violation or deviation within ten (10) business days after SRP knew or should have known of the event. In the report, SRP shall explain the cause or causes of the violation or deviation and any measures taken or to be taken by SRP to cure the reported violation or deviation or to prevent such violation or deviations in the future. If at any time, the provisions of this Consent Decree are included in Title V Permits, consistent with the requirements for such inclusion in this Consent Decree, then the deviation reports required under applicable Title V regulations shall be deemed to satisfy all the requirements of this Paragraph. 94. Each SRP report shall be signed by either SRP’s Manager of Environmental Services or the Plant Manager at CGS, and shall contain the following certification: This information was prepared either by me or under my direction or supervision in accordance with a system designed to assure that qualified personnel properly gather and evaluate the information submitted. Based on my evaluation, or the direction and my inquiry of the person(s) who manage the system, or the person(s) directly responsible for gathering the information, I hereby certify under penalty of law that, to the best of my knowledge and belief, this information is true, accurate, and complete. I understand that there are significant penalties for submitting false, inaccurate, or incomplete information to the United States. 95. If any SO 2 Allowances are surrendered to any non-profit third party pursuant to Section V, the non-profit third party’scertification shall be signed by a managing officer of the nonCase 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 32 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

33 profit third party and shall contain the following language: I certify under penalty of law that _____________ [name of non-profit third party] will not sell, trade, or otherwise exchange any of the allowances and will not use any of the allowances to meet any obligation imposed by any environmental law. I understand that there are significant penalties for making misrepresentations to or misleading the United States.

**XII. REVIEW AND APPROVAL OF SUBMITTALS** 96. SRP shall submit each plan, report, or other submission required by this Consent Decree to EPA whenever such a document is required to be submitted for review or approval pursuant to this Consent Decree. EPA may approve the submittal or decline to approve it and provide written comments explaining the bases for declining such approval as soon as reasonably practicable. Within sixty (60) days of receiving written comments from EPA, SRP shall either: (a) revise the submittal consistent with the written comments and provide the revised submittal to EPA; or (b) submit the matter for dispute resolution, including the period of informal negotiations, under Section XV (Dispute Resolution) of this Consent Decree. 97. Upon receipt of EPA’s final approval of the submittal, or upon completion of the submittal pursuant to dispute resolution, SRP shall implement the approved submittal inaccordance with the schedule specified therein or another EPAapproved schedule.

**XIII. STIPULATED PENALTIES** 98. For any failure by SRP to comply with the terms of this Consent Decree, and subject to the provisions of Sections XIV (Force Majeure) and XV (Dispute Resolution), and except as Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 33 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

34 provided in Paragraph 99, SRP shall pay, within thirty (30) days after receipt of written demand to SRP by the United States, the following stipulated penalties to the United States:

**Consent Decree Violation Stipulated Penalty** a. Failure to pay the civil penalty as specified in Section IX (Civil Penalty) of this Consent Decree $10,000 per day

b. Failure to comply with any applicable 30-Day Rolling Average NO x Emission Rate, 30-Day Rolling Average SO 2 Emission Rate or 30-Day Rolling Average SO 2 Removal Efficiency $2,500 per day per violation where the violation is less than 5% in excess of the lb/mmBtu limits, or less than 0.25% below the removal efficiency requirement $5,000 per day per violation where the violation is equal to or greater than 5% but less than 10% in excess of the lb/mmBtu limits, or equal to or greater than 0.25% but less than 0.50% below the removal efficiency requirement $10,000 per day per violation where the violation is equal to or greater than 10% in excess of the lb/mmBtu limits, or greater than 0.50% below the removal efficiency requirement Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 34 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

35 c. Failure to comply with the applicable 365-Day Plant-Wide Rolling NO xTonnage Limitation established by this Consent Decree $200,000 for thefirst 365-Day PlantWide Rolling NO x Tonnage Limitation violation, plus $5,000 for each subsequent 365-Day Plant-Wide Rolling NO xTonnage Limitation violation that includes any dayin a previouslyassessed 365-Day Plant-Wide Rolling NO xTonnage Limitation violation, plus offset NO x emissions in an amount that is at least equal to the number of tons by which the 365-Day Plant-Wide Rolling NO xTonnage Limitation was exceeded, in accordance with the requirements of Paragraph 99, below d. Failure to install, commence operation, or continue operation of a NO x , SO 2 , or PM control device on either Unit 1 or Unit 2, as required under this Consent Decree $10,000 per day per violation during the first 30 days, $27,500 per day per violation thereafter e. Failure to install or operate CEMS as required in this Consent Decree $1,000 per day per violation f. Failure to apply for any permit required by Section XVI (Permits) $1,000 per day per violation g. Failure to timely submit, modify, or implement, as approved, the reports, plans, studies, analyses, protocols, or other submittals required by this Consent Decree $750 per day per violation during the first 10 days, $1,000 per day per violation thereafter h. Failure to surrender SO 2 Allowances as required by Paragraphs 52 through 55, 57 (a) $27,500 per day plus (b) $1,000 per SO 2 Allowance not surrendered Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 35 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

36i. Failure to demonstrate the thirdparty surrender of an SO 2 Allowance in accordance with Paragraph 56 $2,500 per day per violation j. Failure to undertake and complete any of the Environmental Projects in compliance with Section VIII (Environmental Projects) of this Consent Decree $1,000 per day per violation during the first 30 days, $5,000 per day per violation thereafter k. Any other violation of this Consent Decree $1,000 per day per violation

99. NO xOffset Requirements

. a. No later than ninety (90) days following written demand by the United States for stipulated penalties pursuant to Paragraph 98.c, SRP shall submit a plan pursuant to Section XII (Review and Approval of Submittals), to obtain actual emission reductions of NO xfrom sources other than CGS in Arizona, Colorado, New Mexico, or Utah to offset excess NO xemissions as required by Paragraph 98.c. b. Such plan shall describe the manner in which SRP will obtain the required NO xemission reductions, and shall ensure that the total tons of NO xemissions that exceeded the 365-Day Plant-Wide Rolling NO xTonnage Limitation are offset, no later than three (3) years from the date the plan is approved pursuant to Section XII (Review and Approval of Submittals), by an amount of equal or greater actual NO xemission reductions from the proposed source(s). c. SRP shall implement the project(s) in the approved plan in a manner which ensures that the offsetting NOx emissions are obtained no later than three (3) years from the date the plan is approved pursuant to Section XII (Review and Approval of Submittals). In the next report submitted to EPA pursuant to Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 36 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

37 Section XI (Periodic Reporting)following three (3) years from the date the plan is approved, SRP shall provide documentation to demonstrate that it fully and timely obtained the offsetting NO x emission reductions in accordance with the approved plan. d. NO xemission reductions required by the Clean Air Act, its implementing regulations, or a state implementation plan shall not be approved as emission reductions to offset NO x emissions pursuant to Paragraph 98.c. EPA will apply Clean Air Act § 173(c), 40 C.F.R. § 51.165, and Appendix S to Part 51 for purposes of determining whether to approve the proposed plan. 100. Violations of any limit based on a 30-day rolling average constitutes thirty (30) days of violation but where such a violation (for the same pollutant and from the same Unit) recurs within periods less than thirty (30) days, SRP shall not be obligated to pay a daily stipulated penalty for any day of the recurrence for which a stipulated penalty has already been paid. 101. All stipulated penalties shall begin to accrue on the day after the performance is due or on the day a violation occurs, whichever is applicable, and shall continue to accrue until performance is satisfactorily completed or until the violation ceases, whichever is applicable. Nothing in this Consent Decree shall prevent the simultaneous accrual of separate stipulated penalties for separate violations of this Consent

Decree. 102. SRP shall pay all stipulated penalties to the United States within thirty (30) days of receipt of written demand to SRP from the United States, and shall continue to make such payments every thirty (30) days thereafter until the violation(s) Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 37 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

38 no longer continues, unless SRP elects within twenty (20) days of receipt of written demand to SRP from the United States to dispute the accrual of stipulated penalties in accordance with the provisions in Section XV (Dispute Resolution) of this Consent

Decree. 103. Stipulated penalties shall continue to accrue as provided in accordance with Paragraph 101 during any dispute, with interest on accrued stipulated penalties payable and calculated at the rate established by the Secretary of the Treasury, pursuant to 28 U.S.C. § 1961, but need not be paid until the following: a. If the dispute is resolved by agreement, or by a decision of the United States pursuant to Section XV (Dispute Resolution) of this Consent Decree that is not appealed to the Court, accrued stipulated penalties agreed or determined to be owing, together with accrued interest, shall be paid within thirty (30) days of the effective date of the agreement or of the receipt of the United States’s decision; b. If the dispute is appealed to the Court and the United States prevails in whole or in part, SRP shall, within thirty (30) days of receipt of the Court’s decision or order, pay all accrued stipulated penalties determined by the Court to be owing, together with interest accrued on such penalties determined by the Court to be owing, except as provided in Subparagraph c, below; c. If the Court’s decision is appealed by either Party, SRP shall, within fifteen (15) days of receipt of the Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 38 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

39 final appellate court decision, pay all accrued stipulated penalties determined to be owing, together with interest accrued on such stipulated penalties determined to be owing by the appellate court. Notwithstanding any other provision of this Consent Decree, the accrued stipulated penalties agreed by the United States and SRP, or determined by the United States through Dispute Resolution, to be owing may be less than the stipulated penalty amounts set forth in Paragraph 98. 104. All stipulated penalties shall be paid in the manner set forth in Section IX (Civil Penalty) of this Consent Decree. 105. Should SRP fail to pay stipulated penalties in compliance with the terms of this Consent Decree, the United States shall be entitled to collect interest on such penalties, as provided for in 28 U.S.C. § 1961. 106. The stipulated penalties provided for in this Consent Decree shall be in addition to any other rights, remedies, or sanctions available to the United States by reason of SRP’s failure to comply with any requirement of this Consent Decree or applicable law, except that for any violation of the Act for which this Consent Decree provides for payment of a stipulated penalty, SRP shall be allowed a credit for stipulated penalties paid against any statutory penalties also imposed for such violation. 107. If either of the Units exceeds an applicable emission limitation set forth in this Consent Decree due to malfunction, SRP has an Affirmative Defense to stipulated penalties under this Consent Decree, if SRP has complied with the reporting Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 39 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

40 requirements of Paragraphs 111 and 112 and has demonstrated all of the following: a. The excess emissions resulted from a sudden and unavoidable breakdown of process equipment or air pollution control equipment beyond the reasonable control of SRP; b. The air pollution control equipment, process equipment, or processes were at all times maintained and operated in a manner consistent with good practice for minimizing emissions; c. If repairs were required, the repairs were made in an expeditious fashion when the applicable emission limitations were being exceeded. Off-shift labor and overtime were utilized where practicable to ensure that the repairs were made as expeditiously as possible. If off-shift labor and overtime were not utilized, SRP satisfactorily demonstrated that the measures were impracticable; d. The amount and duration of the excess emissions(including any bypass operation) were minimized to the maximum extent practicable during periods of such emissions; e. All reasonable steps were taken to minimize the impact of the excess emissions on ambient air quality; f. The excess emissions were not part of a recurring pattern indicative of inadequate design, operation, or maintenance; g. During the period of excess emissions there were no Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 40 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

41 exceedances of the relevant National Ambient Air Quality Standards that could be attributed to the emission exceedances at CGS; h. The excess emissions did not stem from any activity or event that could have been foreseen and avoided, or planned, and could not have been avoided by better operations and maintenance practices; i. All emissions monitoring systems were kept in operation if at all practicable; and j. SRP’s actions in response to the excess emissions were documented by contemporaneous records. 108. If either of the Units exceeds an applicable emission limitation set forth in this Consent Decree due to startup or shutdown, SRP has an Affirmative Defense to stipulated penalties under this Consent Decree, if SRP has complied with the reporting requirements of Paragraphs 111 and 112 and has demonstrated all of the following: a. The excess emissions could not have been prevented through careful and prudent planning and design; b. If the excess emissions were the result of a bypass of control equipment, the bypass was unavoidable to prevent loss of life, personal injury, or severe damage to air pollution control equipment, production equipment, or other property; c. The air pollution control equipment, process equipment, or processes were at all times maintained and operated in a manner consistent with good practice for minimizing emissions; Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 41 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

42 d. The amount and duration of the excess emissions (including any bypass operation) were minimized to the maximum extent practicable during periods of such emissions; e. All reasonable steps were taken to minimize the impact of the excess emissions on ambient air quality; f. During the period of excess emissions there were no exceedances of the relevant National Ambient Air Quality Standards that could be attributed to the emission exceedances at CGS; g. All emissions monitoring systems were kept in operation if at all practicable; and h. SRP’s actions in response to the excess emissions were documented by contemporaneous records. 109. If excess emissions occur due to a malfunction during routine startup and shutdown, then those instances shall be treated as other malfunctions subject to Paragraph 107. 110. If excess emissions occur due to a malfunction during scheduled maintenance, then those instances shall be treated as other malfunctions subject to Paragraph 107. 111. For an Affirmative Defense under Paragraphs 107 or 108, SRP shall demonstrate, through submission of the data and information under the reporting provisions of this section, that all reasonable and practicable measures within SRP’s control were implemented to prevent the occurrence of the excess emissions. 112. SRP shall provide notice to the United States in writing of SRP’s intent to assert an Affirmative Defense for malfunction, startup, or shutdown under Paragraphs 107 or 108 as Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 42 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

43 soon as practicable, but in no event later than twenty-one (21) calendar days following the date of the malfunction, startup or shutdown. This notice shall be submitted to EPA pursuant to the provisions of Section XVIII (Notices). The notice shall contain: a. The identity of each stack or other emission point where the excess emissions occurred; b. The magnitude of the excess emissions expressed in the units of the applicable emission limitation and the operating data and calculations used in determining the magnitude of the excess emissions; c. The time and duration or expected duration of the excess emissions; d. The identity of the equipment from which the excess emissions emanated; e. The nature and cause of the emissions; f. The steps taken, if the excess emissions were the result of a malfunction, to remedy the malfunction and the steps taken or planned to prevent the recurrence of the malfunctions; g. The steps that were or are being taken to limit the excess emissions; and h. If the source’s permit contains procedures governing source operation during periods of startup or malfunction and the excess emissions resulted from startup or malfunction, a list of the steps taken to comply with the permit procedures. 113. A malfunction, startup, or shutdown shall not constitute a Force Majeure Event unless the malfunction, startup, Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 43 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

44 or shutdown also meets the definition of a Force Majeure Event, as provided in Section XIV (Force Majeure).

**XIV. FORCE MAJEURE** 114. For purposes of this Consent Decree, a “Force Majeure Event” shall mean an event that has been or will be caused by circumstances beyond the control of SRP, its contractors, or any entity controlled by SRP that delays compliance with any provision of this Consent Decree or otherwise causes a violation of any provision of this Consent Decree despite SRP’s best efforts to fulfill the obligation. “Best efforts to fulfill the obligation” include using the best efforts to anticipate any potential Force Majeure Event and to address the effects of any such event (a) as it is occurring and (b) after it has occurred, such that the delay or violation is minimized to the greatest extent possible. 115. Notice of Force Majeure Events . If any event occurs or has occurred that may delay compliance with or otherwise cause a violation of any obligation under this Consent Decree, as to which SRP intends to assert a claim of Force Majeure, SRP shall notify the United States in writing as soon as practicable, but in no event later than twenty-one (21) calendar days following the date SRP first knew, or by the exercise of due diligence should have known, that the event caused or may cause such delay or violation. In this notice, SRP shall reference this Paragraph of this Consent Decree and describe the anticipated length of time that the delay or violation may persist, the cause or causes of the delay or violation, all measures taken or to be taken by SRP to prevent or minimize the delay or violation, the schedule Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 44 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

45 by which SRP proposes to implement those measures, and SRP’s rationale for attributing a delay or violation to a Force Majeure Event. SRP shall adopt all reasonable measures to avoid or minimize such delays or violations. SRP shall be deemed to know of any circumstance which SRP, its contractors, or any entity controlled by SRP knew or should have known. 116. Failure to Give Notice . If SRP fails to comply with the notice requirements of this Section, the United States may void SRP’s claim for Force Majeure as to the specific event for which SRP has failed to comply with such notice requirement. 117. United States’s Response . The United States shall notify SRP in writing regarding SRP’s claim of Force Majeure within twenty (20) business days of receipt of the notice provided under Paragraph 115. If the United States agrees that a delay in performance has been or will be caused by a Force Majeure Event, the United States and SRP shall stipulate to an extension of deadline(s) for performance of the affected compliance requirement(s) by a period equal to the delay actually caused by the event. In such circumstances, an appropriate modification shall be made pursuant to Section XXII (Modification) of this Consent Decree. 118. Disagreement . If the United States does not accept SRP’s claim of Force Majeure, or if the United States and SRP cannot agree on the length of the delay actually caused by the Force Majeure Event, the matter shall be resolved in accordance with Section XV (Dispute Resolution) of this Consent Decree. 119. Burden of Proof . In any dispute regarding Force Majeure, SRP shall bear the burden of proving that any delay in Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 45 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

46 performance or any other violation of any requirement of this Consent Decree was caused by or will be caused by a Force Majeure Event. SRP shall also bear the burden of proving that SRP gave the notice required by this Section and the burden of proving the anticipated duration and extent of any delay(s) attributable to a Force Majeure Event. An extension of one compliance date based on a particular event may, but will not necessarily, result in an extension of a subsequent compliance date. 120. Events Excluded . Unanticipated or increased costs or expenses associated with the performance of SRP’s obligations under this Consent Decree shall not constitute a Force Majeure

Event. 121. Potential Force Majeure Events . The Parties agree that, depending upon the circumstances related to an event and SRP’s response to such circumstances, the kinds of events listed below are among those that could qualify as Force Majeure Events within the meaning of this Section: construction, labor, or equipment delays; malfunction of a Unit or emission control device; unanticipated coal supply or pollution control reagent delivery interruptions; acts of God; acts of war or terrorism; and orders by a government official, government agency, other regulatory authority, or a regional transmission organization, acting under and authorized by applicable law, that directs SRP to supply electricity in response to a system-wide (state-wide or regional) emergency. Depending upon the circumstances and SRP’s response to such circumstances, failure of a permitting authority to issue a necessary permit in a timely fashion may constitute a Force Majeure Event where the failure of the permitting authority Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 46 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

47 to act is beyond the control of SRP and SRP has taken all steps available to it to obtain the necessary permit, including, but not limited to: submitting a complete permit application; responding to requests for additional information by the permitting authority in a timely fashion; and accepting lawful permit terms and conditions after expeditiously exhausting any legal rights to appeal terms and conditions imposed by the permitting authority. 122. As part of the resolution of any matter submitted to this Court under Section XV (Dispute Resolution) regarding a claim of Force Majeure, the United States and SRP by agreement, or this Court by order, may in appropriate circumstances extend or modify the schedule for completion of work under this Consent Decree to account for the delay in the work that occurred as a result of any delay agreed to by the United States or approved by the Court. SRP shall be liable for stipulated penalties for its failure thereafter to complete the work in accordance with the extended or modified schedule (provided that SRP shall not be precluded from making a further claim of Force Majeure with regard to meeting any such extended or modified schedule).

**XV. DISPUTE RESOLUTION** 123. The dispute resolution procedure provided by this Section shall be available to resolve all disputes arising under this Consent Decree, provided that the Party invoking such procedure has first made a good faith attempt to resolve the matter with the other Party. 124. The dispute resolution procedure required herein shall be invoked by one Party giving written notice to the other Party Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 47 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

48 advising of a dispute pursuant to this Section. The notice shall describe the nature of the dispute and shall state the noticing Party’s position with regard to such dispute. The Party receiving such a notice shall acknowledge receipt of the notice, and the Parties in dispute shall expeditiously schedule a meeting to discuss the dispute informally not later than fourteen (14) days following receipt of such notice. 125. Disputes submitted to dispute resolution under this Section shall, in the first instance, be the subject of informal negotiations between the Parties. Such period of informal negotiations shall not extend beyond thirty (30) calendar days from the date of the first meeting between the Parties’ representatives unless they agree in writing to shorten or extend this period. 126. If the Parties are unable to reach agreement during the informal negotiation period, the United States shall provide SRP with a written summary of its position regarding the dispute. The written position provided by the United States shall be considered binding unless, within forty-five (45) calendar days thereafter, SRP seeks judicial resolution of the dispute by filing a petition with this Court. If SRP seeks judicial resolution, the United States’s written summary shall be deemed its initial filing with this Court regarding the dispute. TheUnited States may submit a response to the petition within fortyfive (45) calendar days of filing. 127. The time periods set out in this Section may be shortened or lengthened upon motion to the Court of one of the Parties to the dispute, explaining the Party’s basis for seeking Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 48 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

49 such a scheduling modification. 128. This Court shall not draw any inferences nor establish any presumptions adverse to either Party as a result of invocation of this Section or the Parties’ inability to reach agreement. 129. As part of the resolution of any dispute under this Section, in appropriate circumstances the Parties may agree, or this Court may order, an extension or modification of the schedule for the completion of the activities required under this Consent Decree to account for the delay that occurred as a result of dispute resolution. SRP shall be liable for stipulated penalties for its failure thereafter to complete the work in accordance with the extended or modified schedule, provided that SRP shall not be precluded from asserting that a Force Majeure Event has caused or may cause a delay in complying with the extended or modified schedule. 130. The Court shall decide all disputes pursuant to applicable principles of law for resolving such disputes. In their filings with the Court under Paragraph 126, the Parties shall state their respective positions as to the applicable standard of law for resolving the particular dispute.

**XVI. PERMITS** 131. Unless expressly stated otherwise in this Consent Decree, in any instance where otherwise applicable law or this Consent Decree requires SRP to secure a permit to authorize construction or operation of any device, including all preconstruction, construction, and operating permits required under State law, SRP shall make such application in a timely Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 49 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

50 manner. The United States will use its best efforts to expeditiously fulfill its role in reviewing all permit applications submitted by SRP in order to meet the requirements of this Consent Decree. 132. When permits are required, SRP shall complete and submit applications for such permits to Arizona DEQ to allow sufficient time for all legally required processing and review of the permit request, including requests for additional information by Arizona DEQ. Any failure by SRP to submit a timely permit application for Unit 1 and/or Unit 2 shall bar any use by SRP of Section XIV (Force Majeure) of this Consent Decree, where a Force Majeure claim is based on permitting delays. 133. Notwithstanding the reference to SRP’s Title V permit for CGS in this Consent Decree, the enforcement of that permit shall be in accordance with its own terms and the Act. SRP’s Title V permit for CGS shall not be enforceable under this Consent Decree, although any term or limit established by or under this Consent Decree shall be enforceable under this Consent Decree regardless of whether such term has or will become part of a Title V permit, subject to the terms of Section XXVI (Conditional Termination of Enforcement Under Consent Decree) of this Consent Decree. 134. Within one hundred eighty (180) days after entry of this Consent Decree, SRP shall amend any applicable Title V permit application, or apply for amendments of its Title Vpermit, to include a schedule for all unit-specific and plantspecific performance, operational, maintenance, and control technology requirements established by this Consent Decree Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 50 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

51 including, but not limited to, Emission Rates, Removal Efficiencies, the 365-day Plant-Wide Rolling NO xTonnage Limitation, and the requirements pertaining to the surrender of

SO 2 Allowances. 135. Within one (1) year from the commencement of operation of the final pollution control device to be installed on a Unit under this Consent Decree, SRP shall either apply to permanently include the requirements and limitations enumerated in this Consent Decree into a federally enforceable permit or request a site-specific amendment to the Arizona SIP to include the requirements and limitations enumerated in this Consent Decree. The permit or Arizona SIP amendment shall require compliance with the following: (a) any applicable Emission Rate or Removal Efficiency, (b) the 365-day Plant-Wide Rolling NO xTonnage Limitation, and (c) the SO 2 Allowance surrender requirements set forth in this Consent Decree. For purposes of this Consent Decree, the federally enforceable permit must be issued by Arizona DEQ under its authority to issue permits pursuant to the Arizona SIP and not solely under Arizona's authority to issue permits pursuant to its Title V permit program. 136. SRP shall provide the United States with a copy of each application for a federally enforceable permit or Arizona SIP amendment, as well as a copy of any permit proposed as a result of such application, to allow for timely participation in any public comment opportunity. 137. If SRP sells or transfers to an entity unrelated to SRP (“Third Party Purchaser”) part or all of its Ownership Interest covered under this Consent Decree, SRP shall comply with Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 51 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

52 the requirements of Paragraphs 145 through 148 of this Consent Decree with regard to that Ownership Interest prior to any such sale or transfer unless, following any such sale or transfer, SRP remains the holder of the permit for such facility.

**XVII. INFORMATION COLLECTION AND RETENTION** 138. Any authorized representative of the United States, including its attorneys, contractors, and consultants, upon presentation of credentials, shall have a right of entry upon the premises of CGS Unit 1 and Unit 2 at any reasonable time for the purpose of: a. monitoring the progress of activities required under this Consent Decree; b. verifying any data or information submitted to the United States in accordance with the terms of this

Consent Decree; c. obtaining samples and, upon request, splits of any samples taken by SRP or its representatives, contractors, or consultants; and d. assessing SRP’s compliance with this Consent Decree. 139. SRP shall retain, and instruct its contractors and agents to preserve, all non-identical copies of all records and documents (including records and documents in electronic form) now in its or its contractors’ or agents’ possession or control, and that directly relate to SRP’s performance of its obligations under this Consent Decree for the following periods: (a) until December 31, 2020 for records concerning physical or operational changes undertaken in accordance with Section IV (NO xEmission Reductions and Controls) and Section V (SO 2 Emission Reductions Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 52 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

53 and Controls); and (b) until December 31, 2017 for all other records. This record retention requirement shall apply regardless of any corporate document retention policy to the contrary. 140. All information and documents submitted by SRP pursuant to this Consent Decree shall be subject to any requests under applicable law providing public disclosure of documents unless (a) the information and documents are subject to legal privileges or protection or (b) SRP claims and substantiates in accordance with 40 C.F.R. Part 2 that the information and documents contain confidential business information. 141. Nothing in this Consent Decree shall limit the authority of the EPA to conduct tests and inspections at SRP’s facilities under Section 114 of the Act, 42 U.S.C. § 7414, or any other applicable federal laws, regulations, or permits.

**XVIII. NOTICES** 142. Unless otherwise provided herein, whenever notifications, submissions, or communications are required by this Consent Decree, they shall be made in writing and addressed as follows: As to the United States of America: Chief, Environmental Enforcement Section Environment and Natural Resources Division U.S. Department of Justice P.O. Box 7611, Ben Franklin Station Washington, DC 20044-7611 DJ# 90-5-2-1-09174 and Director, Air Enforcement Division Office of Enforcement and Compliance Assurance U.S. Environmental Protection Agency Ariel Rios Building [2242A] Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 53 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

54 1200 Pennsylvania Avenue, N.W. Washington, DC 20460 and Director, Air Division U.S. EPA Region 9 75 Hawthorne Street [Air-1] San Francisco, CA 94105

As to SRP : Manager, Environmental Services Salt River Project Environmental, PAB352 1521 N. Project Dr. Tempe, AZ 85281 and Corporate Counsel Salt River Project Legal Services Department, PAB207 1521 N. Project Dr. Tempe, AZ 85281 143. All notifications, communications, or submissions made pursuant to this Section shall be sent either by: (a) overnight mail or overnight delivery service with signature required for delivery, or (b) certified or registered mail, return receipt requested. All notifications, communications, and transmissions (a) sent by overnight, certified, or registered mail shall be deemed submitted on the date they are postmarked, or (b) sent by overnight delivery service shall be deemed submitted on the date they are delivered to the delivery service. 144. Either Party may change either the notice recipient or the address for providing notices to it by serving the other Party with a notice setting forth such new notice recipient or address. Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 54 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

55 **XIX. SALES OR TRANSFERS OF OWNERSHIP INTERESTS** 145. If SRP proposes to sell or transfer an Ownership Interest to another entity (a “Third Party Purchaser”), SRP shall advise the Third Party Purchaser in writing of the existence of this Consent Decree prior to such sale or transfer, and shall send a copy of such written notification to the United States pursuant to Section XVIII (Notices) of this Consent Decree at least sixty (60) days before such proposed sale or transfer. 146. No sale or transfer of an Ownership Interest shall take place before the Third Party Purchaser and the United States have executed, and the Court has approved, a modification pursuant to Section XXII (Modification) of this Consent Decree making the Third Party Purchaser a party to this Consent Decree and jointly and severally liable with SRP for all the requirements of this Consent Decree that may be applicable to the transferred or purchased Ownership Interests. 147. This Consent Decree shall not be construed to impede the transfer of any Ownership Interests between SRP and any Third Party Purchaser so long as the requirements of this Consent Decree are met. This Consent Decree shall not be construed to prohibit a contractual allocation – as between SRP and any Third Party Purchaser of Ownership Interests – of the burdens of compliance with this Consent Decree, provided that both SRP and such Third Party Purchaser shall remain jointly and severally liable to the United States for the obligations of this Consent Decree applicable to the transferred or purchased Ownership

Interests. 148. If the United States agrees, the United States, SRP, Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 55 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

56 and the Third Party Purchaser that has become a party to this Consent Decree pursuant to Paragraph 146, may execute a modification that relieves SRP of its liability under this Consent Decree for, and makes the Third Party Purchaser liable for, all obligations and liabilities applicable to the purchased or transferred Ownership Interests. Notwithstanding the foregoing, however, SRP may not assign, and may not be released from, any obligation under this Consent Decree that is not specific to the purchased or transferred Ownership Interests, including the obligations set forth in Sections VIII (Environmental Projects) and IX (Civil Penalty). SRP may propose and the United States may agree to restrict the scope of the joint and several liability of any purchaser or transferee for any obligations of this Consent Decree that are not specific to the transferred or purchased Ownership Interests, to the extent such obligations may be adequately separated in an enforceable

manner. **XX. EFFECTIVE DATE** 149. The effective date of this Consent Decree shall be the date upon which this Consent Decree is entered by the Court.

**XXI. RETENTION OF JURISDICTION** 150. The Court shall retain jurisdiction of this case after entry of this Consent Decree to enforce compliance with the terms and conditions of this Consent Decree and to take any action necessary or appropriate for its interpretation, construction, execution, modification, or adjudication of disputes. During the term of this Consent Decree, either Party to this Consent Decree may apply to the Court for any relief necessary to construe or Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 56 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

57 effectuate this Consent Decree.

**XXII. MODIFICATION** 151. The terms of this Consent Decree may be modified only by a subsequent written agreement signed by the United States and SRP. Where the modification constitutes a material change to any term of this Consent Decree, it shall be effective only upon approval by the Court. **XXIII. GENERAL PROVISIONS** 152. This Consent Decree is not a permit. Compliance with the terms of this Consent Decree does not guarantee compliance with all applicable federal, state, or local laws or regulations. The emission rates and removal efficiencies set forth herein do not relieve SRP from any obligation to comply with other state and federal requirements under the Clean Air Act, including SRP’s obligation to satisfy any State modeling requirements set forth in the Arizona SIP. 153. This Consent Decree does not apply to any claim(s) of alleged criminal liability. 154. In any subsequent administrative or judicial action initiated by the United States for injunctive relief or civil penalties relating to CGS as covered by this Consent Decree, SRP shall not assert any defense or claim based upon principles of waiver, res judicata, collateral estoppel, issue preclusion, claim preclusion, or claim splitting, or any other defense based upon the contention that the claims raised by the United States in the subsequent proceeding were brought, or should have been brought, in the instant case; provided, however, that nothing in this Paragraph is intended to affect the validity of Section X Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 57 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

58 (Resolution of Past Civil Claims). 155. Except as specifically provided by this Consent Decree, nothing in this Consent Decree shall relieve SRP of its obligation to comply with all applicable federal, state, and local laws and regulations. Subject to the provisions in Section X (Resolution of Past Civil Claims), nothing contained in this Consent Decree shall be construed to prevent or limit the rights of the United States to obtain penalties or injunctive relief under the Act or other federal, state, or local statutes, regulations, or permits. 156. Each limit and/or other requirement established by or under this Consent Decree is a separate, independent requirement. 157. Performance standards, emissions limits, and other quantitative standards set by or under this Consent Decree must be met to the number of significant digits in which the standard or limit is expressed. For example, an Emission Rate of 0.100 is not met if the actual Emission Rate is 0.101. SRP shall round the fourth significant digit to the nearest third significant digit, or the third significant digit to the nearest second significant digit, depending upon whether the limit is expressed to three or two significant digits. For example, if an actual Emission Rate is 0.1004, that shall be reported as 0.100, and shall be in compliance with an Emission Rate of 0.100, and if an actual Emission Rate is 0.1005, that shall be reported as 0.101, and shall not be in compliance with an Emission Rate of 0.100. Removal Efficiency for SO 2 is expressed to 3 significant figures - 95.0%. The 95.0% Removal Efficiency requirement is met if, for example, the calculated Removal Efficiency is 94.95%. However, Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 58 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

59 95.0% Removal Efficiency requirement is not met if, for example, the calculated Removal Efficiency is 94.94%. SRP shall report data to the number of significant digits in which the standard or limit is expressed. 158. This Consent Decree does not limit, enlarge, or affect the rights of either Party to this Consent Decree as against any third parties. 159. This Consent Decree constitutes the final, complete and exclusive agreement and understanding between the Parties with respect to the settlement embodied in this Consent Decree, and supercedes all prior agreements and understandings between the Parties related to the subject matter herein. No document, representation, inducement, agreement, understanding, or promise constitutes any part of this Consent Decree or the settlement it represents, nor shall they be used in construing the terms of this Consent Decree. 160. Each Party to this action shall bear its own costs and attorneys' fees. **XXIV. SIGNATORIES AND SERVICE** 161. Each undersigned representative of the Parties certifies that he or she is fully authorized to enter into the terms and conditions of this Consent Decree and to execute and legally bind to this document the Party he or she represents. 162. This Consent Decree may be signed in counterparts, and such counterpart signature pages shall be given full force and effect. 163. Each Party hereby agrees to accept service of process by mail with respect to all matters arising under or relating to Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 59 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

60 this Consent Decree and to waive the formal service requirements set forth in Rule 4 of the Federal Rules of Civil Procedure and any applicable Local Rules of this Court including, but not limited to, service of a summons.

**XXV. PUBLIC COMMENT** 164. Both Parties agree and acknowledge that final approval by the United States and entry of this Consent Decree is subject to the procedures of 28 C.F.R. § 50.7, which provides for notice of the lodging of this Consent Decree in the Federal Register, an opportunity for public comment, and the right of the United States to withdraw or withhold consent if the comments disclose facts or considerations which indicate that this Consent Decree is inappropriate, improper, or inadequate. SRP shall not oppose entry of this Consent Decree by this Court or challenge any provision of this Consent Decree unless the United States has notified SRP, in writing, that the United States no longer supports entry of this Consent Decree.

**XXVI. CONDITIONAL TERMINATION OF ENFORCEMENT UNDER CONSENT DECREE** 165. Termination as to completed tasks. As soon as SRP completes a construction project or any other requirement of this Consent Decree that is not ongoing or recurring, SRP may, by motion to this Court, seek termination of the provision or provisions of this Consent Decree that imposed the requirement. 166. Conditional termination of enforcement through this

Consent Decree. Subject to the provisions of Paragraph 167, after SRP: a. has successfully completed construction, and has maintained operation, of all pollution controls as Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 60 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

61 required by this Consent Decree for a period of two years; and b. has obtained all the final permits required by Section XVI (Permits) of this Consent Decree covering both Unit 1 and Unit 2 that include as federally enforceable permit terms, all of the Unit performance and other requirements specified in this Consent Decree; then SRP may so certify these facts to the United States and this Court. If the United States does not object in writing with specific reasons within forty-five (45) days of receipt of SRP’s certification, then, for any violations of this Consent Decree that occur after the filing of notice, the United States shall pursue enforcement of the requirements contained in the Title V permit through the applicable Title V permit and/or other enforcement authorities and not through this Consent Decree. 167. Resort to enforcement under this Consent Decree. Notwithstanding Paragraph 166, if enforcement of a provision in this Consent Decree cannot be pursued by the United States under the applicable Title V permit, or if a requirement of this Consent Decree was intended to be part of a Title V Permit and did not become or remain part of such permit, then such requirement may be enforced under the terms of this Consent Decree at any time.

**XXVII. FINAL JUDGMENT** 168. Upon approval and entry of this Consent Decree by the Court, this Consent Decree shall constitute a final judgment between the United States and SRP. Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 61 of 621 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

62 Accordingly, IT IS HEREBY ORDERED entering this Consent Decree, a fully executed version of which has been lodged by the parties at Doc. #2. 

### DATED this 19 th

### day of December, 2008. Case 2:08-cv-01479-JAT Document 18 Filed 12/22/08 Page 62 of 62