### PREVENTION OF SIGNIFICANT DETERIORATION PERMIT ISSUED PURSUANT TO THE REQUIREMENTS AT 40 CFR § 

### 52.21 

## u.s. ENVIRONMENTAL PROTECTION AGENCY, REGION 9 PSD PERMIT NUMBER: 

### AZ 08-01 PERMITTEE: 

### Salt River Project Agricultural and Power District Mail Station PAB352 P.O. Box 52025 Phoenix, AZ 85072 FACILITY NAME: 

### Navajo Generating Station FACILITY LOCATION: 

### On the Navajo Nation Indian Reservation, approximately five miles east ofPage offU.S. Highway 98, in Coconino County, Arizona.

Pursuantto the provisions ofthe Clean Air Act (CAA), Subchapter I, Part C (42 U.S.C. Section 7470, et. seq.), 

### and the Code ofFederal Regulations (CFR) Title 40, Section 52.21, the United States Environmental Protection Agency Region 9 (EPA) is issuing aPrevention of Significant Deterioration 

### (PSD) air quality permit to the Salt River Project Agricultural and Power District (SRP). The PSD Permit applies to the installation of

### Low-Nt), Burners (LNBs) and Separated Over-fire Air (SOFA) systems on three existing coal-fired steam generating units at the Navajo Generating Station (NGS). SRP is authorized to construct and operate the LNBs and SOFA systems at the NGS as described herein, in accordance with the permit application (and plans submitted with the permit application), the federal PSD regulations at 40 CFR § 52.21, and other terms and conditions set forth in this PSD Permit. Failure to comply with any condition or term set forth in this PSD Permit is subject to enforcement action pursuantto Section 113 ofthe Clean Air Act. This permit does not relieve NGS from the obligation to comply with applicable federal, state, and Navajo Nation Environmental ProtectionAgency air pollution control rules and regulations. This PSD Permit becomes effective on the date ofissuance pursuant to 40 CFR § 

### 124.l5(b)(3).

DateNAVAJO GENERATING STATION - LOW-NOxBURNERPROJECT (AZ 08-01) PREVENTION OF SIGNIFICANT DETERIORATIONPERMIT PROPOSED PERMIT CONDITIONS

PROJECT DESCRIPTION The Navajo Generating Station (NGS) has a combinedpower generating capacity of2,250 net megawatts and consists ofthree existing coal-fired steam generating units (Boiler Units 1,2, and 3), associated air pollution control devices, and auxiliary equipment. The facility was constructed in 1970 and is located on the Navajo Nation Indian Reservation approximately five miles east of Page, Arizona. Units 1, 2, and 3 are operated by the Salt River ProjectAgricultural and Power District (SRP) and co-owned by the following six entities: U.S. Bureau ofReclamation, SRP, Los Angeles Department ofWater and Power, ArizonaPublic Service Company, Nevada Power, and Tucson Electric PowerCompany. The Permittee receives coal with a maximum sulfur content of 1.5% by weight from the Peabody Western Coal Company's Kayenta Mine. SRP has decided to implementvoluntary emissionreduction projects at the NGS by retrofitting all three boilers with Low-NOx Burners (LNBs) and separated over-fire air (SOFA) systems. One boiler will be retrofitted during each ofthe next three calendar years. SRP will commence operation in March 2009, provided this permit is finalized in 2008. The installation ofall three new burners will reduce total nitrogen oxide (NOx) emissions by 22,386 tons per year (tpy) although carbon monoxide (CO) emissions will increase by 36,570 tpy. Because ofthe increases in CO emissions, the facility is subject to the Prevention ofSignificant Deterioration (PSD) Program. EQUIPMENT DESCRIPTION Unit ID / Maximum Unit Description Existing Controls New Controls Stack ID Capacity Boiler 1 One (1) pulverized coal-fired 7,725 FGD system, LNB/SOFA UI/Stack boiler, using No.2 fuel oil MMBtulhr; SCBR1 (1999); system Sl	 for ignition fuel. Stack S1 is 750 Net ESPI equipped with S02, CO, and MW NOx CEMS, and a CaMS. Boiler 2 One (1) pulverized coal-fired 7,725 FGD system, LNB/SOFA U2/Stack boiler, using No.2 fuel oil MMBtulhr; SCBR2 (1998); system S2	 for ignition fuel. Stack S1 is 750 Net ESP2 equipped with S02, CO, and MW NOx CEMS, and a CaMS. Boiler 3 One (1) pulverized coal-fired 7,725 FGD system, LNB/SOFA U3/Stack boiler, using No.2 fuel oil MMBtulhr; SCBR3 (1997); system S3 for ignition fuel. Stack S1 is 750 Net ESP3 equipped with S02, CO, and MW NOx CEMS, and a CaMS.

Navajo Generating Station (AZ 08-01) Final PSD Permit November 2008 I

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### PERMIT CONDITIONS I. PERMIT EXPIRATION As provided in 40 CFR 52.21(r), this PSD Permit shall become invalid if construction: A. 

### is not commenced (as defined in 40 CFR 52.21(b)(9)) within 18 months after the approval takes effect; or B. 

### is discontinued for a period of 18 months or more; or C. is not completed within a reasonable time.

II. PERMIT NOTIFICATION REQUIREMENTS Permittee shall notify EPA Region 9 in writing or by electronic mail ofthe: A. 

### date construction is commenced, postmarked within 30 days ofsuch date. B. actual date ofinitial startup, as defined in 40 CFR 60.2, postmarked within 15 days ofsuch date. C. 

### date upon which initial performance tests will commence, in accordance with the provision ofSection IX.F, postmarked not less than 30 days prior to such date. Notificationmay be provided with the submittal ofthe performance test protocol required pursuant to Section IX.F. D. date upon which initial performance evaluation ofthe CEMS will commence in accordance with 40 CFR 60.13(c), postmarked not less than 30 days prior to such date. Notification may be provided with the submittal ofthe CEMS performance test protocol required pursuant to Condition IX.E.5.

III. FACILITY OPERATION At all times, including periods ofstartup, shutdown and malfunction, Permittee shall, to the extent practicable, maintain and operate the facility including associated air pollution control equipment in a manner consistent with good air pollution control practice for minimizing emissions. Determination ofwhether acceptable operating and maintenance procedures are being used will be based on information available to the EPA which may include, but is not limited to, monitoring results, opacity observations, review of operating maintenance procedures and inspection ofthe source.

Navajo Generating Station (AZ 08-01) Final PSD Permit November 2008 3IV. MALFUNCTION REPORTING A. Permittee shall notify EPA by facsimile or electronic mail at R9.AEO@epa.gov within two (2) working days following the discovery ofany failure ofair pollution control equipment, process equipment, or ofa process to operate in a normal manner, which results in an increase in emissions above the allowable emission limit stated in Condition IX.B ofthis permit. B. In addition, Permittee shall notify EPA in writing or electronic mail within fifteen (15) days ofany such failure described under Condition IV.A. This notification shall include a description ofthe malfunctioning equipment or abnormal operation, the date ofthe initial malfunction, the period oftime overwhich emissions were increased due to the failure, the cause ofthe failure, the estimated resultant emissions in excess ofthose allowed in Condition IX.B, and the methods utilized to mitigate emissions and restore normal operations. C. Compliance with this malfunction notification provision shall not excuse or otherwise constitute a defense to any violation ofthis permit or any law or regulation such malfunctionmay cause.

V. RIGHT OF ENTRY The EPA Regional Administrator, and/or an authorized representative, upon the presentation ofcredentials, shall be permitted: A. to enterthe premises where the source is located or where any records are required to be kept under the terms and conditions ofthis PSD Permit; and B. during normal business hours, to have access to and to copy any records required to be kept underthe terms and conditions ofthis PSD Permit; and C. to inspect any equipment, operation, or method subjectto requirements in this PSD Permit; and D. to sample materials and emissions from the source(s).

VI. TRANSFER OF OWNERSHIP In the event ofany changes in control or ownership ofthe facilities to be constructed, this PSD Permit shall be binding on all subsequent owners and operators. Permittee shall notify the succeeding owner and operator ofthe existence ofthis PSD Permit and its conditions by letter, a copy ofwhich shall be forwarded to EPA Region 9 at the address shown in SectionX.

Navajo Generating Station (AZ 08-01) Final PSD Permit November 2008 4

### VII. SEVERABILITY The provisions ofthis PSD Permit are severable, and, ifany provision ofthe PSD Permit is held invalid, the remainder ofthis PSD Permit shall not be affected.



### VIII. OTHER APPLICABLE REGULATIONS Permittee shall construct and operate this project in compliance with this PSD Permit, the application on which this Permit is based, and all other applicable federal, state, and local air quality regulations. This PSD Permit does not release the Permittee from any liability for compliance with other applicable federal, state and local environmental laws and regulations, including the Clean Air Act.



### IX. SPECIAL CONDITIONS Low-Nt), Burner (LNB) & Separated Over-fire Air (SOFA) Requirements A. Prior to commencement ofinstallation, the Permittee shall submit the following information to EPA: 1. Design specifications ofthe LNB/SOFA systemto be installed. 2. At least one month prior to the date ofinitial start-up, an LNB/SOFA system operating plan which sets forth measures that will be taken to maintain and operate the system in a mannerto ensure compliance with the emission limits specified in Condition IX.B. B. Emission Limits 1. Carbon monoxide (CO) emissions from each unit shall not exceed 0.42 lb/MMBtu based on a 30-day rolling average. 2. Nitrogen oxide emissions (NOx) from each unit shall not exceed 0.24 lb/MMBtu based on a 3D-day rolling average. C. Demonstration Period Requirements 1. Demonstration Period is defined as the first 18 months ofoperation after installation ofthe LNB/SOFA system. 2. After the Demonstration Period for each LNB/SOFA system, the Permittee shall submit to EPA a written report together with CO CEMS data showing actual CO emissions which evaluates whether a lower CO emissions limit can be consistently and reasonably achieved while maintaining NOx emission levels at or below 0.24 lb/MMbtu on a 3D-day rolling average. The

Navajo Generating Station (AZ 08-01) Final PSD Permit November 2008 5report shall provide all supporting documentation identifyingthe combustion characteristics that impact CO emissions and evaluate the potential for reducing the CO emission limit to a level that can be consistently and reasonably met. Within 30 days after the EPA concludes in writing that the report is acceptable, the Permittee shall apply for a permit modificationto decrease the CO emission limit. This report shall also evaluate the ten highest occurrences for a one-hour average and an 8-hour average for pounds per hour CO. Ifthese averages are inconsistent (higher) with the modeling submittal, either a new modeling analysis will be required to assure maintenance ofthe CO NAAQS or a short term limit will be established for the permit. D. At all times, including periods ofstartup and shutdown, the Permittee shall, to the extentpracticable, maintain and operate the LNB/SOFA system in a manner consistent with good combustion practices to minimize emissions. E. Continuous Emission Monitoring Systems 1. Within 60 days ofcompletion ofinstallation ofeach LNB/SOFA system, the Permittee shall install, and thereafter operate, maintain, certify, and qualityassure a continuous emission monitoring system (CEMS) for each boiler which measures stack gas CO concentrations in Ib/MMbtu. 2. The CO CEMS shall meet the applicable requirements of40 CFR Part 60 Appendix B, Performance Specifications 3 and 4A, and 40 CFR Part 60 Appendix F, Procedure 1. The diluent monitor (02 or CO2 ) must meet the requirements of40 CFR Part 75. 3. Permittee shall operate, maintain, and quality-assure according to the requirements of40 CFR Part 75, a CEMS for each boiler which measures stack gas NOx concentrations in Ib/MMbtu. The NOx CEMs must meet the requirements of40 CFR Part 75. 4. The CO CEMS shall complete a minimum ofone cycle ofoperations (sampling, analyzing and data recording) for each successive IS-minute period. 5. Permittee shall submit a CO CEMS performance test protocol to the EPA no later than 30 days prior to the test date to allowreview ofthe test plan and to arrange for an observer to be present at the test. The performance test shall be conducted in accordance with the submitted protocol, and any changes required by EPA. 6. Permittee shall furnish the EPA a written report ofthe results of performance tests within 60 days ofcompletion. 7. The CO CEMS shall be tested annually and quarterly in accordance with the requirements of40 CFR 60 Appendix F, Procedure 1. The NOx CEMS shall meet the quality assurance requirement found in 40 CFR Part 75.

Navajo Generating Station (Al 08-01) Final PSD Permit November 2008 6F. Performance Test A thirty day initial performance test for CO and NOx shall be conducted with the CEMS starting the day after successful completion ofthe performance testing for the CO CEMs. A report ofthe NOx and CO hourly emissions during this initial test shall be submittedto EPA within 30 days ofcompletion ofthe test. G. Recordkeeping and Reporting Requirements 1. Permittee shall maintain records ofthe hours ofoperation for U I, U2 and U3 on a monthly basis. 2. Permittee shall maintain records ofthe amount offuel used in UI, U2 and U3 on a monthly basis. 3. Permittee shall maintain all records on site ofactual operating data and emissions calculations for emissions limits required in Condition IX.B. 4. Permittee shall maintain CEMS records that contain the following: the occurrence and duration ofany startup, shutdown or malfunction, performance testing, evaluations, calibrations, checks, adjustments, maintenance, duration ofany periods during which a continuous monitoring system or monitoring device is inoperative, and emission measurements. 5. Permittee shall maintain records and submit a written report of all excess emissions to EPA semi-annually. The report is due on the 

## so" day following the end ofthe calendar quarter and shall include the following:

a. Time intervals, data and magnitude ofthe excess emissions, the nature and cause (ifknown), corrective actions taken and preventive measures adopted; b. Applicable time and date ofeach period during which the CEMS was inoperative (monitor down time), except for zero and span checks, and the nature ofsystem repairs or adjustments; and

c. A negative declaration when no excess emissions occurred or when the CEMS has not been inoperative, repaired, or adjusted. 6. Excess emissions shall be defined as any operating day in which the 30-day rolling average CO and NOx concentration, as measured by the CEMS, exceeds the maximum emission limits set forth in Condition IX.B. 7. A period ofmonitor down time shall be any unit operating hour in which sufficient data are not obtained to validate the hour for CO, NOx, or O2.

Navajo Generating Station (AZ 08-0 I) Final PSD Permit November 2008 78. Excess emissions indicated by the CEMS shall be considered violations of the applicable emission limit for the purpose ofthis permit. 9. All records required by this PSD Permit shall be retained for five years following the date ofsuch measurements, maintenance, and reports.

X. AGENCY NOTIFICATIONS All correspondence as required by this permit must be forwarded to: 1) Director, Air Division (Attn: AIR-3)EPA Region 975 Hawthorne StreetSanFrancisco, CA 94105-3901e-mail: R9AirPermits@epa.govfacsimile: (415) 947-35792) Environmental DepartmentDirectorNavajo Nation EPAP.O. Box 9000Window Rock, AZ 86515Navajo Generating Station (AZ 08-01) Final PSD Permit November 2008 8