Testimony of Ted Schooley Page 1 of 9 STATE OF NEW MEXICO BEFORE THE ENVIRONMENTAL IMPROVEMENT BOARD

IN THE MATTER OF PROPOSED REVISIONS TO THE STATE IMPLEMENTATION PLAN FOR THE SAN JUAN GENERATING STATION BEST AVAILABLE RETROFIT TECHNOLOGY DETERMINATION No. EIB 13

- 02(R)

_____________________________________________________________________________
NMED EXHIBIT 1 0

– Written Testimony of Ted Schooley

______________________________________________________________________________

Statement of Witness Qualifications
Ted Schooley has served as the Permitting Programs Manager of the Air Quality Bureau of the New Mexico Environment Department (“NMED”) since May , 2013. He began with the Bureau in May of 2001 as the Minor Source Manager , and later served as the Technical Services Manager of the Permitting Section in the Bureau

. Mr. Schooley holds a Bachelor of Science degree in Mechanical Engineering from L ouisiana State U niversity , New O rleans , as well as a Bachelor of Science in Math and Physics from the University of Texas at El Paso. He is a registered Professional Engineer in mechanical engineering in the State of Louisiana. His resume is attached as Exhibit 1 0 a.
Testimony
My name is Ted Schooley and I am the Permitting Programs Manager for the Air Quality 1

Bureau within NMED . The purpose of my testimony is to describe the stakeholder process that 2
informed the February 15, 2013 tentative agreement (the “Term Sheet”) between the NMED
, 3
Public Service Company of New Mexico (“ PNM ”) , and the U.S. Environmental Protection 4
Agency (“ EPA ”) to address regional haze and visibility transport requirements for the San Juan 5
Generating Station (“SJGS”); to explain the purpose and mechanism of the Testing Program 6
provided in p aragraph 1.d of this Term Sheet, and to affirm the Department’s support for the 7

“State Alternative” co ntained in the Term Sheet as the State’s BART determination for the 8

SJGS. 9Testimony of Ted Schooley Page 2 of 9 Background 1
On June 2, 2011, this Board adopt ed a regional haze state implementation plan (“SIP”) 2
that included New Mexico’s determination of Best Available Retrofit Technology (“BART”) for 3
the PNM San Juan Generating Station (“SJGS). This plan required the installation of Selective 4

Non

- Catalytic Re duction (“SNCR”) controls, with a NOx emission limit of 0.23 lbs/MMBtu and 5
an estimated total capital invest of approximately $76 million. On June 24, 2011, Governor 6
Martinez submitted the SIP to the Environmental Protection Agency (“EPA”) for approval (E PA 7
received the SIP on July 5, 2011). 8
On August 22, 2011, without taking action to approve or disapprove New Mexico’s SIP, 9
the EPA promulgated a federal implementation plan (“FIP”) imposing a different BART limit on 10
the San Juan Generating Station. This federal plan required the installation of Selective Catalytic 11

Reduction (“SCR”) controls with a NOx emission limit of 0.05 lbs/MMBtu, at a total cost that 12

EPA estimated to be $345 million, but which PNM estimated to be between $740 million and 13

$860 million

. 14
On October 21, 2011, New Mexico petitioned for judicial review of EPA’s FIP in the 15
United States Court of Appeals for the Tenth Circuit, as provided for by the Clean Air Act. 16
Among other issues, New Mexico challenged EPA’s decision to issue this FIP witho ut first 17
determining whether New Mexico’s SIP fully satisfied the Act, because only if the SIP were 18
found to be deficient would EPA have the statutory authority to issue a FIP. New Mexico argued 19
that EPA’s duty to consider the SIP was especially clear in the context of BART determinations, 20
because Congress expressly delegated decisions on BART to the States. The state also filed a 21
motion asking the court to stay the FIP pending the outcome of the litigation. On March 1, 2012, 22

the court denied that motion , without issuing an opinion. 23Testimony of Ted Schooley Page 3 of 9 In response to these events, o n April 26, 2012
, New Mexico Governor Susana Martinez 1
wrote EPA Administrator Lisa Jackson a letter requesting a 90

- day stay of the federal rule “in 2

order to create a structure in which discussion s of potential solutions to the regional haze dispute 3
can occur.” Governor Martinez further explained: 4
“I initiated [a lawsuit] against the EPA because I could not stand idly by as EPA 5 infringed on New Mexico’s rights and moved to impose a significant eco nomic burden 6 on our citizens. However, I believe we owe it to taxpayers to see if we can avoid further 7 litigation by resolving this dispute outside of the courtroom. Therefore, I am urging 8 EPA, Public Service Company of New Mexico (PNM) and other intere sted stakeholders 9 to evaluate whether there are any viable alternatives to the BART FIP that will be in both 10 the environmental and economic best interests of New Mexico.” 11 12
In response to Governor Martinez’s request, on July 2, 2012, Administrator Jackson 13

s igned an order staying the effectiveness of the FIP for 90 days from the date of publication in 14
Federal Register. The order was published in the Federal Register on July 16, 2012, (77 Fed. 15
Reg. 41,697) and a 45 day extension of administrative stay was sub sequently published on 16
October 24, 2012 (77 Fed. Reg. 64,908). Although by their express terms these actions stayed 17
only the effective date of the FIP and did not alter the ultimate compliance deadline of 18
September 21, 2016 for installation of SCR, EPA in dicated in the order it would take future 19
action to extend that deadline or account for an alternative proposal. 20

Stakeholder Process 21
In order to accomplish the evaluation of other alternatives called for by Governor 22

Martinez, the Department conducted a s takeholder outreach process. The process was organized 23
and facilitated by then

- General Counsel Ryan Flynn. I participated in it along with Liz Bisbey

24

Kuehn, also of the Air Quality Bureau, to provide technical support. The process began in July, 25

2012, w hen the Department published its Proposed Stakeholder Outreach Plan to establish a 26
broad, consensual goal with stakeholders, EPA, and PNM , and to determine if an alternative plan 27Testimony of Ted Schooley Page 4 of 9 was feasible. This plan included a series of public meetings and the conveni ng of a Technical 1
Work Group of stakeholder representatives and experts. 2
In accordance with the plan, the Department then held a series of public meetings 3
in July and August , 2012, in venues accessible to the local stakeholders. The principal 4

stakeholde rs identified included local communities, consumers, the Navajo Nation, 5
environmental and public health groups, industry, PNM, and federal, state, and local leaders. 6
These public meetings were held in: 7

1. Farmington, July 24, to address local community c oncerns; 8 2. The Navajo Nation, August 9, to address the tribe’s concerns; 9 3. Albuquerque, August 13, to address consumer and ratepayer concerns; and 10 4. Farmington, August 20, to address environmental and public health concerns. 11 12

In addition to these public meetings, the Department organized a Technical Work Group 13
comprising stakeholder representatives and experts. The Department held a series of Technical 14
Work Group meetings, facilitated by an independent professional facilitator. The meetings 15

prov ided technical input to assist the Department with evaluating whether a viable alternative 16
existed and, if so, to make recommendations concerning its nature. 17
The Technical Work Group included representatives from the Navajo Nation, New 18
Mexico Public Regul ation Commission, WildEarth Guardians, New Mexico Industrial Energy 19

Consumers, the Sierra Club, Four

- Corners Economic Development, Inc., the City of Farmington, 20

Western Environmental Law Center, Western Resource Advocates, the U.S. Forest Service
, 21

PNM , the Department , New Energy Economy, and Amigos Bravos. 22
The Technical Work Group did not reach a consensus around any specific plan, and not 23
all of the groups mentioned above support the State Alternative. However, despite the diversity 24

of stakeholder interes ts, there was general agreement on the additional factors that should be 25Testimony of Ted Schooley Page 5 of 9 considered in developing a regional haze strategy for the SJGS

– including the impact on jobs 1
and the capital cost of any proposal. There was also broad agreement that the shutdown o f units 2
was an appropriate element of an alternative plan. 3
After considering the input of the various stakeholders, on October 2, 2012, the 4
Department announced that it had formulated a proposed alternative. This plan featured the 5

shutdown of SJGS Units 1 and 2 and the installation of SNCR emission controls on Units 3 and 6
4. The Department found that the alternative would result in similar emission reductions 7
required by EPA’s Federal Implementation Plan at a fraction of the costs, and deliver additional 8
environmental benefits. Chief among these is that it would reduce not only NOx but SO 2 , 9
mercury, particulates, and carbon; reduce water usage and coal ash production; and allow for 10
greater fuel diversity by avoiding unnecessary over

- commitment to coal fir ed power. 11

Post

- Stakeholder Process 12
Because EPA and the Department could not agree on a mechanism to provide relief from 13
the September 21, 2016 compliance deadline, briefing of the Tenth Circuit challenges to the FIP 14
continued while the stakeholder process proceeded during the summer of 2012, with oral 15
arguments scheduled for October 23, 2012. As that date approached, the Department’s efforts 16
shifted from obtaining additional stakeholder input on alternatives, to intensive negotiations with 17

EPA and PNM to t ry to reach an agreement based on the proposed “State Alternative.” These 18
efforts then continued on past the date of oral arguments
, including a round of focused, in person 19

discussions between the EPA, the NMED, and PNM
, held f rom November 13 through Nove mber 20

16, 2012 , in which I participated. Eventually , in February of 2013 , the discussions resulted in 21
the tentative agreement memorialized with the signing of the Term Sheet

. 22Testimony of Ted Schooley Page 6 of 9 The Term Sheet agreement differs from NMED’s originally proposed State Alternat ive 1
primarily in the following ways: First, the units to be retired were changed from 1 & 2 to 2 & 3. 2
Because Unit 3 is larger than unit 1, this results in larger reductions of all pollutants (by 3
approximately 22%). Second, the Term Sheet adds the requi rement that the SO 2 emission limit 4
from remaining units 1 & 4 be reduced by 33%, from 0.15 to 0.10 lb/MMBtu. Third, the Term 5
Sheet also adds provisions requiring testing and fine tuning of the SNCR controls on units 1 & 4 6

to determine if a lower rate than 0.23 lbs/MMBtu can be achieved. Finally, under the Term 7
Sheet, PNM agrees to perform a best available control technology ( “ BACT ” ) determination for 8
the natural gas turbine to be installed at San Juan to partially replace the power of retired units 2 9

& 3, and to limit NOx emission from that turbine to no more than 75 tons per year. 10

Selective Non

- Catalytic Reduction (“SNCR”) Testing Program 11

P aragraph 1.d. of the Term Sheet provides a post

- SNCR installation Testing Program. 12
This Testing Program consists of three parts: (1) SNCR Performance Testing ( 2) Fuel 13

Performance Testing, and ( 3 ) Long

- Term Performance Evaluation , as described below

. 14

SNCR Performance Testing 15
The ammonia/urea reagents are injected into the flue gas stream to react with NOx, thus 16

reduci ng NOx emissions. Invariably, this reaction is not 100% efficient, resulting in some 17
fraction of these reagents being emitted to the atmosphere. The amount being emitted is referred 18
to as the “slip

. ” While it reduces NOx emissions, ammonia in the flue g as stream has multiple 19
negative impacts including odors, health concerns, potential visibility impacts, and equipment 20
fouling. 21Testimony of Ted Schooley Page 7 of 9 The Term Sheet limits the acceptable ammonia/urea injection rates such that they do not 1
result in a slip of less than 5 ppm bec ause it has been empirically determined that for similar 2
installations, the NOx Reduction Efficiency is dramatically reduced below this slip level. 3
The Term Sheet limits the maximum slip to 10 ppm because at higher slip values the 4

return in increased NOx reduction efficiency gained by doing so does not justify increasing the 5

aforementioned negative impacts. 6
The SNCR Performance Testing is pre

- Long

- Term Performance Evaluation testing to 7
develop a targeted ammonia/urea injection rate range over various load levels without exceeding 8

a to

- be

- agreed

- upon preliminary slip limit of between 5 and 10 ppm, with the goal of minimizing 9
NOx emissions. These ammonia/urea injection rates corresponding to various load levels will be 10
used in the Long

- Term Performance Eval uation Period phase of this testing program. The terms 11
of the SNCR Performance Testing protocol also provide responsibilities and performance dates 12
for the various parties to concur on a slip limit that PNM will comply with for SJGS Units 1 and 13

4. 14

Fuel Performance Testing 15
PNM can possibly reduce NOx emissions by pre

- treating the coal it uses for fuel. The 16
purpose of this Fuel Performance Testing protocol is to demonstrate that this pre

- treating coal 17
technology does not: 18

1) Measurably increase NOx emissi ons 19

2) Adversely impact overall unit operations 20
If this Fuel Performance Testing does not measurably increase NOx emissions or 21
adversely impact overall unit operations, this pre

- treated coal shall be used in the Long

- Term 22

Performance Evaluation Period to d etermine the NOx emission limit for SJGS Units 1 and 4. 23Testimony of Ted Schooley Page 8 of 9 The Fuel Performance Testing and pre

- treated coal will not be required if it is determined to 1
result in any detrimental effect to Units 1 and 4. PNM is also required to use pre

- treated coal on 2

Units 2 and 3 when used on Units 1 and 4. 3

Long

- Term Performance Evaluation Period 4
The purpose of the Long

- Term Performance Evaluation Period is to determine a new, 5
more appropriate, NOx emission rate if the Long

- Term Performance Evaluation Period indicates 6

the actual NOx emissions are substantially lower than the 0.23 lb/MMBtu on a daily rolling 30

- 7
day average basis emission rate established in paragraph 1.c of the Term Sheet. The targeted 8
ammonia/urea injection rates corresponding to various load levels establ ished in the SNCR 9
Performance Testing and the pre

- treated coal, if its use is appropriate, will ensure the actual NOx 10
emissions measured in the Long

- Term Performance Evaluation Period are the lowest practicably 11

achievable. These actual NOx emission rates will be compared to the 0.23 lb/MMBtu on a daily 12
rolling 30

- day average basis emission rate. The Long

- Term Performance Evaluation Period 13
paragraph of the Term Sheet provides criteria for determining whether the actual NOx emission 14
rate is substantially lo wer than 0.23 lb/MMBtu, and, if it is, a formula for determining the new, 15
lower NOx emission limit. This paragraph also requires PNM to apply for a permit modification 16
by March 31, 2017 to include both the resulting NOx emission rate, if it is lower than the 0.23 17
lb/MMBtu on a daily rolling 30

- day average basis emission rate, and the agreed upon ammonia 18
slip. 19
Department’s Position on the State Alternative 20
The Department strongly supports adoption of the State Alternative as a revised BART 21
determination for the San Juan Generating Station. As the modeling shows, this option will 22
achieve visibility improvements at each of the 16 affected Class I areas that a re within 0.5 23Testimony of Ted Schooley Page 9 of 9 deciview of the improvements achieved by EPA’s FIP, a difference that is undetectable by the 1
average person. In several cases, the State Alternative will achieve greater visibility 2
improvements than the FIP. It will do this for a total capi tal investment of approximately $34 3
million for SNCR at two units, a fraction of the hundreds of millions required by the FIP. The 4
State Alternative complies with the provisions of the Term Sheet, and will satisfy the SJGS’s 5
obligations under the visibili ty and interstate transport provisions of the Clean Air Act. 6
Equally important to the Department, the State Alternative avoids requiring PNM to 7
install costly pollution control retrofits to all four of its units, which would involve investment of 8

on the o rder of $860 million. Such an investment would not appreciably improve visibility any 9
more than would the State Alternative, but would effectively lock the SJGS into coal

- fired 10
production at all four units for decades to come. This would significantly im pede New Mexico’s 11

efforts to transition to a more diverse and less carbon

- intensive mix of energy sources. This 12

would be true even if the ultimate cost of the FIP is closer to EPA’s estimate of $345 Million. 13
Finally, as documented in the Department’s BAR T determination, the State Alternative would 14
result in a 62% reduction in nitrogen oxides, a 67% reduction in SO 2 , a 50% reduction in carbon 15
dioxide, particulate matter, mercury, and volatile organics, up to a 53% reduction in water usage, 16
and a up to a 50 % reduction in coal ash generated. The FIP, in contrast would reduce emissions 17
of only nitrogen oxides, and would not do anything to reduce water use or coal ash generation. 18

For all of these reasons, NMED respectfully requests that the Board adopt the St ate 19

Alternative as BART for the SJGS, as contained in the June 27, 2013 public comment version of 20

the proposed revisions to Chapter 10 and Appendix D of New Mexico’s regional haze state 21
implementation plan. 22