VIA EMA IL May ll ,2 015 Janet McCabe Acting Ass i st an t Administrator Office of Ai r and Radiation Env ironmental Protection Age n cy EPA Docket C enter (EP A/DC) Ma il code 2822 1T Attn: D oc ke t 10 No
. EPA-HQ-OAR

- 20 1 3

-0602 1 200 Pe nn sy lvania Ave. NW Washington, D C 20460 DANA L. BOBRO F F DEPUTY ATTORNEY GENERAL



### R e: Additional Information from the Navajo Nation Regarding U
. S
. EPA ' s Cle an Power Plan Dear M s . McCab e: Thank yo u again for meeting wit h the Navajo Nation during our governm ent
-to
gove rnm ent consultation held on A pril 28 , 2015 in Washington, D
. C. T he Nation believes the meetin g was very productive and apprec iates EPA 's reque st for additional in formation from the Nat io n re gard in g the Clean Power Plan a nd i ts effect o n the Nati on . Th is l etter contai n s additional information that s uppl em ents o ur com m ents and ot h er docu mentat i on previ ous ly su bmitted to EPA. F irst , the Navajo Nation take s this opportun ity to reiterate its gene ral suppor t fo r EPA 's actions to co mbat climate chan ge. The effects of c limate change will have sever e i mpacts o n Nat iv e A m eric an tribes and the Navajo Nation i s no except ion. The Nati on's 27 ,000 s qu are mile s are located in th e hi gh desert , whi ch i s suscept ibl e to i ssues like severe drou ght an d water sh ortages. However, the Navajo Nation al so h as a coal-b ased economy and the two power pl ants located on th e Nation , Nava j o Gen erati ng S tati o n (NOS) and Four Corner s Power P lant (FCPP), provid e an eco no mic lifeline for the Nava j o people and their government. T he avajo Na tion cannot s upport an y rul e that j eopardizes the Navajo Nation economy. T hi s letter also p rovide s addit ional information regarding the following i ss ues:

• T h e uniqu e s ituatio n of the Nava jo Nat ion • An earli er base year for the Navajo Nat io n under Building Block 1

P.O. Box 20 10 ·Wind ow Rock, N avajo N at i on (AZ) 86515 • 928 - 87 1 -6 347/6210 · Fax N o . 928 - 871 - 6177Letter to Janet McCabe May 11 , 2015 Page 2 of9

• The Parity Glide Path propo sed by the Nation that takes into consideration the l arge difference in energy use by the Navajo people versus their regional neighbors • Challenges faced by the Navajo Nation regarding renewable energy development on i ts lands Unique Situation of the Navajo Nation The Navajo Nation is sympathetic to the cha ll enges that EPA is facing with this proposed rule. Among other things, the Nation understands that differences between the states may complicate EPA's efforts to craft a coh erent approach to regulating carbon pollution em issions
. However, the situation on the Navajo Nat ion is unlike anything occurring in the s tates and merits special attention. The un employment rate in the Navajo Nation is a staggering 52 %, comp are d to 5.8% fo r the United States overall. In other words , the Navajo Nation's unemployment rate is over eight tim es that of the United States as a whole. The per capita income of $10 , 695 on the Navajo Nation i s we ll below t hat of the poorest state (Mississipp i). An estimated 32% of the Navajo people lack electricity, 38% lack running water, 31% lack complete plumbing , 28% lack kitchen facilities, and 60% lack telephone service. NGS and FCPP are vital to the Navajo Nation economy . They provide essential jobs to the Navajo people and revenue to the Navajo Nation government. The Navajo Nation's top priority is the continued, unhindered operation of both power plants. Another top concern is to ensure that economic development on the Nation, especially in the area ofRE development, is not hindered as a result of the C lean Power Plan. Job s at NGS and FCPP, a long with the associated coal mines, are generally high- skilled, high-paying jobs with benefits lik e health insurance and pensions. These types of jobs are extremely difficult to find on the Nation and are virtually irreplaceable. The scarcity of jobs s uch as the se often le ads the family "breadwinner" to take a job off th e Navajo Re servation, thus leaving his or her family for extended periods of time. Sometimes an entire family is forced to move offthe Reservation, which strains its ties to extended family , homeland , culture and traditions. The importance of these jobs to the Navajo workers is illustrated in this short cl ip from a video called "The Faces ofNGS" produced br Salt River Project: http: //www.ngspower.com/video

_ employment.aspx. These power plants and mines provide esse ntial revenue to the Navajo Nation government through royalties , taxes, lease paymen ts and other means . The Nation a lso owns the Navajo Mine which supp li es coal to FCPP. Any negative impacts on the power plants an d the mines , including unit sh utdo wns, hav e a severe and direct effect on the Navajo Nation eco nomy. The end result is a s ignificant decrea se in the government's general funds , which weakens the

1 The Nation can provide the complete "The Faces ofNGS" DVD to EPA upon reque st.Letter to Janet McCabe May 11 ,2 01 5 Page 3 of9 government's ab ilit y to provid e esse ntial s erv ic es to its p eople
. It al so weaken s th e Nati on's s overe ignty and forces the tribe to rely on th e fe deral government for ad d iti ona l fundin g. The L. William Seidman Research In s titute at Arizo na State Un ive r s ity analy zed th e impac t s ofFCPP a nd Navajo Mine o n the economie s of th e N a vajo Nation, San Juan County and the State of New Mex ico. T h e economic imp act ana lys i s concerning the Navajo Nation is included in thi s let t er as "Exhibit A" and the economic impact analysi s concerning San Ju an County a nd th e S tate ofNew M ex ico is include d as "Exh ibit B. " Among th e var io u s findin gs concerning the imp ac t s ofFCPP and Nava jo M in e on the Nav ajo Nation were th e following:

• 80% of the employees from FC PP and th e Nava jo Mine ori g in a t e from the Nava jo Nation. • T he average annual wage of a FC PP worke r was over four time s hi g her than th e 2007 medi a n house hold in come for the Nava j o Nation. • A Nava j o M in e worker 's average annual wage was three and a h a lftime s higher th an the 2007 median hou s ehold income for the Nava jo Nation. • In 2011, FCP P (5 unit s operating) a nd Navajo M in e combined were estimated to ge nera t e 2 ,4 83 job s for th e Nava j o Nat ion, $ 1 86. 1 milli o n in labor in co m e, and $ 424. 8 milli on G r o ss Nava jo N ation Product (GNNP) (both in 20 11 $ ). • Th e a nnual ec onomi c impact ofFCPP a nd Nava j o M ine combined, b ased on o nl y units 4 a nd 5 operating at FCPP and the ch a nge in mine in owne r s h ip , i s es timate d t o gen erate 2,293 jobs fo r th e Nava j o Nation , $ 1 59 million labor income, a nd $338 million GNNP (both in 2011 $ ). o T hi s m ean s a loss of 19 0 j obs 2
, $27. 1 million l ab or inco m e, a nd $86

. 8 million in GNNP
. T h e Nat io n expect s s imil ar n egativ e economic imp acts concern in g the likely one uni t s hut-do w n at NOS
. T h ese s hutdo wns are the primary dri ver of th e Nation 's interest in participating in a re g ional carbon trad i ng pro g r am. Participati on in s uch a program wo uld a ll ow the Nation to reco ver lost r eve nue due to t h e unit sh utdo wns and would a lso ass i s t in economic development o n the Nation, includin g re ne wable energy development. 

### Rationale for using an earlier base year for the Navajo Nation As noted i n o ur ea rl ier comments t o E PA, th e Nava jo Nat i on r e iterates that 2 01 2 is an unrepresentativ e b ase ye ar for operati o n ofNGS and FC PP and s hould not fo rm th e bas i s of th e rule for the Nava jo Nation. T he Nat i o n eva luate d total ge n eration over the same period th at EPA u se d for its Bu il d ing Block I s t a ti s ti ca l anal ys i s, 2002-20 12
. Us ing a no rm a l d i stributi on, th ere is onl y a 3% pop ul ation probabi lit y (3 .6 % sample probab ili ty) th at generation w ould b e at o r b e l ow the leve ls it was in 20 1 2
. T hi s res ult demonstrates that 2 01 2 was at th e ext r eme low e nd

2 These job s a re l ost via n atural attrit i on, n ot l ayoffs.Letter to Janet McCabe Mayll,2015 Page 4 of9
of likely generation levels and was primarily driven by natural gas prices being at historic lows , which reduced demand for coal generation for the plants ' customers. Total Net Generation, Probabilit) at or below Year MWh 1 Population Sample 2002 30,746,372 19.1% 20.3% 2003 32,003,869 60.6% 60
. 1% 2004 32,721,4 11 82. 1 % 80
. 9% 2005 32,646,7 14 80.3% 79.1 % 2006 33,508,007 94.9% 94.0% 2007 32,2 1 3,646 67
. 6% 66.9% 2008 32,206 , 687 67.4% 66.7 % 2009 31,780 , 1 84 52.6% 52.5 % 2010 30,334,397 10.6% 11.7 % 20 11 31,006 , 231 26.2% 27
. 2 % 2012 29 , 629,453 3.0% 3
. 6% I. Fro m EIA fonn 923
The Nation i s very economically dependent upon the operation of the two coal power plants and, unlike states t h at have more diverse economies and more generating resources , there is no flexibility to offset the economic impact of reductions in operation of the coal plants wi th other generating resources. As discussed in past government
-to-government meetings and in our comments, the Nation is contemplating converting its carbon emission rate to a mass-based limit to comply with the C lean Power P l an. The Navajo Nation therefore believes that the base year should be at a level that accommodates operation at levels signifi cantly above the average for this period
. If the limit is based upon the average or a lower value than the average, under a scenario where capacity remained the same, it would force the future generation level to well below historical levels, which wou ld be harmful to the economy of the Navajo Nation. In fact , even factoring in the retirement ofFCPP units 1-3, in the event that all NOS units continue to operate, total generation could be imp eded when using a 2012 base year. EPA developed the four building block approach for the proposed C lean Power Plan as the Best System of Em i ssion Reduction (BSER). As noted in our comments, since t he Nation has no existing NGCC to transfer coal generation to under Building Block (BB) 2 and no ab ilit y to impact coal generation through application of the other building blocks, the four building block approach as developed by EPA should not impact the generation l e v e ls o[th e two coal powe r plants or their individual units. The Nation has recommended 2006 as the ba s e year because that year represents the generation level where historical data indicates 95 % ofthe time operation will be at that level or less

- which would provide s igni ficant assurance that future generation levels will not be imp eded.Letter to Janet McCabe May 11, 2015 Page 5 of9
Future generation for the two coal plants will likely be lower than in the 2002-2012 period due to retirement of FCPP units 1

- 3 and likely , but not certain, retirement of one of the NGS units. However, as discussed in our prior comments , these reductions in generation are sacrifices that the Nation has made, and will continue to make , to improve air quality on the Nation. The Nation should be given credit for these sacrifices which are costing the Navajo government's general fund tens of million s of dollars every year. The likely retirement of one of the NGS units will bring further economic hardship to the Navajo Nation on a similar scale as the FCPP retirements. 

### Parity Glide Path As mentioned in the Nation's prior comments, EPA did not consider per-capita energy consumption when factoring in BB4 goals. We believe EPA should have done so, because it is more difficult to reduce energy consumption when it is already very low. The Nation uses much less energy per-capita than any state, even the most efficient states, and, in particular, much less than our regional neighbors

- Arizona, Colorado, New Mexico, and Utah

- which have per-capita en ergy consumption within roughly 10% of one another. We have offered the Parity Glide Path (PGP) as a means to account for this disparity, and we welcome EPA's comments on it or on any alternative means that EPA might recommend to address the large disparity in per-capita energy us e between the Nation and its closest neighbors. 

### How to make the PGP enforceable The Nation appreciates EPA's comments in our government-to-government meeting on April28 that the PGP, if permitted, must be performed in a manner in which it will be enforceable. To this end, we believe it may be best to use historical data rather than forecasts to formulate the PGP rate adjustment. The PGP adjustment proposed by the Nation to be used in the EPA rate equation is based upon the base year EIA and U.S. Census data. Data sources

• EIA Form 861 for the base year o Total electricity retail sales for each of AZ, CO, NM, UT and for the Navajo Tribal Utility Authority (NTUA) • U.S. Census estimate for the base year o Total population for each of AZ, CO, NM, UT and for Navajo Nation for same year as most recent EIA Form 861 data Approach 1. For eachjuri sdiction, divide total electricity retail sales in th e year by respective population to determine per-capita energy use in MWh/yr 2. Average the per-capita energy use in MWhlyr for AZ, CO, NM and UTLetter to Janet McCabe May 11, 2015 Page 6 of9


### 3. Divide result by per capita energy use ofNavajo Nation, to result in per-cap ita energy use ratio 4
. Subtract 1.0 

### from per-capita energy use ratio to result in energy multiplier 5
. Multiply the resulting energy multiplier by NTUA retail energy sales in the base year ofEIA Form 861 

### data to determine the POP adjustment 6
. Determine emission rate for rate equation by subtracting POP adjustment from denominator of EPA rate equation The following is an example using 2012 

### data.
Jurisdiction Population 2012 MWh 3 Per Capita Avg. for states (2012 estimate) MWh Arizona 6,467,315 I 75,063,343 11.61 Colorado 5,116 , 302 I 53,685,297 10.49 10.95 New Mexico 2,078,674 I 23,178,568 11.15 Utah 2 , 8}4,347 I 29,723,368 10.56 Navajo Nation 178,212 2 676,014 3.79 3.79 (NTUA) I. U.S. Census Estimate 2. 2010 U
. S. Census of 173 ,667 and assumed 1.3 % annual growth. The above is provided f o r illustrative purpo ses. In practice, the Navajo Nation will deve lop a formal estimate of its population. The 1.3 % annual growth rate was based upon a 20 13 Affidavit by Dr. Gretchen Greene in State ofNew Mexico, ex rei. State E n gi n ee r v. United S tat es of America (defendant), The Jicari ll a Apache Tribe and the Navajo Nation (defendant interveners). 3. EIA Fom1 861 

### Note that previously submitted examples of the POP used 2013 

### U.S. Census population estimates and 2012 

### EIA data, which at the time were the most recent data
. The above is provided so that data is consistent for a particular year. The POP adjustment will be equal to: 676,014 X 

### [(10
. 95 /3.79)

- 1] 

### = 1,277,114 MWh 

### When applying the POP adjustment, it is also reasonable to adjust the BB4 by the factor 

### 10.95 /3.79. Application to the rate equation : For the Navajo Nation, since BB2 and BB3 do not apply, the rate goal will be: (C0 2 

### emissions from the two fossil plants for the base year) x.BB 1 factor MWh generated in the base year+ BB4 adjustment for the year- POP adjustmentLetter to J anet McCabe May11,2015 Page 7 of9
Usi ng 2012 as the bas e year and 2012 e nergy d eman d a nd census data , and u s in g the 2029 884 and 2014 BB4 adjustments as an example, the following tab le shows the res ul ts of calculations for Option 1 and for Option 2. Option 1 Option 2 2012 C02 lbs 62 , 833,745, 1 82 62 , 833 , 74 5 , 1 82 2012 MWh 29,629,453 29,629,453 BBl factor 0
. 94 0.96 C02 lbs after BBl 59,063 , 720 ,4 7 1 60 , 3 2 0 , 395,375 Normal BB4, MWh 66,525 25,554 Adjusted BB4 , MW h 192 , 203 7 3,830 PGP Ad_justment MWh 1 ,277 , 114 I ,277,1 14 No rmal Final Rate (lb/MWh) 1 , 9 89 2,034 PGP Adjusted Final Rate (lb/MWh) 2069 2122 Mass Cap- Normal (short tons) 2 9,46 5, 703 30,134 , 208 PGP Mass Cap (short tons) 30,654,297 3 1,436,883 

### Demonstrating Compliance If co mpl y ing with a m ass em iss io n s cap, the mass emissions cap (i n s hort tons) will be compared to:
• The total 

### C0 2 e mi ssions ( in s hort t ons) of the two plants reported to EPA e ac h qu arter per the Air Markets Program Data • Plus any 

### C02 allowances ( in sh ort tons ) u se d off of the Navajo Nat i on l ands to another ju risdiction in a trading system • Minus any 

### C0 2 all owanc es ( in sh ort tons) acquired from othe r jurisdictions in a trading system If complying with an e mi ss io n rate goal , t he emission rate goal will b e compared to: The ca lculated emission rate of the p lants , dete rmin ed by:
• The total C0 2 emi s s ions (in short tons) of the two plants reported to EPA per the Air Markets P rogram Data times 2000 lbs/ short ton and the result divided by the total net generat ion ( in MWh) reported to the Energy In for mation Ad mini stration in Form 923 (or e qui vale nt). Id ea ll y, it wi ll be possible for the plants to r epo rt their net generation sh ort ly to avo id the delays associated w ith pos tin g of Form 923 data on the EIA web s ite.Letter to Janet McCabe May 11, 2015 Page 8 of9 Challenges of renewable energy development on the Navajo Nation The Navajo Nation has a coal-based economy. However, as we have stated in our comments and in our government-to-government consultations with EPA, the Nation is interested in renewable energy (RE) deve lopment. The Nation is committed to a balanced energy portfo lio, as is demonstrated by the Navajo Nation Energy Policy of 2013, which is included as "Exhibit C." However, the Nation faces many hurdles when it comes to RE development on its lands. Some of those challenges include land availability for renewable projects and the lack of funding for projects. 3 As discussed in our comments and consultations with EPA, the l anguage of the proposed Clean Power Plan also presents a challenge to RE development on the Nation. RE development that occurs on tribal lands shou ld be able to count toward a state's emission reduction goal. Additionally, developing a section lll(d) plan shoul d not be a requirement to get RE development resources on tribal lands
. That requirement is nothing more than a bureaucratic burden that would hinder or delay renewable projects. The EPA's Clean Power Plan should not create restrictions on the flow of renewable energy credits (REC) and RE across state and tribal lines, but should continue to leave the methodology for coordinating the purchase and sa le of RECs to the existing market. We request that EPA include language in the final rule that allows for renewable energy development undertaken in any jurisdiction (state, tribal or territory) to count toward a state's emission reduction goal. Conclusion The Nation appreciates the opportunity to submit additional information to EPA regarding the Clean Power Plan and its effect on the Navajo Nation. To truly understand the current economic situation on the Nation and the importance of the two power plants to the Nation, we highly encourage EPA's officials to visit the Navajo Nation to observe in person the challenges being faced by the Navajo people. The Nation l ooks forward to a continued dialogue with EPA concerning the Clean Power Plan and any Federal Imp lementation Plan that EPA will promulgate in the future for the Navajo Nation. The Nation understands that this is a very difficult exercise for EPA and we know that the challenges oflnd ian country are very complex. But we are committed to working with EPA in finding a solution for the Navajo Nation that allows the two power plants to continue operating unhindered into the future, the Nation to proceed with economic development on its land with REdevelopment and a potential carbon trading program, and EPA to meet its national carbon reduction goals.

3 A recent Wall Street Journal article entitl ed " The Path From Coal to Renewabl e Energy Can Be Difficult" al s o chronicles some of the challenge s faced by the Nation in de veloping RE projects on our land. The article is avai Iable at http ://www.wsj .com / articles /the-path-from- c oal-to-renewab l e -energy-can-be-difficult

- l43 0881487 and is a lso included as "Exhibit D."Letter to Janet McCabe May 11, 2015 Page 9 of9
If you have any questions about these comments or anything else the Nation has submitted on the Clean Power Plan , or to arrange a visit to the Navajo Nation, please contact April Quinn, Staff Attorney, Natural Resources U nit, Navajo Nation Department of Justice at a:quinn @ nndoj.org or 928-871-634 7.
Sincerely,

# ~~**· sonTsosie**  Navajo Nation

# ~ 

# &flz.'/ '

# {;**B** ::itty
- 

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Executive Director Navajo Nation Environmental Protection Agency

cc: William Niebling , Senior Advisor, Congressional & Internationa l Affairs, OAR, EPA Joe Goffman, Associate Assistant Administrator & Senior Counsel , OAR, EPA Jared B lum enfeld, Regional Administrator, EPA Region 9 Colleen McKaughan, Associate Director, Air Division, EPA Region 9 Amy Zimpfer , Associate Director , Air Division, EPA Region 9 Deswood Tome, Chief of Staff, Navajo Nation OPVP