SALT RIVER PROJECT KELLYJ. BARR, ESQ. P.O. Box 52025 Senior Director Phoenix, AZ 85072-2025 Environmental A’lanagement, (602) 236-5262 Policy and Compliance Fox (602) 236-6690 Kelly.Barr@srpnet.corn
June 26. 2012
N’is. Deborah Jordan Director. Air Division. Region 9

nited States Environmental Protection Agency 75 Hawthorne Street San Francisco, CA, 94105 Re: United States Environmental Protection Agency Proposed Rule on Regional Haze for Arizona and Proposed Best Available Retrofit Technology Determination for Coronado Generating Station Dear \1 s. .1ordan: As we discussed on June 21, 2012. the United States Environmental Protection Agency Region 9 (“EPA” or “Agency”) plans to propose a rule that would govern nitrogen oxide (“NOx”) emissions from Coronado Generating Station (“Coronado”). Salt River Project Agricultural Improvement and Power District (“SRP’) has a number ofconcerns with the emission limit that you and I discussed. particularly with respect to the impact that the contemplated limit would have on an emission control project that is already’ well underway. We discussed this matter with our attorneys and believe that there is a more productive and appropriate way to niove lorward. and we greatly appreciate your interest in discussing these issues with us prior to the proposal ofany rule br Arizona. A detailed description of the work progressing at (‘oi’onado and the manner in which we hope to proceed is provided below. ‘l’hank
you for taking these matters into consideration.Consistency ofBART Limitwith Coronado Consent 1)ecree and BART Guidelines EPA has stated that it intends to partially disapprove Arizona’s regional haze state implementation plan (SIP’) and to propose a federal implementation plan (“FIP”) that would impose best available retrofittechnology (“BART”) emission limits for NOx for Coronado. Specifically, EPA has expressed its intention to propose to require Coronado Units I and 2 to each meet a 0.05 lh/mmBtu NOx emission rate by installing and operating selective catalytic reduction (“5CR”) emission control technology. At the outset, EPA should reconsider imposing a 0.05 lb/mmBtu BART limit for Coronado in light ofthe actions SRP is already undertaking to further control NOx emissions at the thcility. SRP is taking those actions pursuant to an August 12. 2008 consent decree that SRP and the United States entered into to resolve an EPA claim in an enforcement action that Coronado Units I and 2’s emissions failed to comply with the Clean Air Act’s (“CAA” or “Act”) best available control technology (“BACT”) requirements, an element ofthe Act’s New Source Review (‘NSR”) rules under the Prevention ofSignificant Deterioration (“PSD”) program. BACT is a more stringent technology-based standard than BART and is defined as:
an emission limitation based on the maximum degree ofreduction ofeach pollutant subject to regulation under this [Act] emitted from or which results from any major emitting facility, which the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for such facility through application of production processes and available methods. s stems. and techniques. including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control ofeach such pollutant. 42 U.S.C. 

### § 7479(3). Pursuant to the 2008 consent decree, SRP agreed to install, and begin operation of, SCR at one ofthe Coronado units by June 1, 2014. The unit subject to the SCR-hased limit is

### required to achieve and maintain a 30-day rolling averageNOx emission rate ofno greater than 0.080 lb/mmBtu. The other unit must operate low—NOx combustion technology, 

### and the facility
as a whole is subject to aplantwide NOx tonnage limit. SRP is in the midst ofinstalling SCR on Coronado Unit 2, and the project is over40% complete and on schedule to meet the various consent decree requirements.

• The engineering design effort is approximately 88% complete. The foundations. mechanical components. and structural steel design are all completed. The design for the electrical and controls systems is almost complete.

• The overall procurement efforts for the project are approximately 70% complete. The 5CR and associated ammonia system have already been purchased, and final delivery of the SCR components is scheduled forFebruary 2013. SRP has also issued the contract for the steel supply. and the vendorhas purchased the majority ofthe steel. Steel fabrication will begin this August.

• The constructionphase ofthe projecthas begun, and the concrete foundations are currently being installed. The constructionphase ofthe project is about 4% complete but is ramping up quickly to meetthe required operational date. Installation ofthe mechanical and structural systems will commence in approximately 4 months. As evidenced by the SCR installation milestones noted above. SRP has essentially completed the design phase ofthe project. procured the majority ofthe materials, and initiated construction. In other words, SRP has made irrevocable commitments to comply with limits that have been lawfully imposed in an EPA consent decree. It is not feasible for SRP to redesign the SCR at this late date to achieve a more stringent 0.05 lb/mmBtu emission limit. Moreover, if SRP were required to abandon the current design, incurprocurement losses, possibly remove foundations, and undertake new design and procurement, such steps would vastly increase the cost ofthe SCR retrofit with no incremental visibility benefit. Equally important. it would prevent SRP from meeting the compliance schedule in the consent decree. These site-specific facts require that EPA abandon its anticipated proposed 0.05 lb/rnrnBtu limit for Units 1 and 2.

-3EPA has recognized the need to take existing sLLnk commitments into consideration in its recent proposed rule. “Standards ofPerformance for Greenhouse Gas Emissions for New Stationary Sources: Electric Generating Units,” 77 Fed. Reg. 22392 (Apr. 13, 2012) (“GHG NSPS Rule”). The GHG NSPS Rule proposes not to subject ‘transitional sources”

— sources that have received the necessary preconstruction permits

—to the GHG standards provided they
commence construction within a year ofthe date ofthe proposed rule. Id. at 2242 1. The GI-IG NSPS Rule lists the “unique circumstances’ facing such sources that would make application of the standards costly and unfair. Id. For instance, EPA states that transitional sources “may have incurred substantial sunk costs and may have progressed in theirpreconstruction planning to the point where they are poised to commence construction Id. In such circumstances. Ji]mposition ofan unexpected emission rate requirement at such a late date could upset carefully crafted financial plans. causing delay or even cancellation ofthe project.” Id. at 22425:

see u/so /d. at 22422 (applying the performance standard “would likely result inthe loss oftheir sunk costs and would likely cause multi-year delays, or even abandonment, oftheirplans to construct’). Given these facilities’ large expenditures and the potential for significant disruptions to their construction plans. EPA proposes to determine that such facilities “should as
an equitable matterbe allowed to proceed without concern about requirements other than those in their [existing] permits.” Id. at 22425. SRP faces the very same or even greaterhardships should EPA pursue a proposed FIP for Coronado applying a BART limit of0.05 lb/mmBtu. hardships that must be considered by EPA in developing any proposed BART limit for Coronado. EPA’s contemplated BART determination for Units 1 and 2 is also inconsistent with the consent decree and EPA’s BART Guidelines. To begin, because the consent decree’s NOx limit

4was developed to address BACT obligations, that limit should satisfy any NOx BART obligation at Coronado. EPA’s BART Guidelines provide that BACT determinations and “NSR1PSD settlement agreements” should generally be considered to satisfy BART requirements. 70 Fec! Reg. 39104. 39164 (July 6, 2005). This conclusion is unsurprising. Because BACT applies to
new or significantly modified facilities, emission limits representing BACT will be more stringent than emission limits representing BART. which applies oniy to existing facilities that have operated for many years. In its final regional haze rule for North Dakota, EPA applied this principle. That rule explained that, subsequent to EPA’s proposal to require SCR at the Milton R. Young Station (“MRYS”), a United States District Court held that the State ofNorth Dakota had properly determined thatNOx BACT for MRYS was 0.36 lb/mmBtu for MRYS Unit 1 and 0.35 lh/minBlu for MRYS Unit 2. 77 Fed. Reg. 20894. 20897 (Apr. 6. 2012). EPA concluded that because emission control technology had not changed in any appreciable way since that BACT determination was made, it was appropriate to rely on the BACT determination to satisfy BART. Id. The same situation is present here. Coronado is subjectto a very recent NSR consent decree that should, pursuant to EPA’s BART Guidelines, be deemed to satisfy also the lhcility’s BART obligations.’

A report b J. Edward Cichanowicz submitted by Public Service Company ofNew Mexico to EPA as part ofits Supplement to a Petition for Reconsideration ofEPA’s FIP forNew Mexico describes in detail the development ofSCR technology from early applications to the current state ofthe art. Sec Supplement to the Petition ofPublic Service Company ofNew Mexico for Reconsideration and Stay ofEPA’s Final Rule: Approval and Promulgation of Implementation Plans New Mexico; Federal Implementation Plan for Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology Determination,” Docket No. EPA-R06-OAR-2010-0846. Exhibit C. J. Edward Cichanowicz, “Evaluation ofEngineering and Analytical Studies To Assess the Cost ofSelective Catalytic Reduction (SCR) NOx Control Technology for the Public Service Company ofNew Mexico San Juan Generation Station” (April 2012). That report demonstrates that SCR technology has become increasingly complex since its early deployment at those facilities that presented the least challenging retrofit scenarios, and that SCR installation costs have increased considerably as installation complexity 5The BART Guidelines also provide substantive support for concluding that the Unit 1 and Unit 2 NOx limits 

### in the consent decree represent BART for Coronado. Those Guidelines establish presumptive BART limits forNOx emissions for each type ofcoal-fired electric generating unit. 70 Fed. Reg. at 39134-35, 39172. The presumptive BART limit forthe Coronado units. which are dry-turbo-fired boilers burning sub-bituminous coal, is 0.23 lb/mniBtu. Id. The lowest presumptive BART NOx emission limit for 

### am’ type of

### coal-fired unit is 0.15 lb/mmBtu. Thus, the 0.08 lb/mmBtu limit applicable to Coronado Unit 2 is barely a third ofthe relevantpresumptive NOx BART limit. On its face, therefore, the 

### consent decree satisfies Coronado’s BART obligations forNOx. Similarly, the BART Guidelines support reliance 

### on the 2008 consent decree to satisfy BART based on the Guidelines’ description ofthe type ofemission controls that should typically he considered as BART. According to the Guidelines, with the exception ofcyclone units. SCR is not generally cost-effective as BART and the presumptive NOx BART limits are based on combustion controls only. Id. at 29134-36, 39171-72. Accordingly. the BART Guidelines do not support requiring installation ofSCR 

### on Coronado Unit 1. The fact that SRP is already 

### in the process ofinstalling SCR 

### on Coronado Unit 2 and that the facility will he subject to a plantwide NOx limit that is less than the presumptive NOx BART limit, satisfies BART. ee 

### also id. at 39172 (encouraging use ofplantwide average limits for BART).

at more challenging facilities has increased. That report also demonstrates that SC’R has not developed 

### in any significant manner with respect to its ability to achieve deeper levels ofcontrol ofNOx emissions since the time that SRP entered into the 2008 consent decree. Accordingly. EPA has no basis forrequiring more stringent emission controls or emission limits than those reflected 

### in the consent decree.
6In addition, considerations relevantunderthe statutory BART factors confirm that a 0.05 lb/mmBtu NOx emission limit based on SCR is inappropriate for Coronado. Section 169A ofthe CAA sets forth the five BART factors: the costs ofcompliance, the energy and nonair quality environmental impacts ofcompliance, any existing pollution control technology in use at the source, the remaining useful life of the source, and the degree ofimprovement in visibility which may reasonably be anticipated to result from the use ofsuch technology. 42 U.S.C. 

### § 749l(g)(2). A report, titled “BART Analysis forthe Coronado Generating Station Units 1 & 2.” (“BART Analysis”) prepared by ENSR Corp. in February 2008, fully assessed the BART factors as applied to Coronado. That analysis demonstrates that a proposed BART emission limit of0.05 lb/mmBtu forNOx would be wholly unwarranted. The BART Analysis demonstrates that the projected visibility improvement the from operation ofSCR at both Coronado units is minuscule butthat the cost to achieve it is enormous. Indeed, that analysis demonstrated that controls equivalentto those imposed pursuantto the 2008 consent decree will result in only marginal visibility improvements for substantial incremental additional costs. Specifically, the BART Analysis determined that operation ofSCR on both units would achieve only slight visibility benefits —0.12 delta-deciviews (‘dv”) or 2%. BART Analysis at 5-2. A 0.12 change in dv is not only imperceptible to the human eye, it is an order of magnitude below EPA’s 1.0 dv threshold forperceptibility. Indeed, such a change is even far below EPA’s 0.5 dv threshold for “contribution” to visibility impairment in a Class I area. Such
a minuscule projected visibility improvement cannotjustify the incremental cost ofan additional SCR. Finally, as noted in a June 25, 2009 Response to Request for Additional Information, SRP explained to EPA that afterpreparation ofthe BART Analysis, SRP and EPA entered into
7the 2008 consent decree. SRP further explained that the NOx emission controls required under that consent decree, which, as stated, were equivalent to one ofthe control options assessed in the BART Analysis, were “betterthan BART” based on a site-specific assessment ofthe BART factors A BART determination must consider emission control commitments already made, and
a state determining BART may properly give 

### weight to such considerations. Here. Arizona rejected the emission limit EPA says it is planning to propose because the state determined that the consent decree limit satisfied BART. This determination was consistent with the BART Guidelines, as discussed above, and was a valid exercise ofthe state’s discretion underthe CAA’s BART provisions. See American Corn Growers Ass ‘n v. EPA, 291 F.3d 1. 5-9 (D.C. Cir. 2002). EPA must defer to that determination. Achievability ofNOx BART Limit A 0.05 lb/mmBtu NOx emission rate as BART for the two Coronado units must also be rejected on achievability grounds. SRP is aware ofonly one other facility that has been subjected to such requirements pursuant to BART the San Juan Generating Station in New Mexico

— and that BART determination is currently being challenged in the U.S. Court of Appeals for the Tenth Circuit by Public Service Company ofNew Mexico, the New Mexico Environment Department, and the Governor ofNew Mexico, in part, on the ground that the 0.05 lb/mmBtu limit is unachievable. 2

2 A report by RMB Consulting & Research, Inc.. included as an attachment to Public Service Company ofNew Mexico’s Petition for Reconsideration ofEPA’s FIP for New Mexico demonstrates that a 0.05 lb/mmBtu NOx emission limit is not feasible for the San Juan Generating Station and that such a limit at a retrofit unit is unprecedented. See Petition ofPublic Service Company ofNew Mexico for Reconsideration and Stay ofEPA’s Final Rule: Appro\’al and Promulgation ofImplementation Plans: New Mexico: Federal Implementation Plan Ibr Interstate Transport ofPollution Affecting Visibility and Best Available Retrofit Technology Determination,” Docket No. EPA-R06-OAR-20 10-0846, Attachment 2, RMB Consulting & 8EPA itselfhas made findings in other recent rulemaking proceedings that support the conclusion that a 0.05 lb/mmBtu NOx emission rate is unachievable on a continuous basis. For instance, as part ofthe Agency’s Cross-State Air Pollutionrulemaking. EPA concluded that a NOx limitbelow 0.06 lb/mmBtu is not achievable through retrofit ofSCR on coal-fired electric generating units. 76 Fed. Reg. 1109, 1115 (Jan. 7, 2011); EPA, Transport Rule Engineering Feasibility Response to Comments,” EPA-HQ-OAR-2009-0491-4529, at 13 (July 12. 2011). EPA in fact stated that this well-controlled emission rate[j of0.06 lbs/mmBtu for

... NOx represent[s] the lowest annual emission rate[j assumed achievable when state-of-the-artpollution control technologies are installed at coal units” such as Coronado, and that a 0.06 lb/mmBtu rate is ‘based on the floor rates used in [EPA] modeling and [is] intendedto reflectthe lower bound ofemission rates that suppliers are willing to guarantee when installing state—of—the—art pollution control equipment (selective catalytic reduction (SCR) 76 Fed. Reg. at 1115 & n.3. EPA took similar action in proposed and final rules forNorth and South Dakota, effectively recognizing that a 0.05 lb/mrnBtu rate is unachievable. In its evaluation ofNOx BART for two facilities in North Dakota, EPA examined visibility impacts ofan SCR-hased 0.05 lh/mmBtu NOx emission rate but ultimately proposed a less stringent 0.07 lb/rnmBtu rate. 76 Fed. Reg. 58.570. 58.605. 58.610, 58.613-14 (Sept. 21. 2011). EPA explained its action thus: “In proposing a BART emission limit of0.07 lb/MMBtu, we adjusted the annual design rate of0.05 lb/MMBtu upwards 

### to allowfor a sufficientmargin ofcoinpliance for a 30—day rolling average limit that would apply at all times, includingstartup, shutdown, and ma/Junction.” Id. at 58,610

Research, Inc., “Analysis ofthe Achievability ofthe FTP NOx Limit for San Juan Generating Station and Comparison to Other Ultra-Low NOx Units” (Oct. 21, 2011).
9(emphasis added) (footnote omitted); see 

### also Id. at 58,613; id. at 58,619. 

### And in EPA’s final rule approving South Dakota’s regional haze SIP, EPA approved the state’s determination that NOx BART for one electric generating facility was SCR and aNOx limit of0.10 lh/mmBtu. 77 Fed. Reg. 24,845, 24.847. 24,849 (Apr. 26, 2012). EPA recently has proposed similarNOx BART determinations, based on SCR, for facilities in Colorado and Illinois at rates of0.07, 0.08, and 0.11 lh/mmBtu. 77 Fed. Reg. 3966 (.Jan. 26. 2012) (Proposed rule for I1linois) 77 Fed. Reg. 18052 (Mar. 26, 2012) (proposed rule for Colorado). Moreover, in the vastmajority ofcases, EPA has recognized that SCR is not an appropriate BART control technology and has proposed or finalized less stringent BART requirements forNOx. such as SNCR or low NOx burners (‘LNB”). with correspondingly less stringent emission rates than even those described above. See, e.g.. 77 Fed. Reg. 11 022 (Feb. 24. 2012) (proposed rule for Alaska approving SIP limit of0.20 lb/mrnBtu based on SNCRplus existing LNB): 77 Fed. Reg. at 1 8052 (proposed rule for Colorado approving SIP limit of0.27 lh/mmBtu based on SNCR); 77 Fed. Reg. 12770 (Mar. 2. 2012) (proposed rule forNebraska approving SIP limits of0.23 lb/ininBtu based on LNB with overfire air (OFA”): 77 Fed. Reg. 17334 (Mar. 26, 2012) (final rule forNevada approving various SIP limits ranging from 0.15 to 0.20 lh/mmBtu based on combustion controls and SNCR); 77 Fed. Reg. 1 1809 (Feb. 28. 2012) (proposed rule forNew Hampshire approving SIP limit of0.35 lb/mmBtu when burning oil and 0.25 lb/mmBtu when burning a combination ofoil and gas, based on LNB. OFA. and water injection) 77 Fed. Reg. 20894 (Apr. 6, 2012) (final rule forNorth Dakota imposing a FIP for Coal Creek Station Units 1 and 2 and aNOx limit of0.13 lb/mmBtu based on SNCR plus In its final rule forNorth Dakota, EPA rejected SCR as BART and approved North Dakota’s SIP with respectto these facilities due to a district court determination that selective noncatalvtic reduction (“SNCR”) controls satisfied the CAA’s BACT requirements, a determination discussed further in this letter above. 77 Fed. Reg. at 20,897.
10

### separatedoverfireair(“SOFA”)

### plusLNB andapproving

### various SIPlimitsrangingfrom0.19to 0.36lb/mmBtubasedon SNCRandcombustioncontrols); 76Fed. Reg. 81729 (Dec. 28.2011) (finalruleforOklahomaapprovingvarious SIPlimitsrangingfrom0.15 to 0.45 lb/mmBtubased
oncombustioncontrols); 77 Fed. Reg. 33022 (Jun. 4, 2012) (proposedruleforWyoming approving SIPlimitsbasedoncombustioncontrols). Astheseactionsdemonstrate, EPA’s proposedrule forArizona, atleastwithrespectto Coronado, is anextremeoutlierthatcannotbe justifiedas BART. Insum,thisproposedBARTlimitwouldirreconcilablyconflictwiththe SCRinstallation projectthatisrequiredto satisfythe2008 consentdecreeandthatisalreadywellunderway. ConsistentwithEPA’sBARTGuidelines anditsownpastpractice, EPA shouldfindthatthe 2008 consentdecreeismore stringentthanBARTandthatCoronado’s compliancewiththat consentdecree satisfies anyBARTobligations itmayhave. Moreover, theexceptionally stringent0.05 lblmmBtuemissionratewouldimposeextraordinarilyhighincremental costsfor vanishingly smallbenefits andwould,moreovetbeinfeasibletomeet. BasedonEPA’sBART precedent,theproposedFIPthatEPAsays itisplanningforCoronado is inconsistentwithEPA’s BARTGuidelines. Pleasecontactme ifyouoryourstaffwouldliketo discussthismatter. Sincerely, 

# I&utll KellyJ. Barr
cc: TheHonorableJaredBlumenfeld RegionalAdministrator United StatesEnvironmentalProtectionAgencyRegion9 HenryDarwin Director,ArizonaDepartmentofEnvironmental Quality
11