SALT RIVER PROJECT KELLY J. 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. .1 ordan:

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 of concerns 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 of any 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 of BART Limit with 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 retrofit technology (“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 of the 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 of the Act’s New Source

Review (‘NSR”) rules under the Prevention of Significant 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 of reduction

of each 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 of each 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 of the Coronado units by June 1, 2014. The unit subject to the SCR-hased limit is
required to achieve and maintain a 30-day rolling average NOx emission rate of no greater than

0.080 lb/mmBtu. The other unit must operate low—NOx combustion technology, and the facility

as a whole is subject to a plantwide NOx tonnage limit. SRP is in the midst of installing SCR on

Coronado Unit 2, and the project is over 40% 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 for February 2013. SRP has also issued the contract

for the steel supply. and the vendor has purchased the majority of the steel. Steel

fabrication will begin this August.

• The construction phase of the project has begun, and the concrete foundations are

currently being installed. The construction phase of the project is about 4% complete but

is ramping up quickly to meet the required operational date. Installation of the

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 of the project. procured the majority of the 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, incur procurement losses, possibly remove

foundations, and undertake new design and procurement, such steps would vastly increase the

cost of the 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.

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EPA has recognized the need to take existing sLLnk commitments into consideration in its

recent proposed rule. “Standards of Performance 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 of the date of the 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 their preconstruction planning to the

point where they are poised to commence construction Id. In such circumstances.

Ji]mposition of an unexpected emission rate requirement at such a late date could upset

carefully crafted financial plans. causing delay or even cancellation of the project.” Id. at 22425:

see u/so /d. at 22422 (applying the performance standard “would likely result in the loss of their

sunk costs and would likely cause multi-year delays, or even abandonment, of their plans 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 matter be allowed to proceed without concern about requirements other than those

in their [existing] permits.” Id. at 22425. SRP faces the very same or even greater hardships

should EPA pursue a proposed FIP for Coronado applying a BART limit of 0.05 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

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was 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 of North Dakota

had properly determined that NOx 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 subject to 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 of New

Mexico to EPA as part of its Supplement to a Petition for Reconsideration of EPA’s FIP for New

Mexico describes in detail the development of SCR technology from early applications to the

current state of the art. Sec Supplement to the Petition of Public Service Company of New

Mexico for Reconsideration and Stay of EPA’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 of Engineering

and Analytical Studies To Assess the Cost of Selective Catalytic Reduction (SCR) NOx Control

Technology for the Public Service Company of New 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

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The 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 for NOx emissions for each type of coal-fired electric

generating unit. 70 Fed. Reg. at 39134-35, 39172. The presumptive BART limit for the

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 of the relevant presumptive NOx BART limit. On its face, therefore, the consent decree

satisfies Coronado’s BART obligations for NOx.

Similarly, the BART Guidelines support reliance on the 2008 consent decree to satisfy

BART based on the Guidelines’ description of the type of emission controls that should typically

he considered as BART. According to the Guidelines, with the exception of cyclone 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 of SCR on Coronado Unit 1. The fact that SRP is already in

the process of installing 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 of plantwide 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 of control

of NOx emissions since the time that SRP entered into the 2008 consent decree. Accordingly.

EPA has no basis for requiring more stringent emission controls or emission limits than those

reflected in the consent decree.

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In addition, considerations relevant under the statutory BART factors confirm that a 0.05

lb/mmBtu NOx emission limit based on SCR is inappropriate for Coronado. Section 169A of the

CAA sets forth the five BART factors:

the costs of compliance, the energy and nonair quality

environmental impacts of compliance, any existing pollution

control technology in use at the source, the remaining useful life of

the source, and the degree of improvement in visibility which may

reasonably be anticipated to result from the use of such

technology.

42 U.S.C. § 749 l(g)(2). A report, titled “BART Analysis for the 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 of 0.05 lb/mmBtu for NOx would be wholly unwarranted.

The BART Analysis demonstrates that the projected visibility improvement the from

operation of SCR at both Coronado units is minuscule but that the cost to achieve it is enormous.

Indeed, that analysis demonstrated that controls equivalent to those imposed pursuant to the 2008

consent decree will result in only marginal visibility improvements for substantial incremental

additional costs. Specifically, the BART Analysis determined that operation of SCR 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 for perceptibility. 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 cannot justify the incremental cost of an additional

S CR.

Finally, as noted in a June 25, 2009 Response to Request for Additional Information,

SRP explained to EPA that after preparation of the BART Analysis, SRP and EPA entered into

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the 2008 consent decree. SRP further explained that the NOx emission controls required under

that consent decree, which, as stated, were equivalent to one of the control options assessed in

the BART Analysis, were “better than BART” based on a site-specific assessment of the 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 of the state’s discretion under the

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 of NOx 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 of only 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 of New Mexico, the New Mexico

Environment Department, and the Governor of New 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 of New Mexico’s Petition for Reconsideration of EPA’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 of Public

Service Company of New Mexico for Reconsideration and Stay of EPA’s Final Rule: Appro\’al

and Promulgation of Implementation Plans: New Mexico: Federal Implementation Plan Ibr

Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology

Determination,” Docket No. EPA-R06-OAR-20 10-0846, Attachment 2, RMB Consulting &

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EPA itself has 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 of the Agency’s Cross-State Air Pollution rulemaking. EPA concluded that a

NOx limit below 0.06 lb/mmBtu is not achievable through retrofit of SCR 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 of 0.06 lbs/mmBtu for ...NOx

represent[s] the lowest annual emission rate[j assumed achievable when state-of-the-art pollution

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] intended to reflect the lower bound

of emission 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 for North and South Dakota, effectively

recognizing that a 0.05 lb/mrnBtu rate is unachievable. In its evaluation of NOx BART for two

facilities in North Dakota, EPA examined visibility impacts of an 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 of 0.07 lb/MMBtu, we adjusted the annual design rate of 0.05

lb/MMBtu upwards to allow for a sufficient margin ofcoinpliance for a 30—day rolling average

limit that would apply at all times, including startup, shutdown, and ma/Junction.” Id. at 58,610

Research, Inc., “Analysis of the Achievability of the FTP NOx Limit for San Juan Generating

Station and Comparison to Other Ultra-Low NOx Units” (Oct. 21, 2011).

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(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 a NOx limit of 0.10 lh/mmBtu. 77

Fed. Reg. 24,845, 24.847. 24,849 (Apr. 26, 2012).

EPA recently has proposed similar NOx BART determinations, based on SCR, for

facilities in Colorado and Illinois at rates of 0.07, 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 vast majority of cases, EPA has recognized that SCR is not an

appropriate BART control technology and has proposed or finalized less stringent BART

requirements for NOx. 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 of 0.20 lb/mrnBtu based on SNCR plus

existing LNB): 77 Fed. Reg. at 1 8052 (proposed rule for Colorado approving SIP limit of 0.27

lh/mmBtu based on SNCR); 77 Fed. Reg. 12770 (Mar. 2. 2012) (proposed rule for Nebraska

approving SIP limits of 0.23 lb/ininBtu based on LNB with overfire air (OFA”): 77 Fed. Reg.

17334 (Mar. 26, 2012) (final rule for Nevada 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 for New Hampshire approving SIP limit of 0.35 lb/mmBtu when burning oil and

0.25 lb/mmBtu when burning a combination of oil and gas, based on LNB. OFA. and water

injection) 77 Fed. Reg. 20894 (Apr. 6, 2012) (final rule for North Dakota imposing a FIP for

Coal Creek Station Units 1 and 2 and a NOx limit of 0.13 lb/mmBtu based on SNCR plus

In its final rule for North Dakota, EPA rejected SCR as BART and approved North

Dakota’s SIP with respect to 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.

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separated overfire air (“SOFA”) plus LNB and approving various SIP limits ranging from 0.19 to

0.36 lb/mmBtu based on SNCR and combustion controls); 76 Fed. Reg. 81729 (Dec. 28.2011)

(final rule for Oklahoma approving various SIP limits ranging from 0.15 to 0.45 lb/mmBtu based

on combustion controls); 77 Fed. Reg. 33022 (Jun. 4, 2012) (proposed rule for Wyoming

approving SIP limits based on combustion controls). As these actions demonstrate, EPA’s

proposed rule for Arizona, at least with respect to Coronado, is an extreme outlier that cannot be

justified as BART.

In sum, this proposed BART limit would irreconcilably conflict with the SCR installation

project that is required to satisfy the 2008 consent decree and that is already well underway.

Consistent with EPA’s BART Guidelines and its own past practice, EPA should find that the

2008 consent decree is more stringent than BART and that Coronado’s compliance with that

consent decree satisfies any BART obligations it may have. Moreover, the exceptionally

stringent 0.05 lblmmBtu emission rate would impose extraordinarily high incremental costs for

vanishingly small benefits and would, moreovet be infeasible to meet. Based on EPA’s BART

precedent, the proposed FIP that EPA says it is planning for Coronado is inconsistent with EPA’s

BART Guidelines.

Please contact me ifyou or your staffwould like to discuss this matter.

Sincerely,

I&utll

Kelly J. Barr

cc: The Honorable Jared Blumenfeld

Regional Administrator

United States Environmental Protection Agency Region 9

Henry Darwin

Director, Arizona Department ofEnvironmental Quality

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