THE NAVAJO NATION SHEaY

August 28, 2013

Mr. Jared Blumenfeld

Region 9 Administrator

United States Environmental Protection Agency

75 Hawthorne Street

San Francisco, California 94105

RE: Requesting U.S. EPA to Conduct an Improved 5-Factor Analysis for Best Available

Retrofit Technology for Navajo Generating Station Using Significant New

Information

Mr. Blumenfeld:

On behalf of the Navajo Nation (the “Nation”), I am writing to you concerning the U.S.

Environmental Protection Agency’s (“EPA”) Best Available Retrofit Technology (“BART”)

proposed rulemaking for the Navajo Generating Station (“NGS”). I am calling for EPA to

Lindertake a review of new information relevant to the proposed rulemaking. particularly (1)

information concerning the economic impacts of the rule on the Navajo Nation. as described in a

recent study conducted by the L. William Seidman Research Institute at the W.P. Carey School

of Business at Arizona State University (“ASU Report”); and (2) the recently enacted

amendments to the lease between the Navajo Nation and th owners of NGS. I signed these

amendments into law on July 30, 2013. I hereby request that EPA conduct a more thorough 5—

Factor Analysis for BART for NGS using this new information, which the Navajo Nation

believes to he of central relevance to the rulemaking and which should therefore be placed in the

rulemaking docket. See CAA § 307(4)(B)(i).

I also ask that the EPA consider re-opening the comment period to allow time for EPA to

review the new information and incorporate it into the 5-Factor Analysis required by EPA’s

BART regulations, and to allow the pLiblic time to review and comment on the new information.

Alternatively, EPA may wish to reconsider and re-propose the BART Federal Implementation

Plan (“FIP”) for NGS .See CAA § 307(7)(B).’

Pursuant to the federal trust responsibility, EPA must recognize that it is “standing in the

shoes of the Navajo Nation in making this BART determination, which calls for a clear

reflection of Navajo Nation’s interests in the final outcome. See Central Ari:onci Water

Conseri’ation District i’. USEPA. 990 F.2d 1531, 1541(9th Cir. 1993).

See also 40 CFR § 124.14(a). (h) (describing re-opening ui the comment period and actions the Regional

Administrator may take in CAA permit proceedings i[ new iniormation appears to raise substantial new questions).

1
Economic Impacts to the Navajo Nation Will Be Substantial as a Result of EPA’s

proposed BART rule for NGS.

There al-c already serious detrimental impacts to the Nation’s economy as a resLilt of

EPA’s proposed rule for BART for the Four Corners Power Plant (“FCPP”). There will he more

detrimental impacts as a result of EPA’s proposed rule for NGS, which recommends Selective

Catalytic Reduction technology (“SCRs” by 2018.

The likelihood that three units at the FCPP will close due to EPA’s proposed BART rule

for the plant has caused the current fuel supplier to get oLit of its coal supply agreement with

Arizona PLiblic Service Co. Now the Navajo Nation is using its own financial and legal resources

to create an entity to take over the coal mine in order to keep FCPP operating. so that the Nation

may benefit from the 25-year lease extension for the plant that was approved in 2011.

If the lease extension for NGS is approved by the U. S. Department of the Interior

(“DCI”) and NGS operates at full capacity until 2044, the revenues the Nation will derive will he

substantial. The total expected economic benefits amount to S 1.02 billion dollars (in 2013

dollars) in direct payments to the Navajo Nation. If the proposed rule causes the premature

retirement of one unit, the Navajo Nation stands to lose an estimated $295,421,819 (in 2013

dollars) between 2013 and 2044.

The Nation has articulated numerous times the dire economic consequences that it

anticipates would occur should NGS face shutdown or progressive retirement of its units due to

the proposed BART rule for NGS. The Nation’s reliance on the revenue derived from operations

at NGS has been expressed to the EPA on numerous occasions, and the history of the Nation’s

dependence on coal has also been communicated. With the lease amendments in your hands you

can see for yourself what is at stake in terms of future economic benefits. You also need to

consider these potential benefits in light of the federal Sequestration currently underway. We

expect federal budgets to be drastically reduced over the next ten years, and it is imperative that

we do everything possible to retain and generate our own revenue rather than relying on

dwindling federal appropriations.

The recent 2013 ASU Report on Economic Impacts to the Navajo Nation 2provides new

information that further highlights the significance of NGS to the Nation. According to the ASU

Report, NGS and Kayenta Mine will contribute close to $13 billion to the Navajo economy and

support nearly 75,000 jobs from 2020 through 2044, without taking into account the proposed

BART requirements. The ASU Report supports the Nation’s position that NGS is among the

largest employers within the Nation, and that cumulative revenues from both power plants and

mines on the Navajo Nation are considerable. The report finds that the cumulative revenues

totaled approximately $93.9 million in 2005-2006, accounting for about 55% of the Nation’s

General Funds budget of $172 million for that period. 3

2 Dr. Anthony Evans. ci at. Nnajo Generating Station & Kavenia illim’, An Eronomic Iiiipart Aiia1vsistr the

Naralo Nation. 20/i (W.P. Cares’ School of Business. Arizona State Universit . April 9. 2013).

2009—2010 Comprehensive Economic Development Stratecy of the Navajo Nation ( “CEDS” ). available at

hilp://www.navajohusiness.com/piII1CEDS/CED_NN_FinalOO..j 0.pdl.

2
Because the economic impacts to the Nation will be so substantial, the Nation would like

to see a longer timeframe for compliance to lessen the economic impacts to the Nation and to

provide time to analyze and plan for strategies to replace the loss in revenue that the Nation

anticipates will occur due to installation of SCRs at NGS. Some of the strategies the Nation

needs to pursue may not become evident until other evaluations have been completed, in

particular the Phase 2 NREL Study, a portion of which is intended to evaluate the power

generation alternatives named in the Phase 1 study that has already been conducted.

A Thorough 5-Factor Analysis is Needed, Using Information From the 2013 ASU

Report and Other Important New and Relevant Information.

Although the importance of NGS to the Nation is widely acknowledged, the complex

aspects of that relationship, including the impacts of NGS on the Nation and its resources, have

not been adequately evaluated by EPA. I am reiterating my concerns related to EPA’s lack of

diligence in undertaking adequate analyses in contemplating and issuing the proposed BART FIP

for NGS. A thorough 5-Factor analysis is needed, using new information from the recently

completed ASU Report on economic impacts to the Navajo Nation, and by examining other

sources containing pertinent information that will assist the EPA in conducting an adequate 5-

Factor analysis.

There is no other tribe in North America that relies so heavily on revenue derived from

the operations of a power plant, nor is there another coal-fired power plant in North America that

is owned in such substantial part by the federal government. In addition, the federal

government’s trust responsibilities to the impacted Arizona tribes, especially in the context of the

2004 Arizona Water Settlements Act and other potential water rights settlements, are intricately

related to the proposed BART rule. and these water rights settlements have potential and

significant economic impacts in Arizona. These and other factors related to energy and non-air

quality impacts were not adequately evaluated in the BART analysis performed by EPA.

The 2013 ASU Report includes new information on the economic effects that are

exclusive to the Navajo Nation. The earlier Harvey Economics study, in contrast, did not focus

exclusively on the Nation but examined broad economic impacts in the state of Arizona

correlated to BART control options and assumed that BART would not lead to closure of NGS.

Promulgation of the proposed BART rule for NGS will have serious implications for the

Navajo Nation, as the 2013 ASU Report attests. Therefore, I am asking the EPA to conduct an

adequate 5-Factor Analysis pursuant to the BART Guidelines and to fulfill EPAs trust

responsibility to the Navajo Nation, an Indian tribe that stands to incur substantial direct effects

from the proposed BART rule.

I am making this request even though the Nation has signed on to the Technical Work

Group agreement (“TWG agreement”) for NGS. The TWG agreement is a supplemental

proposal by the participants of the stakeholder work group and offers a “Better than BART”

alternative for achieving greater emission reductions while taking into account the future

economic and environmental considerations of the region. Although the Nation has signed the

TWG agreement. the Nation did so in light of the even more dire economic impacts of other

proposals. Regardless of the Nation’s signature on the TWG agreement. the previous concerns of

the Nation remain, and the Nation’s signature on the TWG agreement does not imply agreement

3
that EPA’s 5-Factor Analysis is thorough and complete. In fact, the TWG agreement was crafted

to expressly allow for the Navajo Nation to continue communicating with EPA about the

proposed rule, including our assertion that the current 5-Factor Analysis is flawed.

Furthermore, the recent NGS lease amendments contain language related to the option for

the Nation to acquire an ownership interest in NGS. Although this is a potential scenario for the

Nation to explore, the timelines in the TWG agreement do not provide the Nation with enough

time to fully explore acquisition ofthe necessary resources to pursue this ownership option.

Lack of relevant and available information has prevented EPA from conducting an

adequate 5-Factor Analysis, particularly as related to non-air quality impacts. The new

information I have referenced in this letter should be considered and used by EPA to refine its 5-

Factor analysis; this new information should not be disregarded. It would be negligent for EPA

to conclude that an adequate 5-Factor analysis was conducted, given that the information now

available did not exist during the earlier stages ofthe proposed rulemaking. This new

infonnation is critical in understanding the extensive impacts of NGS on the Nation, together

with the impacts of air regulations, particularly the non-air quality impacts of those regulations.

The Navajo Nation considered transmitting a preliminary final draft ofthe NOS Lease

Amendments to EPA in December 2012. Navajo Nation Department ofJustice requested and

received guidance on conveying Confidential Business Information from EPA. But because the

proposed lease amendments had not been introduced to the Navajo Nation Council and had not

been proposed as new legislation, the Nation decided to wait until the Lease Amendments

became a public document before releasing them to EPA.

Mother factor EPA did not consider when conducting its analyses and making its BART

proposal is economic mobility in the context of the Navajo economy. Economic mobility in

relationship to the revenue derived from NGS and the jobs that provide income to Navajo

families has not been assessed. From the ASU Report, certain information is understood related

to the economic significance of NGS to the Nation and Arizona. The Equality ofOpportunity

Project, 4published in July 2013, contained findings about economic mobility. The study stated

that “near some of Arizona’s Indian reservations, a child born into poverty hasjust a 4.8 percent

chance ofrising to the top, the lowest rate in the Southwest” 5Moreover, the Harvard and

University of California, Berkeley scholars who published the report found that the lowest levels

of upward mobility were located in areas where a smaller middle class existed. On the Navajo

Nation the existence of a middle class is tenuous at best. Facilities like NGS help to sustain a

middle class and elevate Navajo people from poverty.

Information regarding economic mobility on the Navajo Nation is important in assessing

non-air quality impacts, particularly since the Navajo Nation is currently far from being a land of

opportunity. The adverse economic ramifications expected as a result of BART for NGS will

further diminish the economic gains the Nation has achieved through its coal-based economy.

4Rxij Chetty. ci at Summary ofProject Findhigs, JuLy 2013, The Equality ofOppommity Project, available at

5

hupi!www.cqualiiy-of-opponunity.orgl

ionathan Reid. Study: Astonans’ chances qfclimbing the econonic ladder are gutted. CR0NKrrE NEVs. August

14. 2013. available at htcp:llcronkiccaewsonline.com!2013!08!scudy-arizonans chances-of-climbing-the-economicladder-are-mixed!.

4
Moreover, the existing poverty on the Navajo Nation will he perpetuated further and the middle

class on Navajo will he threatened.

Navajo Nation Involvement in the Technical Work Group and the Work Group

Agreement

The Nation, alongside other stakeholders, contributed fully and meaningfully in the

Technical Work Group meetings to discuss and identify emission alternative options for the

NGS. Representatives for the Nation were confronted with many challenges in contemplating the

best options for the Navajo Nation from among the various proposals discussed during the TWG

meetings. In the end, the Nation signed the TWG agreement because the Nation believed the

agreement presented the best alternatives of various other options, all of which could have

detrimental impacts on the Nation, particularly in terms of the Nation’s economy.

Endorsing the TWO agreement was therefore a difficult decision for the Navajo Nation to

make. The most troubling aspects of the agreement for the Nation relate to the proposed closure

of one 750 MW unit at NGS and the implementation of SCR on the remaining units if the Los

Angeles Department of Water and Power (LADWP”) and Nevada (NV”) Energy relinquish

their ownership shares in NGS by 2019. and if the Nation elects not to exercise the option of

purchasing a portion of the NGS ownership shares. The Nation anticipates harsh consequences

from the closure of one unit. These consequences will reverberate over time and the effects

experienced locally on the Navajo Nation will extend regionally. Between now and 2044,

$295,421,819 (in 2013 dollars) is expected in loss of revenues to the Nation from the closure of

one unit at NGS. In addition, despite having signed the TWG agreement, the Nation believes

that Low NOx burners and Separated Over-Fire Air should be BART for NGS.

In order to explore its option to acquire an ownership share in NGS, the Nation will need

to develop acquisition strategies, identify sLifficient financial resources, and obtain tribal

legislative support to exercise that option. Depending upon the outcome of the variables at hand.

the Nation could lose the purchase opportunity, which would seal the loss of one unit.

The calculus involved is not simple and will involve reliance on the Nation’s resources

for the ability to finance an ownership share in NGS during this time of weakened economies.

For the Nation, the weakened national economy is compounded by declining revenues on the

Navajo Nation, particularly resulting from the closure of three units at Four Corners Power Plant

(“FCPP’) and the impending shutdown of a unit at NGS, depending on the final BART rule for

NGS. Requiring Low NOx burners and Separated Over-Fire Air as BART rather than SCRs

would tip the scales somewhat to allow NGS to remain in operation in the future. It is the

Nation’s position in any event that these technologies represent BART.

Encouraging aspects of the TWG agreement include the commitments by stakeholders,

particularly DOT, to mitigate the effects of the BART rule and to consider the diverse interests in

the region, including those of the Nation and other stakeholder tribes.

5
July 18, 2013 NGS Lease Extension with Amendments Contains Language Related to

Navajo Nation Ownership of the Navajo Project Share of Los Angeles Department of

Water and Power

The Navajo Nation and the operator and owners of NGS have negotiated an extension of the

NGS lease for an additional 25 years throLigh 2044, and the proposed lease extension was

enacted by the Nation on July 30, 2013. The NGS owners are currently reviewing the

amendments included in the final Navajo Nation Council vote. Thereafter. DOl will determine

whether to grant final approval of the lease extension and amendments.

Some of the lease amendments contain language related to the Nation’s option (the “Navajo

Nation Purchase Option”) to obtain an ownership portion of up to 170 MWs in NGS (the

“Navajo Project”). The Nation’s potential share is described as the LADWP portion acquired by

Salt River Project (“SRP”) or any other current Lessee (the “Navajo Nation Interest”). 6The

Nation may pursue the purchase option if LADWP’s ownership interest in NGS is sold or

purchased prior to December 23, 2019, and if the cLirrent Lessees consent. The Nation’s potential

ownership is described in the lease amendments as occurring in two phases, beginning as a

“virtual ownership” 7in the first phase, and leading to “direct ownership’ 5in the second phase.

The timelines in the lease are not specifically associated with the intricate processes

necessary to culminate in the Nation’s ownership, nor do the lease extension or the amendments

contemplate BART for NGS, installation of mercury controls, or other future rulemakings that

could further affect the Nation’s reliance on the revenue derived from NGS or the continued

viability and operation of NGS in the face of future environmental rulemaking. The references in

the lease related to ownership by the Nation are aspirational and presuppose that the Nation has,

or will have, all the necessary resources to acquire an ownership interest in NGS. As noted

above, there will be serious investment challenges for the Nation to acquire an ownership share

in NGS at a time when its own revenue has begun to rapidly decline, which will be intensified by

the retirement of three units at the FCPP from which considerable revenue has also been derived,

and by the timing of the necessary environmental actions for expiring federal permits and

operational aspects of NGS that were previously undocumented (e.g., Environmental Impact

Statement and permitting related to rights-of-way).

The NGS lease extension and amendments are therefore new information that should he rised

by EPA to further assess the non-air quality impacts in finalizing BART for NGS.

‘

NGS Lease Amendment I as approved by Navajo Nation Council (NNC). July I t. 2013 (Legislation #0177—13)

The “virtual ownership agreement in the first phase will “provide an ownership-like cost/benefit structure. In this

phase. the Navajo Nation shall paY its share ol’ the total Navajo Project costs that serve as the basis or charges to

other participants and would receive the applicable l’.lWs of capacity it will be purchasing or its respective

pcrcentae of output during unil curtailments or outages. (NGS Lease Amendment 1. page 27. as approved h

NNC 7/lS/2013.

“Direct ownership entails sLibjectiflO purchased interests to the same Na ajo Project agreements’ requirements.

and proides that the Nation shall assume all righis and responsibilities of Navajo Project ownership ( NGS Lease

Amendment I as approved 1w NNC 7/I H12() I 3.

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Flexibility is Called for in the Compliance Timeframe to Install SCR beyond 2026

and to Meeting the 0.055 Ib/Mi\IBTU Emission Limit.

A longer timeframe for compliance would allow the Nation to plan for and conduct

evaluations with goals related to long-term and sustainable economic development goals,

including developing strategies to incorporate electric generation alternatives. An extension of

the tirneirame also would assist in ensuring that a permit limit is achievable on a continuous

basis and would allow the Nation to continue to receive revenue from the operations of NGS for

a predictable period.

The Nation supports a NO\ emission rate of 0.08 lhs/MMBtu as a permit limit if SCR will he

required as BART for NGS. EPA did not adequately consider the cost of compliance for NGS to

achieve the permit limit of 0.055 lbs/MMBtu. The EPA needs to conduct a more thorough 5-

Factor Analysis for Cost of Compliance to understand that the stringent emission limit of 0.055

lhs/MMBtu could force NGS to shutdown one or more emission units.

Region 9 has repeatedly told us that BART determinations are facility-specific and they

avoid considering non-facility impacts across our reservation region. EPA recognizes in the

proposed NGS BART rule that it has flexibility to alter various statutory deadlines, as it did in

the Tribal Authority Rule, and it should exercise this flexibility to consider other factors such as

cumulative impacts to NGS from earlier and on-going BART determinations for FCPP and San

Juan Generating Station (SJGS). FCPP is still ongoing, but they completed SO2reductions in

2005. SJGS is still ongoing, but under a Consent Agreement in 2005 they completed earlier

emissions reductions. The Mohave Generating Station closed in 2005 and so no longer emits

pollution into the 11 Class I areas that NGS impacts.

I ask for your willingness to consider my requests. I also ask that EPA continue offering

flexibility and discretion in these regulatory actions, particularly considering their impending

impacts on the Navajo Nation. Many current EPA actions and ituie rulemakings will have the

potential to negatively affect the Navajo Nation and other tribes, both directly and indirectly, and

EPA must meet its consultation obligations to the Navajo Nation by analyzing the array of nonair quality impacts to the Nation before finalizing the BART rule for NGS. 9

I appreciate your consideration of this important matter and look forward to discussing these

topics with you further. If you have any questions, I have designated Mr. Stephen B. Etsitty, as

the primary contact. Mr. Etsitty can be reached at 928-871-7692.

E.O. 13175. h5 Fed. Ree. 6724g. (Nov. .200() (:see USEPA PoIic on Consultation and Coordination with Indian

Trihes (May 4. 2(111).

Enclosures

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