# 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 behalfofthe 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 ofnew information relevant to the proposed rulemaking. particularly (1) information concerning the economic impacts ofthe 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 ofNGS. 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 ofcentral 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 ofthe Navajo Nation in making this BART determination, which calls for a clear reflection ofNavajo 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 ofEPA’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 ofEPA’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 ofits 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.

Ifthe lease extension for NGS is approved by the U. S. Department ofthe 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. Ifthe proposed rule causes the premature retirement ofone 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 ofits 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 ofthe Nation’s dependence on coal has also been communicated. With the lease amendments in your hands you
can see for yourselfwhat is at stake in terms offuture economic benefits. You also need to consider these potential benefits in light ofthe 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 2 provides new information that further highlights the significance ofNGS 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 75,000jobs 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% ofthe 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 ofBusiness. Arizona State Universit

. April 9. 2013).

2009—2010 Comprehensive Economic Development Stratecy ofthe Navajo Nation ( “CEDS”). available at hilp://www.navajohusiness.com/piII1CEDS/CED_NN_FinalOO..j 0.pdl.
2Because 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 ofSCRs at NGS. Some ofthe 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 ofwhich 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 ofNGS to the Nation is widely acknowledged, the complex aspects ofthat relationship, including the impacts ofNGS 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 ofa 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 ofArizona correlated to BART control options and assumed that BART would not lead to closure ofNGS.

Promulgation ofthe 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 ofthe 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 ofthe region. Although the Nation has signed the TWG agreement. the Nation did so in light ofthe even more dire economic impacts ofother proposals. Regardless ofthe 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

### thatEPA’s 5-FactorAnalysisis thorough

### andcomplete. Infact, theTWG agreementwas crafted to expressly allow fortheNavajo Nationto continuecommunicating withEPA about the proposedrule, including

### ourassertionthatthe current5-FactorAnalysis is flawed.

Furthermore, therecentNGS lease amendments contain language related to the option for theNation to acquire an ownershipinterestinNGS. Althoughthis is apotential scenario forthe Nation to explore, the timelines in theTWG agreementdo notprovide theNation with enough timeto fullyexplore acquisitionofthe necessaryresources topursuethis ownership option.

Lackofrelevant and available information has preventedEPA fromconducting an adequate 5-FactorAnalysis, particularly as related to non-airquality impacts. The new information Ihavereferencedin this lettershouldbe considered andusedbyEPAtorefineits 5- Factoranalysis; this new information shouldnotbe disregarded. Itwouldbe negligent forEPA to concludethat an adequate 5-Factoranalysis was conducted, given thattheinformationnow available didnotexistduring theearlierstages oftheproposedrulemaking. This new infonnation is critical inunderstandingthe extensive impacts ofNGS on theNation, together with the impacts ofairregulations, particularly the non-airqualityimpacts ofthose regulations.

TheNavajoNationconsideredtransmitting apreliminary

### final draftofthe NOS Lease Amendments to 

### EPAinDecember2012. NavajoNationDepartmentofJusticerequestedand receivedguidanceon conveyingConfidential Business Information fromEPA. Butbecause the proposedlease amendments hadnotbeenintroduced to 

### theNavajo Nation Council andhadnot beenproposedas new legislation, the Nationdecidedto waituntil the Lease Amendments became apublic documentbeforereleasingthemto EPA.

MotherfactorEPAdidnotconsiderwhenconductingits analyses and makingits BART proposal is economic mobilityin the contextofthe Navajo economy. Economic mobility in relationship to the revenue derived fromNGS andthejobs thatprovide income to Navajo families has notbeen assessed. From theASU Report, certaininformationis understoodrelated
to 

### the economic significanceofNGS to

### the Nation andArizona. The

### Equality of

### Opportunity Project, 4 

### publishedinJuly2013, containedfindings abouteconomic mobility. The study stated that “nearsome ofArizona’s Indianreservations, achildbornintopovertyhasjusta4.8 percent 

### chance ofrising to the top, the lowestrateinthe Southwest” 5 Moreover, theHarvard and UniversityofCalifornia, Berkeley scholars whopublishedthereportfound thatthe lowest levels ofupward mobilitywere located in areas where a smallermiddleclass existed. On the Navajo Nation the existence ofamiddleclass is tenuous atbest. Facilities likeNGS help to sustain a middle class and 

### elevateNavajo people from

### poverty.

Information regardingeconomic mobilityonthe NavajoNation is importantin assessing non-airquality impacts, particularly since the NavajoNationis currentlyfarfrom

### being aland of opportunity. The adverse

### economicramifications expected as aresult ofBART forNGS will furtherdiminishthe economic gains theNationhas 

### achievedthrough its 

### coal-basedeconomy.

4 Rxij 

### Chetty. ci

### at

### SummaryofProjectFindhigs, JuLy2013, TheEqualityofOppommityProject, availableat hupi!www.cqualiiy-of-opponunity.orgl 5 ionathan

### Reid. Study: Astonans’ 

### chancesqfclimbingtheecononic ladderaregutted. CR0NKrrENEVs. August 14. 2013. availableathtcp:llcronkiccaewsonline.com!2013!08!scudy-arizonans chances-of-climbing-the-economicladder-are-mixed!. 4Moreover, 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 ofvarious other options, all ofwhich could have detrimental impacts on the Nation, particularly in terms ofthe Nation’s economy.
Endorsing the TWO agreement was therefore a difficult decision for the Navajo Nation to make. The most troubling aspects ofthe agreement for the Nation relate to the proposed closure ofone 750 MW unit at NGS and the implementation ofSCR on the remaining units ifthe Los Angeles Department ofWater and Power (LADWP”) and Nevada (NV”) Energy relinquish their ownership shares in NGS by 2019. and ifthe Nation elects not to exercise the option of purchasing a portion ofthe NGS ownership shares. The Nation anticipates harsh consequences 

### from the closure ofone 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 ofrevenues 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 ofthe variables at hand. the Nation could lose the purchase opportunity, which would seal the loss ofone 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 ofweakened economies. For the Nation, the weakened national economy is compounded by declining revenues on the Navajo Nation, particularly resulting from the closure ofthree units at Four Corners Power Plant (“FCPP’) and the impending shutdown ofa 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 ofthe TWG agreement include the commitments by stakeholders, particularly DOT, to mitigate the effects ofthe BART rule and to consider the diverse interests in the region, including those ofthe Nation 

### and other stakeholder tribes.

5

### July 18, 2013 NGS Lease Extension with Amendments Contains Language Related to Navajo Nation Ownership ofthe Navajo Project Share ofLos Angeles Department of Water and Power

The 

### Navajo Nation and the operator and owners ofNGS have negotiated an 

### extension ofthe 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 ofthe lease extension and amendments.

Some ofthe lease amendments contain language related to the Nation’s option (the “Navajo Nation Purchase Option”) to obtain an ownership portion ofup 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”). 6 The Nation may pursue the purchase option 

### ifLADWP’s ownership interest in NGS is sold or purchased prior to December 23, 2019, and ifthe cLirrent Lessees consent. The Nation’s potential ownership is described in the lease amendments as occurring in two phases, beginning as a “virtual ownership” 7 in the first phase, and leading to “direct ownership’ 5 in 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 ofmercury 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 ofNGS in the face offuture 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 ofthree units at the 

### FCPP from which considerable revenue has also been derived, and by the timing ofthe necessary environmental actions for expiring federal permits and operational aspects ofNGS 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 ofcapacity it will be purchasing or its respective pcrcentae ofoutput 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 Naajo Project agreements’ requirements. and proides that the Nation shall assume all righis and responsibilities ofNavajo Project ownership (NGS Lease Amendment I as approved 1w NNC 7/I H12()I 3.
6

### 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 ofNGS for

a predictable period.

The Nation supports a NO\ emission rate of0.08 lhs/MMBtu as a permit limit ifSCR will he required as BART for NGS. EPA did not adequately consider the cost ofcompliance 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 ofCompliance to understand that the stringent emission limit of0.055 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 SO 2 reductions 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 ofnonair quality impacts to the Nation before finalizing the BART rule for NGS. 9

I appreciate your consideration ofthis important matter and look forward to discussing these topics with you further. Ifyou 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

7