## February 9, 2012

Mr. James M. Parker PPL Montana, LLC 303 North Broadway Suite 400 Billings, MT 59101-1255 VIA E-Mail RE: Updated SCR NO x 

## Control Cost for Colstrip 1 & 2
Dear Mr. Parker: This letter is to update our Se ptember 2011 BART* analysis addressing the cost-effectiveness of the installation of selective catalytic reduction (SCR) t echnology at Colstrip Units 1 and 2 for controlling nitrogen oxide (NO x 

## ) emissions on dollar/ton basis, to take into account a new site-specific assessment of the cost of SCR prepared by Burns & McDonnell. TRC’s September 2011 report, entitled “NO x 

## Control Update to PPL Montana’s Colstrip Generating Station BART Report,”* contained a detailed breakdown of the capital and operating costs associated with the installation of SCR controls on Colstrip Units 1 and 2. See Table 2-3b (attached). The 2011 report updated the cost of SCR from a 2008 BART control cost study, relying on a 2010 Sargent & Lundy analysis (which was in 2009 dollars). The 2008 TRC study relied on the 2002 “EPA Control Cost Manual” which was based on 1998 costs escalated to 2008. Burns & McDonnell recently completed a site-specific cost analysis for SCR at Colstrip Units 1 and 2. That analysis estimated a total capital cost for SCR of $203 million per unit (in 2015 dollars) or $190 million in 2011 dollars, as compared to $152 million per unit using the Sargent & Lundy method in 2011 dollars. This site-specific cost estimate corres ponds to a cost-effectiveness of $8,884 per ton of NO x 

## controlled, as compared to $7,300/ton of NO x 

## controlled using the Sargent & Lundy method. See table 2- 3b-revised February 9, 2012 (attached). To summarize, the cost effectiveness associated with the installation and operation of SCR NO x 

## controls at Colstrip Units 1 and 2 are: September 2011 BART Update (Revised Oc tober 2011) $7,300 (2011 dollars) February 2012 Burns & McDonnell Site Specific Study $8,884 (2011 dollars) If you have any questions or comments regarding this update, please contact me at (860) 298-6245. Sincerely,

TRC

Mark M. Hultman, P.E. Principal Consulting Chemical Engineer

*Revisions were added in October 2011

### Table 2-3b PPL BART Cost Effectiveness Analysis SCR NOx Control Colstrip Units 1&2 Two 333 MW Coal Fired Boilers (Each)30dayavera g eemissionNOxrat e Maximum Gross Heat Input MM Btu/hr 3,982 Design Percent Load % 92 Uncontrolled Emissions lbs/MMBtu 0.200 ExhaustTemperature, ( o F) T 314 Steam Turbine Power Output (TMW) MW 333 Capacity Factor (92%) hrs 8,059 Controlled NOx Emissions lbs/MMBtu 0.06 Overall NOx Reduction Efficiency, (%) % 70.00 Uncontrolled NOx Emissions, (lb/hr) 796.4 Uncontrolled NOx Emissions, (tons/yr) 3209.2 Controlled NOx Emissions, (ton/yr) 962.8 Annual Interest Rate, (%) 7 Equipment Life, (yrs) yr 20 Capital Recovery Factor, CRF CRF 0.0944

Unit Item Cost Item Suggested Factor Cost Cost

IPM Model, August 20, 2010 (1) Capital Cost ($/KW) 443 $147,593,135 Equipment Cost Total, (EC) EC (Adjusted by Cost Index Calcs) (2011 dollars) (2,3) $152,306,678

Total Capital Costs, TCC --- $152,306,678

Direct Annual Costs, DA C Catalyst Cost (4) VOMW $939,300 Urea Cost VOMR $706,224 Steam Cost VOMM $14,187 Maintenance Labor FOMO $62,400 Maintenance Materials FOMM $300,000

Total Direct Annual Costs, DAC $2,022,111

Indirect Annual Costs Capital Recovery CRF*TCC --- $14,376,673

Total Indirect Annual Costs, IAC $14,376,673

Total Annual Costs, TAC = DAC + IA C $16,398,784
Cost Effectiveness ($/ton pollutant Removed) $7,300

Cost data references:


### 1)Costanalysisequationsfrom"IPMModelRevisionstoCostAndPerformanceforAP CTechnologiesSCRCostDevelopmentMethodologyFINAL",August2010Project12301007,PerrinQuarlesAssociates,Inc.,preparedbySargent&Lundy,LLC 2) Cost indices used to adjust 2009 costs to 2011 costs (2009 CI= 109.594, 2011 CI= 113.094) 3) This includes a dry sorbent system for control of SO 3 4) Cost is for replacement and disposal based on S&L cost estimate in $/MW-hr for PRB coal

Page 13 Revised

### Table 2-3b (Revised February 9, 2012) PPL BART Cost Effectiveness Analysis SCR NOx Control Colstrip Units 1&2 Two 333 MW Coal Fired Boilers (Each) 30

­ day avera g e emission NOx rat e Maximum Gross Heat Input MM Btu/hr 3,982 Design Percent Load % 92 Uncontrolled Emissions lbs/MMBtu 0.200 ExhaustTemperature, ( o F) T 314 Steam Turbine Power Output (TMW) MW 333 Capacity Factor (92%) hrs 8,059 Controlled NOx Emissions lbs/MMBtu 0.06 Overall NOx Reduction Efficiency, (%) % 70.00 Uncontrolled NOx Emissions, (lb/hr) 796.4 Uncontrolled NOx Emissions, (tons/yr) 3209.2 Controlled NOx Emissions, (ton/yr) 962.8 Annual Interest Rate, (%) 7 Equipment Life, (yrs) yr 20 Capital Recovery Factor, CRF CRF 0.0944

Unit Item Cost Item Suggested Factor Cost Cost

Total Capital Costs, TCC Note 1 $190,000,000

Direct Annual Costs, DA C Catalyst Cost (2) VOMW $939,300 Urea Cost VOMR $706,224 Steam Cost VOMM $14,187 Maintenance Labor FOMO $62,400 Maintenance Materials FOMM $300,000

Total Direct Annual Costs, DAC $2,022,111

Indirect Annual Costs Capital Recovery CRF*TCC --- $17,934,656

Total Indirect Annual Costs, IAC $17,934,656

Total Annual Costs, TAC = DAC + IA C $19,956,767
Cost Effectiveness ($/ton pollutant Removed) $8,884

Cost data references:
1) Revised capital cost based on PPL/Burns & McDonnell February 2012 costing study 2) Cost is for replacement and disposal based on S&L cost estimate in $/MW-hr for PRB coal

Page 13 Revised