James M Parker Manager

- Compliance Services, Env. PPL Montana, LLC 303 N. Broadway, Suite 400 Billings, MT 59101 Tel. 406.740.9998 Fax 406.237.6901 jmparker@pplweb.com

February 15, 2012

The HonorableJames Martin Regional Administrator U. S. Environmental Protection Agency

- Region 8 1595 Wynkoop Street Denver, Colorado 80202-1129 PPL MONTANA",

Re: EPA Region 8 Regional Haze Federal Implementation Plan forMontana Update on PPLMontana Colstrip Units 1 & 2 NOxBART Cost-Effectiveness and Visibility Modeling
Dear AdministratorMartin: Enclosed for yourconsideration are three documents related to Region 8's development ofthe regional haze federal implementation plan for Montana and, in particular, the best available retrofit technology ("BART") determination for Colstrip Units 1 & 2. The first two documents are a Selective Catalytic Reduction ("SCR") Feasibility Analysis performed by Burns &McDonnell ("B&M") dated February 7,2012, and an updated Cost Effectiveness Letter Reportprepared by TRC Consulting ("TRC") dated February 9, 2012, which is based on the B&M SCR Feasibility Analysis. We previously submitted these documents to EPA, and are enclosing them with this letterfor your convenience. We are also enclosing an Updated Visibility Modeling analysis performed by TRC dated February 15,2012, which we have not previously submitted to the Agency. B&M is one ofthe foremost engineering and construction companies in the country, with extensive experience designing and installing pollution control equipment at powerplants. B&M also has direct knowledge ofColstrip Units 1 & 2. B&M has projected that the cost of installing SCR on Units 1 & 2 would be approximately $380 million, or $190 million perunit (in constant 2011 dollars). The B&M SCR Feasibility Analysis is adetailed, site-specific analysis that includes costs that would be unique to the Colstrip facility. These costs are consistent with, although higher than, those reflected in the amended September2011 TRC report, entitled "NOx Control Update to PPLMontana's Colstrip Generating Station BARTReport." The amended September2011 TRC report updated the cost ofSCR from a 2008 BART control cost study, relying on a 2010 Sargent &Lundy analysis. That amended September2011 TRC report projected the cost ofSCR for Colstrip Units 1 & 2 at $304 million, or $152 million perunit (in constant 2011 dollars).PPLis confidentthatthe B&M SCR Feasibility Analysis, which relies on more current costinformation and unit-specific characteristics, is more reliable and accurate than the prior TRC report. Nonetheless, SCR cannotbejustifiedundereithercostanalysis. At $190 million perunit (according to the enclosed B&M report), the control cost is $8,884 (2011 dollars) per ton ofNOxremoved. At $152 million perunit (according to the amended September 2011 TRC report), the control costis $7,300 (2011 dollars) perton ofNOxremoved. These costs are much higherthan the costeffectiveness thresholds setforth in EPA guidance. See, e.g., 70 Fed. Reg. 39,104,39,135-36 (July 6,2005) (BART guidelines, describing costs under $1,500/ton as cost effective). The costs are even lessjustified in light ofthe imperceptible visibility impact that would resultfrom installation ofSCR. TRC's Updated VisibilityModeling analysis examines the benefits ofvarious control technologies at Colstrip on Class I areas within 300 kilometers, for which the most affected area is UL Bend National Wildlife Refuge. The modeling shows that, even with highly conservative modeling assumptions, installing SCR would produce no perceptible improvementin visibilitybeyond that achieved with the installation ofhighly costeffective controls: SOFA for NOxreductions and lime addition for increased S02 reductions. SCR would achieve, atbest, only a0.36 deciview improvement at an annualized cost of$111 million per deciview. See Tables 1 and 2 (attached). PPLMontana is committed to continuallyimproving the air quality in Montana and the region. The Colstrip facility has substantially reduced both NOx and S02 emissions since the 2001-2003 baselineperiod for the regional haze program. PPLMontanacan, and is prepared to, achieve significant further reductions through investments in highly-costeffective controls that improve visibility. However, the analyses discussed above demonstrate thatEPA cannotjustify requiring the installation ofSCR at Colstrip Units 1 & 2. We lookforward to discussing these issues with you.
Sincerely,/'

Enclosures and Attachments

Cc: JanetMcCabe, EPA/OARAttachments

Table 1 Modeled Visibility Analysis
Modeled VISIBILITY UNITS 1 & 2 Combined"
Sulfur Dioxide Nitroqen Oxides Prediction"" Prediction Control (deciviews) Control (deciviews) Base Base 2001-2003 2.42 2001-2003 2.42

Reference# 2.15 Reference 2.15 Lime Addition 1.83 SOFA 1.79 SCR 1.43 

# I Combined Control Case of Lime Addition and SOFA 11.45 deciview

• Reported visibility for Units 1 & 2 combined. # Reference Case

- Those controls in-place as of November 2010 ""Highest modeled deciview

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Table 2 Capital Cost-Effectiveness
Deciview Control Scenario Deciview Capital $ (2011 $) Tons Rmvd (1) $!Ton (2011 $) Improvement (2) $/Dv
Base 2001-2003 2.42 Reference Case 2.15 Lime Addition S02 1.83 $3M 6,350 $223 0.32 $4.4 M SOFA NOx 1.79 $26M 4,814 $551 0.36 $7.4 M Lime Addition and SOFA Combined 1.45 $29 M 11,164 $364 0.70 $5.8 M SCR NOx 1.43 $380 M 4,493 $8,884 0.36 $110.9 M

(1) Tons removed is calculated for the total of Units 1 & 2 (2) Deciview Improvement calculated from reference case, except for the SCR case which is the incremental improvement from the SOFA case