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 Honorable James 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 for Montana

Update on PPL Montana Colstrip Units 1 & 2 NOx BART Cost-Effectiveness and

Visibility Modeling

Dear Administrator Martin:

Enclosed for your consideration are three documents related to Region 8's development

of the 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

Report prepared 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 letter for 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 of the foremost engineering and construction companies in the country, with

extensive experience designing and installing pollution control equipment at power plants.

B&M also has direct knowledge of Colstrip 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 per unit (in

constant 2011 dollars). The B&M SCR Feasibility Analysis is a detailed, 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 September 2011 TRC report, entitled "NOx

Control Update to PPL Montana's Colstrip Generating Station BART Report." The amended

September 2011 TRC report updated the cost of SCR from a 2008 BART control cost study,

relying on a 2010 Sargent & Lundy analysis. That amended September 2011 TRC report

projected the cost of SCR for Colstrip Units 1 & 2 at $304 million, or $152 million per unit (in

constant 2011 dollars).
PPL is confident that the B&M SCR Feasibility Analysis, which relies on more current

cost information and unit-specific characteristics, is more reliable and accurate than the prior

TRC report. Nonetheless, SCR cannot be justified under either cost analysis. At $190 million

per unit (according to the enclosed B&M report), the control cost is $8,884 (2011 dollars) per ton

of NOx removed. At $152 million per unit (according to the amended September 2011 TRC

report), the control cost is $7,300 (2011 dollars) per ton of NOx removed. These costs are much

higher than the cost effectiveness thresholds set forth 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 less justified in light of the imperceptible visibility impact that would

result from installation of SCR. TRC's Updated Visibility Modeling analysis examines the

benefits of various 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 improvement in visibility beyond that achieved with the installation of highly costeffective controls: SOFA for NOx reductions and lime addition for increased S02 reductions.

SCR would achieve, at best, only a 0.36 deciview improvement at an annualized cost of $111

million per deciview. See Tables 1 and 2 (attached).

PPL Montana is committed to continually improving the air quality in Montana and the

region. The Colstrip facility has substantially reduced both NOx and S02 emissions since the

2001-2003 baseline period for the regional haze program. PPL Montana can, and is prepared to,

achieve significant further reductions through investments in highly-cost effective controls that

improve visibility. However, the analyses discussed above demonstrate that EPA cannot justify

requiring the installation of SCR at Colstrip Units 1 & 2.

We look forward to discussing these issues with you.

Sincerely,

/'

Enclosures and Attachments

Cc: Janet McCabe, EPA/OAR
Attachments

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 --

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