# MEMORANDUM TO FILE

TO: Docket No. EPA-R09-OAR- 2013-0009; Approval of Air Quality

Implementation Plans; Navajo Nation; Regional Haze Require ments for Navajo

Generating Station; Proposed Rule

FROM: Anita Lee

Date: March 18, 2013

Subject: Record of Meeting with Central Arizona Water Conserva tion District during

Public Comment Period

1. Participants at Meeting

 Janet McCabe, EPA

 Tamara Saltman, EPA

 Colleen McKaughan, EPA

 Anita Lee, EPA

 David Modeer, CAP

 Marie Pearthree, CAP

 Tracey Tucker, CAP

 Phil Lorang, OAQPS

2. Date and Location of Meeting:

 March 18, 2013, Washington, DC

3. General Statement of the Topic of Discussion:

 CAWCD expressed preference for compliance date to be as late as possible, ideally 2028

4. Copy of Any Materials Presen ted or Received (attached):CentralArizonaProjectWaterDeliveryEnergyRatesCAPHistoricalandAdoptedrates(darkblueline)reflectgradualbutsignificantcostincreasesovertime,drivenbycostsoffuel,operationsandmaintenanceandnon‐BARTregulatoryrequirements(e.g.,MATS,AshRule)–includescostofLowNOxBurners/SeparatedOverfireAir(LNB/SOFA)-Currentrate(2013)is$53peracre‐foot–paidbyallCAPcustomers,includingcities,Indiantribes,agriculturaldistrictsandindustrialcustomersTheNGSowners,theNavajoNationandPeabodyCoalareintheprocessofrenegotiatingvariouscontracts(e.g.,landlease,coalsupply)thatexpirein2019.Althoughthenegotiationsarenearingcompletion,beforeaRecordofDecision(ROD)approvingtheseagreementsmaybeenteredbytheSecretaryoftheInterior,thenewcontractsmustundergoastringentNEPAprocessthatmaytakeuptofiveyears(2018).-TheseitemsmaypushtheCAPrateabove$80(50‐60%higherthan2013)by2020(greenline)UntiltheNEPAprocessiscompleted,significantuncertaintywillstillexistwithrespecttothefutureofNGS.EvenaftertheROD,therewillbeongoingriskanduncertaintyrelatedtopotentiallitigation.UncertaintywillinfluencetheabilitytofinancemajorcapitalinvestmentssuchasthoserequiredbyBART.BARTAlternative#3(SCRin2023‐2026)wouldrequirepermitting,planninganddesignexpenditurestobeginin2018,aboutthesametimeastheRODisexpected.Majorprocurementandcapitalexpenditureswouldneedtobeginin2021,whichmaybelateenoughtoallowlong‐termfinancingforSCRs(purpleline)and,ifnecessary,baghouses(redline).-CAPratescouldexceed$100–$120(90‐125%higherthan2013)by2025BARTAlternative#1requirestheinstallationofSCRs(orangeline)orSCRsplusbaghouses(redline)2021‐2023,whichwouldentailmajorcapitalexpenditureswhilesignificantriskstillwouldexistwithrespecttoNEPA.Undersuchconditions,financingmightbeimpossibleandallofthosecostswouldhavetobeabsorbedincurrentoperatingperiodrates.-CAPrateswouldexceed$120–$150asearlyas2020(125‐200%higherthan2013)-TheNGSutilityownershavemadeitclearthatthiswouldcausethecostofNGStoexceedthatofothereconomicallyviablealternatives,andthatplantclosureisalmostcertaininthisscenarioBART=BestAvailableRetrofitTechnologyLNB=LowNOxBurnersNGS=NavajoGeneratingStationBH=Baghouse(particulatecontrol)MATS=MercuryandAirToxicStandardsSCR=SelectiveCatalyticReductionCAP=CentralArizonaProjectNEPA=NationalEnvironmentalPolicyActSOFA=SeparatedOverfireAirNGS Timing Constraints2020406080100120140160

Cost ($ per acre

‐ foot)CentralArizonaProjectWaterDeliveryEnergyRateBARTAlternative#3Historical/AdoptedCAPRatesLatestCostFiguresIncludingNGSLease&CoalSupplyAgreementWithSCR2024‐2026(BARTAlternative#3)BARTAlternative#3withBaghouses020406080100120140160

Cost ($ per acre

‐ foot)CentralArizonaProjectWaterDeliveryEnergyRateBARTAlternative#1Historical/AdoptedCAPRatesLatestCostFiguresIncludingNGSLease&CoalSupplyAgreementWithSCR2021‐2023(BARTAlternative#1)BARTAlternative#1withBaghouses