Edward Z. Fox Tel 602/250-2916 Mail Sta tion 9085 

Vice President Fax 6021250-3002 PO Box 539 99 

and Chief Sustainabilily Officer edward .fox@ aps.com Phoeni x, AZ 85072 -3999 

November 24,2010 

The Honorable Jared Blumenfeld, 

Regional Director, Region IX 

U.S. Environmental Protection Agency 

75 Hawthorne Street 

San Francisco, California 94105-3901 

Re: EPA-R09-0AR-20 1 0-0683: Source Specific Federal Implementation Plan for 

Implementing Best Available Retrofit Technology for Four Comers Power Plant: 

Navajo Nation 

Dear Mr. Blumenfeld: 

On October 19,2010 the U.S. Environmental Protection Agency (EPA or the Agency) 

published a proposed Source Specific Federal Implementation Plan for Implementing Best 

Available Retrofit Technology for Four Corners Power Plant: Navajo Nation (the Proposed FLP) 

75 Fed. Reg. 64221 (Oct. 19,2010). The Proposed FIP would require the Four Corners Power 

Plant (Four Comers or the Plant), located on the Navajo Nation, to achieve specific emission 

reductions of nitrogen oxide (NOx) and particulates (PM) to comply with the Best Available 

Retrofit Technology (BART) requirements of the visibility protection program under the Clean 

Air Act. 42 U.S .c. 7491A. The Proposed FIP would also impose new opacity limits for the 

electric generating units at the Plant and for fugitive dust associated with material handling_ The 

Proposed Rule solicits comments by December 20,2010. 

Arizona Public Service Company (APS or the Company) intends to submit detailed 

comments addressing the many issues raised in the Proposed FLP. However, since EPA issued 

the Proposed FIP, an important event has occurred that may have significant implications, both 

within and beyond the context of the Proposed FIP. This event presents a unique opportunity to 

satisfy the Clean Air Act BART requirements in a manner that, compared to EPA's Proposed FIP 

is more cost effective, achieves better visibility improvement and more significant emission 

reductions from the Plant, and assures that the employment and economic benefits of the Plant for 

the Navajo Nation and local economy are sustained. 

Cdiso ~The~ 

· Winner of 2008 Edison Award 

2oou~ard In recognition of in novative leadership and J.:DJ.~ON r.! r ' TRIC ,r-:STlTUH. operational excellence In the electric industry 
The purpose of this letter is to outline APS's proposal to EPA. As we discussed with Ms. 

Jordan and Ms. McKaughan in our offices on November 9, this is a proposal to resolve all issues 

associated with several Clean Air Act programs. Specifically, and as described in detail below, 

our proposal is to close Four Corners Units 1-3 by 2014 and to install selective catalytic reduction 

technology (SCRs) on Units 4 & 5 by 2018, in exchange for EPA's agreement that these actions 

resolve Four Comers' obligations under the BART, reasonably attributable visibility impairment 

(RA VI) BART, New Source Review (NSR) and historical New Source Performance Standards 

(NSPS) programs of the Clean Air Act. 

BACKGROUND 

On November 8,2010, APS announced that it has reached an agreement with Southern 

California Edison (SCE) to purchase SCE's ownership share of Units 4 & 5 at the Plant (the 

Agreement). SCE made the decision to divest from Four Comers based upon the California 

Public Utilities Commission's (CPUC's) rules' precluding California utilities from making "life 

extension" investments in electric generating units that do not meet a specified emissions 

standard. The Agreement requires regulatory approvals from several agencies, including the 

CPUC, Federal Energy Regulatory Commissions, and the Arizona Corporation Commission. The 

Agreement establishes an anticipated closing date of October 2012.2 Both parties must obtain the 

necessary regulatory approvals before the transaction can close. 

On a parallel track, APS and the other co-owners will be required to begin making 

significant capital expenditures to comply with final BART requirements, four to five years in 

advance of the effective compliance date of the new BART rule. Accordingly, if EPA issues final 

BART rule in early 2011, APS and the co-owners would need to begin spending significant 

dollars almost immediately, to assure compliance with the 2016 deadline. 

The timing of the closing of the SCE transaction, when superimposed on the schedule to 

begin capital expenditures to meet anticipated BART requirements, presents a significant 

challenge. Neither APS nor any other co-owner will be willing to spend capital on required 

pollution control upgrades if the transaction with SCE has not closed: who would pay SCE's 

48% share of those costs, with no certainty regarding future ownership of that share? In short, if 

capital expenditures for SCRs for NOx control are required before the deal with SCE closes, the 

co-owners may simply elect to close the entire Plant (all five units), rather than assume the risk of 

a multimillion dollar expenditure for which there may be no subsequent recovery. 

Significantly, APS also announced that, if the deal closes, APS will close Units 1-3 at 

some point in the future. 3 APS has not committed to a date certain for closing Units 1-3. 

In 2007, the CPUC promulgated the Greenhouse Gas Emissions Perfonnance Standard, prohibiting California load serving entities 

from making "life extension" investments in electric generating units that do not meet a specified emission limitation for greenhouse 


gases. 


2 The closing may occur before or after that date, but the purchase price varies accordingly. U the closing has not occurred by 


December 31, 2012, either SCE or APS may tenninate the transaction. 


) The Agreement is also contingent upon a lease extension being approved by the Navajo Nation Council and a new fuel purchase 


agreement being executed with BHP Billiton. 


2 

I 
THE APS PROPOSAL 

Four Comers is currently faced with uncertainty on all sides: we have not yet 

consummated our transaction with SCE; we are facing potential BART costs of $1 billion for 

controls at a Plant at which one owner has announced its intent to divest by 2016; the National 

Parks Conservation Association petitioned the United States Departments of the Interior and 

Agriculture to certify to EPA visibility impairment reasonably attributable to Four Corners; we 

received a Notice of Intent to Sue from EarthJustice concerning alleged NSR and NSPS 

violations; and we have received and responded to an EPA Clean Air Act § 114 request for 

information concerning historic Plant projects, presumably in the context of an NSR 

investigation. In addition, we are facing myriad additional environmental regulations in the 

future, including mercury, coal combustion residues, ozone, carbon and others. APS' proposed 

approach resolves these critical uncertainties, protects and enhances the environment, assures the 

Navajo Nation economic stability, and provides APS the flexibility it needs to manage the risks 

associated with finalizing this transaction. 

To synchronize the timing of the transaction with SCE and the beginning of BART 

expenditures, APS proposes closing Units 1-3 by 2014. This action would result in Plant-wide 

NOx emission reductions of 16,184 tons per year, from 45,132 today to 28,948 tons. By taking 

this action by 2014, the environment would benefit a full three years ahead of the NOx and PM 

emission reductions that would occur under the EPA proposal. In addition, the benefits would 

include reductions in S02, mercury and C02 emissions and a reduction in the use of water. 

APS would begin the process of engineering new SCRs for Units 4 & 5 no later than 

2014 and would have those controls installed and operational by the end of 2018. While 2018 is 

two years later than the timeframe that would be required under a 2011 BART rule by EPA, the 

APS plan would result in greater emission reductions in 2018 and beyond than would occur 

under EPA's final BART rule. 

Table 1 below shows NOx emission reductions resulting from the closure of Units 1-3 for 

the years 2014 to 2018, for both the Proposed FIP and the APS proposal. Under the APS 

proposal, the Plant-wide NOx emissions during this five year period would be 9,024 tons less 

than under the EPA's proposal. Furthermore, starting in 2019, annual NOx emissions from the 

Plant will be significantly lower than the emission limit included in the Proposed FIP. 

Table 1 


Four Corners Power Plant NOx Emissions (tons) 


Comparison of EPA BART Proposal and APS Alternate Proposal 


2014 2015 2016 2017 2018 2019 

Total 

(2014 ­

2018) 

EPA 

Proposal 45,132 45,132 45,132 9,184 9,184 9,184 153,764 

APS 

Proposal 28,948 28,948 28,948 28,948 28,948 6,498 144,740 

• Emissions are in short tons and assumes a plant-wide capacity factor of 91 % 

3 
Table 2 below shows emission reductions of other pollutants that would result from 

closing Units 1-3. The APS proposal results in significant reductions of all relevant pollutants, 

including a 30% reduction in the Plant's carbon footprint. 

Table 2 


Reductions Closing Units 1,2 and 3 


NOx (tons) 16,184 104,958 

S02 (tons) 2,852 68,448 

Particulate 

Matter (tons) 678 16,272 

Mercury 

(Ibs) 361 8,664 

Water (Acrefeet) 6,000 144,000 

C02 (tons) 5.2M 125M 

* Current emissions 

**Cumulative values assume APS proposal and continuing 

operations through 2037 prior to end of new lease. 

After SCRs are installed on Units 4 & 5 in 2018, NOx emissions at the Plant would be 6,498 tons 

per year, compared to emissions under a fully implemented BART FIP of 9, 184 tons per year. 

The APS proposal not only results in earlier and greater emission reductions than the 

Proposed FIP; the APS proposal, if implemented, would result in regional visibility improvement 

three years earlier than under the Proposed FIP and in greater overall improvement after controls 

are installed on Units 4 & 5. APS' consultant (ABCOM) ran the CALPUFF Model Version 5.8 

with the same input parameters EPA used for its Proposed FW (including the IWAQM 

background ammonia concentrations) for current emissions (baseline), Proposed FIP emissions 

level, and two additional emissions scenarios: a) with zero emissions from Units I, 2, and 3; and 

b) with SCR emissions level specified in the Proposed FIP for Units 4 & 5. CALPUFF predicted 

deciview (DV) values for these four cases are shown below for the 16 Class I areas included in 

the analysis. Clearly, the APS proposal (yellow bar) shows better visibility improvement than 

under the Proposed FIP (blue bar) for all the 16 Class I areas. In fact, closing Units 1-3 alone 

(green bar) shows significant DV change from the baseline levels (red bar). 

Clearly, closing Units 1-3 would result in significant changes in DV and, if closed in 

2014, the improvement would occur three years before the Proposed PIP requirements are in 

place. Additionally, the emission reductions from installing SCRs on Units 4 & 5 in 2018 would 

result in even greater visibility improvement than would be achieved under the Proposed FIP. 

4 
Arizona Public Service Four Corners Power Plant 


CALPUFF V5.8 Regional Haze Impacts using IWAQM Ammonia Background Concentrations 


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In addition to BART resolution, APS wishes to resolve any potential liability under the 

RA VI BART, NSR and NSPS programs as part of this settlement. It would be imprudent of APS 

to agree with EPA on a schedule to install SCRs, only to have an intervening lawsuit (by EPA or 

the environmental groups) accelerate that schedule or impose additional requirements. 

Accordingly, our proposal to close Units 1-3 in 2014 and install SCRs in 2018 includes a full 

resolution of RA VI BART and all potentially alleged historic NSR and/or NSPS violations. 

CONCLUSION 

We respectfully submit that this proposal, made possible by the opportunity to acquire 

SCE's share of Units 4 & 5, deserves serious consideration by EPA. It is quite simply a win-win 

for everyone: for EPA, the environmental groups, the Navajo Nation and APS. 

It is a win for EPA and the environmental groups. The proposal achieves earlier and 

greater emission reductions, and greater visibility improvement, than would be achieved under 

EPA's Proposed FIP. The three older units would be permanently closed down, substantially 

reducing emission of NOx, S02, PM, mercury and greenhouse gases. The remaining newer units 

will be upgraded with state-of-the art SCRs, on a timeline that assures continuing visibility 

improvement. 

It is a win for the Navajo Nation. APS is a significant contributor to the economic 

stability of the Nation, comprising approximately 35% of the Nation's general fund. Together, 

Four Comers and the Navajo mine provide jobs to roughly 1,000 people, more than 75% of 

whom are Native American. Both APS and the mine have pledged not to lay any employees off 

if Units 1-3 close. The combined annual payroll is over $100 million, and the Nation receives 

approximately $65 million in tax and royalty payments annually as a result of Plant operations. 

Federal, state, and local economies also benefit from nearly $40 million in tax payments that Four 

Corners and the Navajo mine make each year. Plant operations support local vendors as well, 

contributing an estimated $20 million annually for the services and goods those vendors provide. 

S 
If the Plant shuts down entirely, these tremendous benefits evaporate, potentially 

crippling the already fragile economy and exacerbating the Navajo Nation's already high 

unemployment rate. Under APS's proposal, the Nation and surrounding community will continue 

to benefit from over .$\ 00 million in yearly payroll revenue - a critical asset to the local economy. 

The Nation also will continue to receive more than $60 million annually in tax, fee and royalty 

contributions, due to the continued operation of Units 4 & 5. 

Finally, it is a win for APS. The proposal affords us the flexibility necessary to complete 

the transaction with SCE and to thoughtfully plan for and implement the future pollution 

upgrades to Units 4 & 5, and it provides much needed regulatory certainty. 

We respectfully request that EPA give thoughtful consideration to our proposal. 

CC: 

Deborah Jordan 

Colleen McKaughan 

Anita Lee 

EPA Docket Center (EPA-R09-0AR-2010-0683; FRL-9213-7) 

6