# V~~~~·DAKOTA ADivisionofMDUResources Group, Inc. 400NorthFourth Street Bismarck., NO58501 (701)222·7900 February 27,2012 U.S. Environmental Protection Agency Region VIII 1595 Wynkoop Street Denver, CO 80202-1129 Attention: Vanessa Hinkle, 8P-AR Re: Follow-up to Response to Request for Additional Reasonable Progress Information for the Montana-Dakota Utilities Company, Lewis & Clark Generating Station, Pursuant to Section 114(a) ofthe Clean Air Act (42 U.S.c. Section 7414(a)) DearMs. Hinkle: This letter follows-up on your voicemail request ofFebruary 15, 2012 regarding MontanaDakota's February 10, 2012 letterconceming the firing ofnatural gas at Lewis & Clark Station (L&C Station). In your voicemailmessage, and during a subsequent call with you and EPA's consultant on February 22, 20 II, you requested: (a) inforl11ation in regard to the diameterofthe 22 mile long natural gas supplypipeline that would need to be constructed to ensure the supply offiml gas to L&C station in the event ofa fuel switch; (b) the cost oflignite perkilowatt hour 

### (lew hr) produced; and (c) the cost ofnatural gas perkw hrproduced. We understand that the request reOects EPA's preliminarilydeterl11ination that a switch from lignite to natural gas at L&C Station maybe technically feasible. Therefore, EPA is now attempting to detennine whether fuel switching would be cost effective. The attached document supplies the infotmation you requested. With the high cost differential projected between lignite and natural gas, we believe the average cost effectiveness would be substantiallyhigher than that prescribed in the 2005 Guidelines. 1 Ourrecent past communications with EPA express concem with the timing ofthe agency's request for a Reasonable Progress (RP) Regional Haze (RR) evaluation, the relative short amount oftime provided to respond, and now, EPA's fuel switching inquiries, which similarly provide very little time for response. Montana-Dakota therefore reserves the right to update, revise and supplement any given element ofany ofits responses to EPA's RP related inquiries as Montana-Dakota deems necessary. 1n addition, even though Montana-Dakota's promptresponse to EPA's RP inquiries demonstrates our effort to fully cooperatewith the agency, it does not reflectMontana-Dakota's agreement that, for example, fuel switching is technically feasible at By way ofreference, EPA's July 2005 BART Guidelines indicate thatpresumptive BARTcost effectiveness for S02 is anything less than $2,000 per ton ofremoved, and, for NOx, anything less than $1,500 per ton ofremoved.**Scc~,** 70 Fed. Reg. 39104, 39133 and 39135 (July 5, 2005).February 27, 2012 Page 2 

### L&C Station. Tn fact, we disagree with this conclusion and reserve the right to supply additional infonnation to EPA in the future regarding the technical feasibility offuel switching. Finally, upon concluding the February 22 conferencecall, it was agreed that EPAwould share its fuel switchingcosting analysis and conclusions with Montana-Dakotapriorto proposing the same in any Montana RH FIP. We are also renewing therequest in ourFebruary 10 lellerthat EPA discuss its final conclusions with respect to the Emission Control Analysis for Lewis & Clark Station (Feb./June 2011) so that Montana-Dakotacan efficientlyplan and execute upcoming engineering and capital projects at L&C Station in light ofEPA's RP 

### detennination. Please contact me at 701-222-7844 ifyou have questions about this letter orthe attachment. Sincerely,

# c/~ 

# /CL

. ____ s. Abbie Krebsbach Environmental Manager Montana-Dakota Utilities Co. Enclosure:

cc: 2011 Coal vs. Natural Gas CostDifferential Calculations Mr. Alan Welte, Generation Manager Mr. Bruce Beiswanger, L&C Station Manager Ms. Andrea Stomberg, VicePresident Electric Supply Mr. Joel Trinkle, BarrEngineering Company

### Lewis & 

### ClarkStation Unit1 Coal Heating Value Natural gas Cost of coal (2011) Cost of natural gas (2011) Cost of natural gas (2011) lewis & Clark Annual Fuel Use Anticipated L&C Natural Gas use Calculated Coal Consumption (tons) Calculated Natural Gas Consumption (MMsd) Calcualted Natural Gas Consumption (Mscf) Annual Cost of Coal Annual Cost of Natural Gas Cost Differential Annual net generation Average Generation (ost of Coal Average Generation Cost of Natural Gas Pipeline 

### 2011 Coal vs. Natural CostDifferentialCalculations

6.435 Btu/lb (2009 2011 average from FERC Form 1/EIA 923 reports) 1,201 MMBtu/MMscf (2009
- 2011 average from EIA 923 reports) $ 18.79 $/ton (2011 year end delivered price) $ 7.91 $/Msef $ 6.59 S/Dkt or MMBtu (2011 year end Firm gas cost)

3,941,093 MMBtu/yr (2009
- 2011 average from Performance Report) 3,941,093 MM8tu/yr

306,239 tons

3,283 MMscf 3,282,876 Mscf $ 5,754,232 $ 25,974,126 S 20,219,894 (Does not include capital cost - see capital cost estimate below)

311,248,294 kwh/yr (2009·2011 average from Performance Report)

$0.018488 $Ikwh net $0.083451 $Ikwh net length Diameter Installed Capita! Cost (2012 $) 22 miles 8 inch $ 18,000,000 (Gas Supply Department estimate) (Gas Supply Department estimate) (Gas Supply Department estimate -Includes direct, right ofway, sales tax, contingency, and MDU overhead costs. Does not include financing costs and propertytaxes.)