V~~~~·DAKOTA ADivision of MDU Resources Group, Inc.

400 North Fourth Street

Bismarck., NO 58501

(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) of the Clean Air Act (42 U.S.c. Section 7414(a))

Dear Ms. Hinkle:

This letter follows-up on your voicemail request of February 15, 2012 regarding MontanaDakota's February 10, 2012 letter conceming the firing of natural 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 diameter ofthe

22 mile long natural gas supply pipeline that would need to be constructed to ensure the supply

of fiml gas to L&C station in the event of a fuel switch; (b) the cost of lignite per kilowatt hour

(lew hr) produced; and (c) the cost of natural gas per kw hr produced.

We understand that the request reOects EPA's preliminarily deterl11ination that a switch from

lignite to natural gas at L&C Station may be 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 substantially higher than that

prescribed in the 2005 Guidelines. 1

Our recent 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 of any of its responses to EPA's RP related inquiries as

Montana-Dakota deems necessary. 1n addition, even though Montana-Dakota's prompt response

to EPA's RP inquiries demonstrates our effort to fully cooperate with the agency, it does not

reflect Montana-Dakota's agreement that, for example, fuel switching is technically feasible at

By way of reference, EPA's July 2005 BART Guidelines indicate that presumptive BART cost

effectiveness for S02 is anything less than $2,000 per ton of removed, and, for NOx, anything less than $1,500 per

ton of removed. 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 conference call, it was agreed that EPA would share its

fuel switching costing analysis and conclusions with Montana-Dakota prior to proposing the

same in any Montana RH FIP. We are also renewing the request in our February 10 leller that

EPA discuss its final conclusions with respect to the Emission Control Analysis for Lewis &

Clark Station (Feb./June 2011) so that Montana-Dakota can efficiently plan and execute

upcoming engineering and capital projects at L&C Station in light ofEPA's RP detennination.

Please contact me at 701-222-7844 if you have questions about this letter or the attachment.

Sincerely,

c/~ /CL .____ s. Abbie Krebsbach

Environmental Manager

Montana-Dakota Utilities Co.

Enclosure:

cc:

2011 Coal vs. Natural Gas Cost Differential Calculations

Mr. Alan Welte, Generation Manager

Mr. Bruce Beiswanger, L&C Station Manager

Ms. Andrea Stomberg, Vice President Electric Supply

Mr. Joel Trinkle, Barr Engineering Company
Lewis & Clark Station Unit 1

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 Cost Differential Calculations

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 $ I kwh net

$0.083451 $ I kwh 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 of way, sales tax,

contingency, and MDU overhead costs. Does not include financing costs and

property taxes.)