Appeals court denies PNM request for stay over San Juan emissions

The U.S. Tenth Circuit Court of Appeals in Denver on March 1 denied requests by Public Service Co. of New Mexico (PNM) and others to put on hold a new U.S. Environmental Protection Agency visibility requirement for the coal-fired San Juan power plant near Farmington, N.M.

The court will now consider the merits of appeals of the requirement by PNM, the New Mexico Environment Department and New Mexico Gov. Susana Martinez. Those parties maintain that EPA’s mandate would cost New Mexico electric ratepayers and others $750m or more while an alternative plan from the state of New Mexico plan could meet the same federal visibility rules for $77m, or about one-tenth of the cost.

“We remain committed to resolving this issue and, ultimately, to installing the most cost-effective, new visibility controls on the San Juan power plant,” said Pat Vincent-Collawn, Chairman, President and CEO of PNM parent company PNM Resources (NYSE:PNM), in a March 1 statement. “In the meantime, we have a strong case to make that EPA violated the Clean Air Act and its own regulations in determining the best available retrofit technology for the plant.”

Vincent-Collawn added: “Today’s decision does increase our focus on convincing EPA administrators to quickly approve the New Mexico plan and, prior to taking that action, put the EPA requirement on hold. These actions are consistent with the Clean Air Act and EPA’s regulations and will serve interests of New Mexico’s economy and its electric consumers. The EPA has full, discretionary authority to grant that stay today.”

EPA’s aggressive, five-year compliance deadline for the San Juan plant to install the agency’s chosen technology for NOx control, selective catalytic reduction (SCR), requires PNM to begin preparing to install that technology now even though the court ultimately could find it unnecessary.

PNM on Jan. 27 issued a request for proposals for design and construction of SCR technology at San Juan. PNM said about $246m of the total expected project cost will be spent through 2013 – a timeframe in which the matter could still be pending in court. As owner of 46% of the plant, PNM’s portion of these initial SCR costs total about $22m through the end of this year and about $113m in total through the end of 2013.

New Mexico regulators have approved a plan to meet the visibility rules by installing cheaper selective non-catalytic reduction (SNCR) on all units at the San Juan plant. PNM supports that plan, which would reduce San Juan’s emissions of NOx by 20% annually. Combined with reductions resulting from a major environmental upgrade completed in 2009, this would represent an annual NOx reduction of 73% from 2006 levels.

“In light of the court’s order denying the pending motions for stay, and in accord with our order dated November 22, 2011, the parties shall confer, and, within 15 days of the date of this order, shall file a proposed schedule for merits briefing,” said a second March 1 order from the appeals court. “We urge the parties to coordinate and to file, if possible, a single proposed schedule. If they cannot agree, however, separate proposals may be filed.”

PNM argues for state plan over federal plan

In Feb. 17 arguments for the stay, PNM said that a contention by EPA and the environmental groups intervening in this case on the side of EPA “hinge” on the faulty premise that EPA could promulgate its Best Available Retrofit Technology (BART) federal implementation plan (FIP) without considering New Mexico’s very different state implementation plan (SIP). “EPA asserts that an obligation to consider a SIP submittal received after a FIP proposal could forever delay FIP promulgation through serial fraudulent SIP submissions,” PNM argued. “No such danger exists here. The exceptional deference to state decision making required by the [Clean Air Act]’s regional haze provisions, and the fact that New Mexico’s SIP is, on its face, legitimate and approvable, required EPA to engage the SIP submittal prior to voluntarily deciding to promulgate its FIP.”

An obligation to look at a submitted SIP before promulgating a FIP would not paralyze EPA’s ability to fulfill its Clean Air Act (CAA) obligations “by opening the floodgates to unscrupulous state actions,” said PNM. “To the contrary, Movants’ position is premised on the unremarkable proposition that EPA cannot wholly disregard a SIP once it is submitted, but must evaluate it to determine whether it is facially approvable. Under such a test, if a submitted BART SIP is a sham or plainly unapprovable, EPA could simply announce its view that the FIP may be promulgated because the SIP submittal does not ‘satisf[y] the standards’ of the CAA. If, however, EPA determines the SIP could satisfy the Act’s basic requirements, then it would be inconsistent with the CAA’s assignment to states of primary BART-determining authority for EPA to disregard that submission and proceed to FIP promulgation without taking some formal action on the SIP.”

The San Juan plant, fed with captive coal from nearby mines of BHP Billiton, consists of four units operated by PNM. Units 1, 2, 3, and 4 have net rated capacities of 340 MW, 340 MW, 498 MW and 523 MW, said PNM Resources’ Feb. 29 annual Form 10-K filing.

San Juan Units 1 and 2 are owned on a 50% shared basis with Tucson Electric Power. San Juan Unit 3 is owned 50% by PNM, 41.8% by Southern California Public Power Authority, and 8.2% by Tri‑State Generation and Transmission Assn. San Juan Unit 4 is owned 38.457% by PNM, 28.8% by MSR Public Power Agency, 10.04% by the city of Anaheim, Calif., 8.475% by the city of Farmington, N.M., 7.2% by the county of Los Alamos, N.M., and 7.028% by Utah Associated Municipal Power System.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.