EPA holds off on NOx BART mandate for San Juan coal plant

The U.S. Environmental Protection Agency is taking no action for the moment on a NOx Best Available Retrofit Technology (BART) determination for the coal-fired San Juan power plant in New Mexico.

EPA noted in a Nov. 27 Federal Register notice that it is approving New Mexico State Implementation Plan (SIP) revisions submitted in July 2011 and December 2003 by the governor of New Mexico addressing the regional haze requirements for the 16 Class I areas covered by the Grand Canyon Visibility Transport Commission Report and a separate submittal for other federal mandatory Class I areas. It is also taking final approval action on all components of the state’s submittals except for the submitted NOX BART determination for the San Juan Generating Station (SJGS).

EPA is also approving several SIP submissions offered as companion rules to the regional haze plan, including submitted regulations for the Western Backstop Sulfur Dioxide Trading Program, for the inventorying of emissions, for smoke management, and open burning. This final rule is effective Dec. 27, 2012.

EPA issued a notice of this proposed rulemaking in the Federal Register on June 15, 2012. It didn’t include a NOX BART requirement for SJGS because that is satisfied by the BART determination that has been promulgated under a recent federal implementation plan (FIP). EPA issued a temporary stay of the effectiveness of the New Mexico FIP rule for 90 days on July 16, 2012, and this temporary stay was extended an additional 45 days to Nov. 29, 2012. The temporary stays are to allow additional time to discuss new and potentially different methods for complying with the NOX BART requirements for the SJGS and to receive additional information from the state of New Mexico required for EPA to consider the state’s different method and for further discussion among the stakeholders.

“If this approach leads to an additional regulatory proposal, it will be the subject of a separate, future rule making,” EPA said in the Nov. 27 notice. “Because today’s action does not include any action on the State’s NOX BART determination for the SJGS, this final action is not affected by the ongoing discussions to consider replacing the NM FIP Rule.”

PNM planning for expensive SCRs, just in case

In its Nov. 2 Form 10-Q report, PNM Resources (NYSE: PNM), the parent of San Juan co-owner Public Service Co. of New Mexico, outlined a long legal process that has led up to this point and the ongoing effort to find a NOx BART alternative for the plant. “Notwithstanding the above process, the unchanged compliance deadline of the FIP requires PNM to continue to take steps to commence installation of [selective catalytic reduction] at SJGS,” it added. “In April 2012, PNM received bids for this project from several bidders pursuant to its RFP. After further negotiations with the bidders, PNM entered into a contract on October 31, 2012 with an engineering, procurement, and construction contractor to install SCRs and is negotiating a contract with an engineering firm for construction management services on behalf of the SJGS owners. The construction contract includes termination provisions in the event that SCRs are determined in the future to be unnecessary. The construction contract contains a cost estimate, which will be refined through an ‘open book’ subcontractor bidding process with final costs to be determined by June 30, 2013. Based on the indicative bid for construction, PNM estimates the total cost to install SCRs on all four units of SJGS will be between approximately $824 million and $910 million, which amounts include costs for construction management, gross receipts taxes, AFUDC, and other PNM costs.”

Based on a recently completed conceptual design study, PNM currently estimates the installation of alternative selective non-catalytic reduction (SNCR) on all four units of SJGS would cost between $85m and $90m. If SNCRs are installed at SJGS, additional equipment would be required to be installed to meet National Ambient Air Quality Standards (NAAQS) requirements, the cost of which is estimated to total between $105m and $110m for all four units of SJGS. The estimates for SNCRs and the NAAQS requirements include gross receipts taxes, AFUDC, and other PNM costs.

PNM’s share under either SCRs or SNCRs would be about 46.3% based upon its SJGS ownership interest. Plant operating costs would also increase with the installation of either SCRs or SNCRs.

PNM Resources said its utility subsidiary anticipates filing a request with the New Mexico Public Regulation Commission in late 2012 or early 2013 for approval of the SCR project and to recover SCR costs in rates charged to customers.

Due to the compliance deadline under the FIP, PNM is preparing to install SCRs at SJGS while simultaneously pursuing two other paths regarding BART at SJGS. PNM continues to pursue litigation in the U.S. Court of Appeals for the Tenth Circuit. PNM is also participating in discussions regarding an alternative to the FIP and SIP.

SJGS Units 1 and 2 have a unit capacity of 350 and 360 MW, respectively. Units 3 and 4 each have a unit capacity of 544 MW.

PNM tells court that agency action was a ‘rush to judgment’

In a Sept. 14 PNM brief filed in the Tenth Circuit case against EPA, the utility said: “EPA’s conduct ignored constraints Congress imposed on EPA’s authority to adopt federal implementation plans (‘FIPs’) that would contradict a submitted SIP awaiting EPA’s approval. Rather than coordinate final action on the submitted SIP with final action on the proposed FIP, EPA chose to promulgate immediately a combined Interstate Transport and BART FIP, asserting that immediate promulgation of a combined limit was needed to avoid ‘confusion’ by petitioner Public Service Company of New Mexico (‘PNM’) and provide PNM ‘certainty.’ The disingenuous goal of providing ‘certainty’ does not excuse noncompliance with the principle of state primacy established in CAA § 110.”

EPA’s “rush to judgment” is also reflected in its fundamentally flawed BART analysis for San Juan, PNM added. PNM submitted the results of site-specific cost analyses during and after the public comment period in EPA’s FIP rulemaking. “Those analyses contradicted generic cost estimates on which EPA relied,” the utility said. “Disregarding substantial evidence that San Juan BART costs would greatly exceed EPA’s estimates, EPA proceeded to finalize its FIP. Following EPA’s rush to promulgation, PNM submitted more detailed engineering analyses and vendor bids to EPA, confirming errors in EPA’s cost estimates that PNM had identified in its rulemaking comments based on its site-specific cost analysis. While EPA was using artificially deflated cost estimates to try to justify selective catalytic reduction (‘SCR’) as BART for SJGS (and ignoring the BART Guidelines’ directive to conduct an assessment of incremental cost-effectiveness of BART candidate controls), EPA manufactured inflated visibility-benefit projections to try to establish SCR’s cost-effectiveness. To accomplish this, EPA relied on a hypothetical ‘cumulative’ visibility improvement analysis that departed from the BART Guidelines. EPA also ignored the BART Guidelines’ requirement to justify any deviation from the ‘presumptive’ BART limit for facilities like San Juan. In addition, EPA arbitrarily refused to use updated models and real-world data in projecting visibility impacts, disregarded substantial evidence of the unachievability of the Final Rule’s emission limit, and failed to allow the plantwide compliance averaging method contemplated by its own BART Guidelines.”

All of these defects illustrate that EPA was committed to having its BART policy decision trump New Mexico’s very different policy choice, PNM wrote. “EPA could do this only through hurriedly promulgating its proposed BART FIP in preference to New Mexico’s NOx BART SIP, on which EPA still, over a year later, has taken no action.”

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.