PacifiCorp reported in its Nov. 1 Form 10-Q filing at the SEC that it is facing a number of regional haze mandates impacted coal-fired power plants in several of the western U.S. states it serves.
The state of Utah issued a regional haze state implementation plant (SIP) requiring the installation of SO2, NOx and particulate controls on the coal-fired Hunter Units 1-2, and Huntington Units 1-2. In December 2012, the EPA approved the SO2 portion of the Utah regional haze SIP and disapproved the NOx and particulate matter portions.
Certain groups have appealed the EPA’s approval of the SO2 portion. The state of Utah and PacifiCorp filed petitions for review of the EPA’s final rule on the best available retrofit technology (BART) determinations in Utah’s regional haze SIP in March 2013. In addition, and separate from the EPA’s approval process and related litigation, the Utah Division of Air Quality is undertaking an additional BART analysis for Hunter Units 1-2, and Huntington Units 1-2, which will be provided to the EPA as a supplement to the existing Utah SIP. It is unknown whether and how this supplemental analysis will impact the EPA’s decision regarding the existing SIP.
The state of Wyoming issued two regional haze SIPs requiring the installation of SO2, NOx and particulate controls on certain PacifiCorp coal-fueled facilities in Wyoming. The EPA approved the SO2 SIP in December 2012, but initially proposed in June 2012 to disapprove portions of the NOx and particulate SIP and instead issue a federal implementation plan (FIP).
The EPA withdrew its initial proposed actions on the NOx and particulate SIP and the proposed FIP, and in June 2013, published a re-proposed rule to disapprove portions of the SIP and instead issue a FIP. The EPA proposed to:
- approve the installation of selective catalytic reduction (SCR) equipment at Jim Bridger Unit 3 by Dec. 31, 2015;
- approve the installation of SCR at Jim Bridger Unit 4 by Dec. 31, 2016;
- approve installation of SCR at Jim Bridger Unit 2 by Dec. 31, 2021;
- approve the installation of SCR at Jim Bridger Unit 1 by Dec. 31, 2022; and
- approve the installation of SCR and a baghouse at Naughton Unit 3 by Dec. 31, 2014.
However, the EPA accepted comments on PacifiCorp’s planned conversion of Naughton Unit 3 from coal to natural gas. Until the EPA approves the natural gas conversion, PacifiCorp remains under an obligation to comply with the SIP.
The EPA also proposed to reject the SIP for the Wyodak coal facility, Naughton Units 1 and 2 and Dave Johnston Units 3 and 4; and to require within five years, the installation of selective non-catalytic reduction (SNCR) equipment at the Wyodak facility and Dave Johnston Unit 4, and SCR at Naughton Units 1 and 2 and Dave Johnston Unit 3. The EPA also proposed to require the installation of low-NOx burners and overfire air systems at Dave Johnston Units 1 and 2 by July 31, 2018.
The EPA held three public hearings in June and July 2013, and the public comment period closed Aug. 26, 2013. The EPA is under a consent decree entered into with environmental groups to take final action on its proposed action by November 2013. In the meantime, certain groups have appealed the EPA’s approval of the SO2 SIP, and PacifiCorp has intervened in that appeal.
The state of Arizona issued a regional haze SIP requiring, among other things, the installation of SO2, NOx and particulate controls on the coal-fired Cholla Unit 4. The EPA approved in part, and disapproved in part, the Arizona SIP and issued a FIP for the disapproved portions.
PacifiCorp filed an appeal in the U.S. Court of Appeals for the Ninth Circuit regarding the FIP as it relates to Cholla Unit 4, and the Arizona Department of Environmental Quality and other affected Arizona utilities filed separate appeals of the FIP as it relates to their interests. The Ninth Circuit has not made any decisions in regard to these appeals.
In April 2013, the EPA granted in part PacifiCorp’s February 2013 petition for reconsideration relating to the compliance methodology for NOx at Cholla Unit 4. The EPA plans to publish a notice of proposed rulemaking seeking comment on an alternative compliance methodology for NOx at Cholla Unit 4, and PacifiCorp will have an opportunity to submit comments on that methodology.
Court cases in play in other states that impact PacifiCorp’s haze situation
In a matter affecting PacifiCorp’s regional haze situation, a case is pending before the U.S. Court of Appeals for the Tenth Circuit with regard to a similar appeal of a FIP issued by the EPA in New Mexico. A three-judge panel of the Tenth Circuit issued a ruling on an appeal of a FIP issued by the EPA rejecting portions of the Oklahoma SIP, denying the state’s and utility’s challenge. In September 2013, the state and utility filed petitions for review by the full court of the Tenth Circuit’s decision in the Oklahoma case. Legal challenges of the EPA’s final action on the Utah or Wyoming FIP would be filed in the Tenth Circuit.
The U.S. Court of Appeals for the Eighth Circuit recently issued a ruling on an appeal of a FIP issued by the EPA rejecting portions of the North Dakota SIP. The Eighth Circuit denied the state’s and utilities’ challenge in certain respects, but vacated and remanded a portion of the EPA’s action relating to the EPA’s refusal to take into consideration any existing pollution control technology in use at the source when it issued its FIP. PacifiCorp has raised similar concerns regarding the existing controls in use at the source to the EPA in the issuance of its Wyoming FIP and has filed comments relating to the Eighth Circuit decision with the EPA.
“Until the EPA takes final action in each state and decisions have been made on each appeal, PacifiCorp cannot fully determine the impacts of the Regional Haze regulation on its generating facilities,” the Form 10-Q said.
PacifiCorp has been spending money this year on coal plant compliance
Forecasted capital expenditures for PacifiCorp, which exclude amounts for non-cash equity AFUDC and other non-cash items, are approximately $1.1bn for calendar 2013 and include the following:
- $247m for transmission system investments, including projects for the Energy Gateway Transmission Expansion Program, which includes construction costs of $104m for the Sigurd-Red Butte transmission line, $54m for the Mona-Oquirrh transmission line that was placed in-service in May 2013 and $41m for other segments that are expected to be placed in-service over the next several years, depending on siting, permitting and construction schedules.
- $157m for construction of the gas-fired Lake Side 2 power facility, which is expected to be placed in-service in 2014.
- $68m for environmental projects, which includes emissions control equipment to meet air quality and visibility targets, including the reduction of SO2, NOx and particulates. This estimate includes the installation of new or the replacement of existing emissions equipment at a number of units at several of PacifiCorp’s coal-fueled facilities, including Hunter Unit 1 and Jim Bridger Units 3 and 4.