PacifiCorp currently plans to convert the coal-fired Naughton Unit 3 (330 MW) in Wyoming to a natural gas-fueled unit in 2018 and plans to retire the coal-fired Carbon Units 1 and 2 (172 MW) in Utah in April 2015.
The retirement of the Carbon plant in April 2015 is the least-cost alternative to comply with the federal Mercury and Air Toxics Standards (MATS) and other environmental regulations, PacifiCorp noted in its March 2 annual Form 10-K report. Efforts are underway to effectuate the decommissioning activities and transmission system modifications necessary to maintain system reliability following disconnection. Carbon produced 1.3 million MWh of electricity, or 2.1% of PacifiCorp’s owned generation production, during 2014.
In the meantime, the state of Utah issued a regional haze state implementation plan (SIP) requiring the installation of sulfur dioxide, nitrogen oxides and particulate matter controls on Hunter Units 1-2 and Huntington Units 1-2, covering the other PacifiCorp coal plants in Utah. In December 2012, the EPA approved the sulfur dioxide portion of the Utah regional haze SIP and disapproved the nitrogen oxides and particulate matter portions. Certain groups appealed the EPA’s approval of the sulfur dioxide portion and oral argument was heard before the U.S. Court of Appeals for the Tenth Circuit in March 2014.
In October 2014, the Tenth Circuit upheld the EPA’s approval of the sulfur dioxide portion of the SIP. The state of Utah and PacifiCorp filed petitions for administrative and judicial review of the EPA’s final rule on the best available retrofit technology (BART) determinations for the nitrogen oxides and particulate matter portions of Utah’s regional haze SIP in March 2013. Oral argument was held before the Tenth Circuit in March 2014. In May 2014, the Tenth Circuit dismissed the petition on jurisdictional grounds.
In addition, and separate from the EPA’s approval process and related litigation, the Utah Division of Air Quality has undertaken an additional BART analysis for Hunter Units 1 and 2, and Huntington Units 1 and 2, for which the public comment period closed in December 2014. The additional analysis will be provided to the EPA as a supplement to the existing Utah SIP once the Utah Division of Air Quality responds to the public comments. It is unknown whether and how this supplemental analysis will impact the EPA’s decision regarding the Utah SIP, the utility company said.
Wyoming haze situation also going through its own legal issues
The state of Wyoming issued two regional haze SIPs requiring the installation of sulfur dioxide, nitrogen oxides and particulate matter controls on certain PacifiCorp coal facilities in Wyoming. The EPA approved the sulfur dioxide SIP in December 2012. Certain groups have appealed the EPA’s approval of the sulfur dioxide SIP, and PacifiCorp has intervened in that appeal. Oral argument was held before the Tenth Circuit in March 2014. In October 2014, the Tenth Circuit upheld the EPA’s approval of the sulfur dioxide portion of the SIP.
In addition, the EPA initially proposed in June 2012 to disapprove portions of the nitrogen oxides and particulate matter SIP and instead issue a federal implementation plan (“FIP”). The EPA withdrew its initial proposed actions on the nitrogen oxides and particulate matter SIP and the proposed FIP, published a re-proposed rule in June 2013, and finalized its determination in January 2014, which aligns more closely with the SIP proposed by the state of Wyoming.
The EPA’s final action on the Wyoming SIP approved the state’s plan to have PacifiCorp install low-NOx burners at Naughton Units 1 and 2, selective catalytic reduction (SCR) controls at Naughton Unit 3 by December 2014, SCR controls at Jim Bridger Units 1 through 4 between 2015 and 2022, and low-NOx burners at Dave Johnston Unit 4. The EPA disapproved the Wyoming SIP and issued a federal implementation plan (FIP) for Dave Johnston Unit 3, where it required the installation of SCR controls by 2019 or, in lieu of installing SCR controls, a commitment to shut down Dave Johnston Unit 3 by 2027, its currently approved depreciable life. The EPA also disapproved the Wyoming SIP and issued a FIP for the Wyodak coal-fueled generating facility, requiring the installation of SCR controls within five years (by 2019). The EPA action became final on March 3, 2014.
PacifiCorp filed an appeal of the EPA’s final action on the Wyodak Facility in March 2014. The state of Wyoming has also filed an appeal of the EPA’s final action, as have the Powder River Basin Resource Council, National Parks Conservation Association and Sierra Club. In September 2014, the Tenth Circuit issued a stay of the March 2019 compliance deadline for the Wyodak Facility, pending further action by the Tenth Circuit in the appeal.
In June 2014, the Wyoming Department of Environmental Quality issued a revised BART permit providing for the Naughton Unit 3 natural gas conversion in 2018 and allowing the unit to operate on coal through 2017. In its final action, the EPA indicated it supported the conversion of the unit to natural gas and would expedite action relative to consideration of the natural gas conversion once the state of Wyoming submitted the requisite SIP amendment; nonetheless, the Naughton Unit 3 natural gas conversion remains subject to final approval by the EPA.
Arizona haze situation is a little less complicated for PacifiCorp
The state of Arizona issued a regional haze SIP requiring, among other things, the installation of sulfur dioxide, nitrogen oxides and particulate matter 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 requiring SCR controls on Cholla Unit 4. 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 issued an order on Feb. 20, 2015, holding the matter in abeyance relating to PacifiCorp and Arizona Public Service as they work with state and federal agencies on an alternate compliance approach for Cholla Unit 4. In January 2015, Arizona Public Service submitted the permit applications and studies required to amend the Title V permit, and subsequently the Arizona SIP to convert Cholla Unit 4 to a natural gas-fueled unit in 2025. The amended plan is currently awaiting review and approval by the state of Arizona and after approval will be submitted to the EPA for review and approval.
There are haze issues in Colorado, too
The state of Colorado issued a regional haze SIP, which was approved by the EPA, and requires, among other things, the installation of selective non-catalytic reduction (SNCR) technology by 2018 at Craig Unit 1, in which PacifiCorp has an ownership interest. Environmental groups appealed the EPA’s action, in which PacifiCorp intervened in support of the EPA.
In July 2014, parties to the litigation, other than PacifiCorp, entered into a settlement agreement which required the installation of SCR controls at Craig Unit 1 by 2021. PacifiCorp opposed the settlement. Nonetheless, the Tenth Circuit has granted the EPA’s remand and vacatur of its previous action, which is currently pending. The state of Colorado regional haze SIP also requires SCR controls at Craig Unit 2 and Hayden Units 1 and 2, in which PacifiCorp has ownership interests. Each of those regional haze compliance projects are underway.
Haze issues are being fought out beyond PacifiCorp. A case was filed in the Tenth Circuit appealing a FIP issued by the EPA in New Mexico. In addition, two cases involving the EPA’s issuance of a FIP were appealed to the U.S Supreme Court in 2014, one from the Tenth Circuit based on the EPA rejecting portions of the Oklahoma SIP and one from the U.S. Court of Appeals for the Eighth Circuit based on the EPA’s rejection of the North Dakota SIP. In May 2014, the U.S. Supreme Court issued its decisions denying review of the Oklahoma and North Dakota SIPs. Until the EPA takes final action in each state and decisions have been made on each appeal, PacifiCorp said it cannot fully determine the impacts of the Regional Haze Rule on its generating facilities.
PacifiCorp works at various commissions on Deer Creek shutdown approvals
In December 2014, PacifiCorp filed applications with the Utah Public Service Commission (UPSC), the Oregon Public Utility Commission (OPUC), the Wyoming Public Service Commission (WPSC) and the Idaho Public Utilities Commission (IPUC), and an advice letter with the California Public Utilities Commission (CPUC), seeking certain approvals, prudence determinations and accounting orders to close PacifiCorp’s Deer Creek mining operations, sell certain Utah mining assets, enter into a replacement coal supply agreement, amend an existing coal supply agreement, withdraw from the UMWA 1974 Pension Trust and settle PacifiCorp’s other postretirement benefit obligation for United Mine Workers of America (UMWA) unionized participants.
The applications filed with the UPSC, the WPSC and the IPUC, request that the commissions approve: closure of the Deer Creek mine; asset sales to a third party for certain Utah mining assets, including the Cottonwood Preparatory Plant; the execution of a long-term coal supply agreement for the Huntington plant and amendment to the existing long-term coal supply agreement for the Hunter plant; and the withdrawal from the UMWA 1974 Pension Trust that will be triggered upon closure of the Deer Creek mine. In the UPSC and WPSC applications, PacifiCorp’s request for approval to sell certain Utah mining assets includes the sale of the undeveloped Fossil Rock coal reserves in Utah that are currently reflected in rates in Utah and Wyoming.
In addition to the requested approvals, PacifiCorp’s applications filed with the UPSC, the WPSC and the IPUC request that the noted components of the transaction and the settlement of PacifiCorp’s other postretirement benefit obligation related to the UMWA participants be found prudent and in the public interest. PacifiCorp’s advice letter filed with the CPUC requests approval to sell certain Utah mining assets and seeks approval to establish memorandum accounts to track the costs associated with the “Utah Mine Disposition” for future recovery.
These asset sales and coal supply agreements are contingent upon regulatory approvals, which PacifiCorp has requested be issued no later than May 27 in order to close the transactions with the third party by May 31.
PacifiCorp has interests in coal mines that support its coal-fueled facilities and operates the Bridger surface and Bridger underground coal mines, as well as the Deer Creek underground coal mine that has historically served the Huntington, Hunter and Carbon generating facilities. These mines supplied 27%, 31% and 30% of PacifiCorp’s total coal requirements during 2014, 2013 and 2012, respectively. The remaining coal requirements are acquired through long- and short-term third-party contracts. PacifiCorp also operates the Cottonwood Preparatory Plant and Wyodak Coal Crushing Facility.
Due to coal quality issues and rising costs, PacifiCorp believes the Deer Creek coal reserves are no longer able to be economically mined. As a result, PacifiCorp intends to permanently close the Deer Creek mine, and in the second quarter of 2015, sell the Cottonwood prep plant to a third party.
Bowie Resource Partners LLC said back in December that it has entered into a deal with PacifiCorp to supply all of the coal requirements of the Huntington plant through 2029 (estimated at about 2.8 million tons per year). Bowie said Dec. 16 that the deal also covers it acquiring approximately 50 million tons of undeveloped, high-Btu, low-sulfur coal reserves in Utah from PacifiCorp, which is the Fossil Rock reserve. Bowie in 2013 bought the three deep mines in Utah of Arch Coal (NYSE: ACI).
PacifiCorp is a vertically integrated electric utility company serving 1.8 million retail customers, including residential, commercial, industrial, irrigation and other customers in portions of the states of Utah, Oregon, Wyoming, Washington, Idaho and California. PacifiCorp owns, or has interests in, 75 thermal, hydroelectric, wind-powered and geothermal generating facilities, with a net owned capacity of 11,136 MW. PacifiCorp delivers electricity to customers in Utah, Wyoming and Idaho under the trade name Rocky Mountain Power and to customers in Oregon, Washington and California under the trade name Pacific Power.