EPA proposes new SO2 limits for Sherco coal plant under legal settlement

The U.S. Environmental Protection Agency is proposing to revise the Minnesota Federal implementation plan (FIP) for regional haze, to establish emission limits for Northern States Power‘s (NSP) coal-fired Sherburne County (Sherco) Units 1 and 2 under a settlement agreement with environmental groups.

The settlement, signed by representatives of EPA, NSP, and three environmental groups, was for resolution of a lawsuit filed by the environmental groups for EPA to address any contribution from Sherco to reasonably attributable visibility impairment (RAVI) that the Department of Interior (DOI) certified was occurring at Voyageurs and Isle Royale National Parks.

A proposed rule to implement that agreement is to be published in the Oct. 27 Federal Register, and EPA will take comment on the proposal for 30 days beyond that date.

The 2,222-MW Sherco plant is located at Becker, Minn., 45 miles northwest of the Twin Cities, on the Mississippi River. The Sherco units are:

  • Unit 1 – 680 MW – commercial start in 1976;
  • Unit 2 – 682 MW – commercial start in 1977; and
  • Unit 3 – 860 MW – commercial start in 1987.

In October 2009, DOI certified to EPA that RAVI was occurring at the Voyageurs and Isle Royale National Parks, in Northern Minnesota and Northern Michigan, respectively, citing studiies that in DOI’s view demonstrated that Sherco in northern Minnesota was the source of this RAVI. Separately, Minnesota submitted its regional haze plan in December 2009, and submitted a proposed supplemental submission in January 2012. In this plan, Minnesota proposed no emission limits for Sherco (or for other electric generating units (EGUs) in Minnesota), relying instead on federal trading program rules known as the Transport Rule to satisfy pertinent requirements for best available retrofit technology (BART).

EPA proposed to approve this element of Minnesota’s plan in January 2012, but stated that this proposal did not address whether Minnesota had satisfied the requirements that applied as a result of DOI’s certification of RAVI. Minnesota submitted a final supplemental regional haze plan in May 2012. In this submittal, Minnesota submitted source-specific limits on sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions from Sherco, which it found to represent BART. These limits applied to the common stack serving Units 1 and 2, limiting SO2 emissions to 0.12 pounds per million British Thermal Units (lbs/MMBtu) and limiting NOX emissions to 0.15 lbs/MMBtu. EPA took no action during that rulemaking as to whether Minnesota’s plan satisfied requirements triggered by DOI’s certification of RAVI.

In December 2012, with subsequent amendments on March 25 of this year, the National Parks Conservation Association, Sierra Club, and the Minnesota Center for Environmental Advocacy filed a lawsuit in the U.S. District Court for the District of Minnesota seeking to compel action by EPA to address DOI’s RAVI certification. NSP was an intervenor in this case. These parties engaged in settlement discussions with EPA, leading to a draft settlement agreement that the parties signed on May 15 of this year. EPA published a notice soliciting comments on this settlement agreement on June 1. EPA received two sets of generally supportive comments, and on July 24, the Department of Justice notified the Eighth Circuit that the settlement agreement was final.

The terms of this settlement agreement require EPA to propose new SO2 emission limits for Units 1 and 2 and also for the newer Unit 3 at Sherco. Specifically, the settlement agreement requires EPA to propose an emission limit for Units 1 and 2 of 0.050 lbs/MMBtu, expressed as a rolling 30-day average. EPA anticipates that NSP will be able to meet this limit through the use of low-sulfur coal and the facility’s existing flue gas desulfurization equipment. The settlement requires EPA to propose an emission limit for Unit 3 of 0.29 lbs/MMBtu, also expressed as a rolling 30-day average. EPA anticipates that Northern States Power will be able to meet this limit with the facility’s existing flue gas desulfurization equipment and increased use of desulfurizing reagent.

The settlement agreement states that Sherco Units 1 and 2 will achieve their SO2 emission limit starting Oct. 1, 2015, and that Sherco Unit 3 will achieve its SO2 emission limit starting June 1, 2017. EPA said it recognizes that the compliance deadline for Units 1 and 2 pre-dates this final rulemaking. Because NSP is a party to the settlement, however, the company has had adequate notice that an initial demonstration of compliance with the limits for Units 1 and 2 would be required on Oct. 1, notwithstanding provisions in the settlement agreement that would allow EPA to sign a final rulemaking as late as February 2016.

Northern States Power has proposed early retirement of Units 1 and 2

Xcel Energy (NYSE: XEL), the parent of Northern States Power, due in part to the EPA’s final Clean Power Plan, has shifted gears and now wants to retire its coal-fired Sherco Units 1 and 2 early to mid next decade, instead of around 2030 as it originally planned. Northern States Power on Oct. 2 filed with the Minnesota Public Utilities Commission a revision to a Resource Plan that it originally filed with the commission in January. In the original plan, it wanted to keep Sherco 1 and 2 in operation until 2030, though with gradually decreasing reliance on the units as that shutdown deadline approached. Notable is that the newer, bigger and cleaner-emitting Sherco Unit 3 is not part of this shutdown discussion.

“In our initial Resource Plan, we shared a vision of a 40 percent reduction of carbon dioxide emissions from 2005 levels by 2030,” said the Oct. 2 update. “Since that time, other parties filed comments recommending different approaches, and the Environmental Protection Agency has issued its final Clean Power Plan (CPP). We have reviewed and analyzed the comments filed by our stakeholders. We have also conducted a preliminary analysis of the CPP, though we recognize much more will develop around this rule.”

Xcel said its revised proposal would result in a 60% reduction of carbon emissions from 2005 levels by 2030. “We recognize many pieces of a complex effort need to come together to achieve these benefits,” it added. “We outline this proposal to begin the necessary discussions and actions and to allow parties to consider how we may work together to achieve this outcome while weighing it against other alternatives.”

This proposal would: achieve 60% carbon emission reductions by 2030; end coal generation at Sherco Unit 2 in 2023; end coal generation at Sherco Unit 1 in 2026; and advance the addition of substantial renewable generation (1,200 MW by 2020).

“We believe there are tangible benefits to moving now,” Xcel noted. “For instance, we will have the opportunity to maximize the anticipated Production Tax Credit extensions in the acquisition of renewable energy. Additionally, addressing the future of Sherco Units 1 and 2 now helps us avoid the situation where we are replacing all of our baseload energy generation in the early 2030s.

“Second, environmental regulations will continue to place pressure on the operations of Sherco Units 1 and 2. The possibility that NOx reductions would require installation of Selective Catalytic Reduction (SCRs) at the Sherco Units in the mid- 2020s was a factor that advanced this proposal. We do not believe committing significant amounts of capital to these Units represents a realistic view of our energy future. We have successfully operated Sherco Units 1 and 2 to produce cost-effective energy while exceeding environmental regulations; however, the environmental pressures on these Units will continue to build.”

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.