Tri-State: Somebody erred in ordering equipment for Nucla coal plant

Tri-State Generation and Transmission Association had to tell the U.S. Court of Appeals for the D.C. Circuit on Dec. 2 that somebody made a mistake in its organization and accidentally signed for new air emissions controls for the small Nucla coal plant without permission from upper management.

The filing came in a broad case where various parties are appealing the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS). It was out of this case that the U.S. Supreme Court in June ruled that EPA had not adequately looked at the costs of complying with MATS, but otherwise left MATS in place. EPA on Dec. 1 put out for comment its cost estimates in response to the high court decision.

In this case, Tri-State has been pleading for a special break under MATS for Nucla, a small coal plant in an isolated part of Colorado. It had been telling the court it had not ordered MATS-compliant equipment for Nucla, but had to come back on Dec. 2 to correct the record since such equipment had been ordered – by mistake.

“In its Motion to Govern and related filings, Tri-State made several statements implying that it had not yet ordered or decided whether to order the pollution control equipment that it would need to install at one of its power plants known as Nucla Station (‘Nucla’) in order to bring Nucla into compliance with the HCl limit in the MATS Rule,” said the cooperative. “At the time Tri-State made these submissions and until a recent discovery, counsel and Tri-State’s senior management believed and had a reasonable basis for believing that these statements were true and accurate.

“As explained in several prior filings, because Nucla is a small plant that does not operate frequently, the cost of installing new control equipment to reduce HCl emissions is not economically justified. However, until a new transmission project in southwestern Colorado is completed, Nucla will play an important role in maintaining electric reliability. For that reason, Tri-State has asked EPA for relief that would allow Nucla to remain in service without meeting the MATS HCl limit until the transmission project is completed. Tri-State has also asked this Court to suspend the HCl limit for Nucla unless and until EPA makes a new regulatory finding that is consistent with the Supreme Court’s decision in Michigan v. EPA.” That is the June decision on the MATS cost issue.

Tri-State added: “Although Nucla is already in compliance with most of the requirements of the MATS Rule, its deadline for coming into compliance with the HCl limit is April 16, 2016. Unless Nucla is equipped with new HCl control equipment, it must shut down by that date. Because of the upcoming compliance deadline, the uncertainty about whether Tri-State would obtain administrative or judicial relief, and the lead-time needed to fabricate and install such equipment, Tri-State’s senior management took steps to preserve the option of installing HCl control equipment at Nucla by April 2016. In April of 2015, Tri-State took steps to obtain bids from vendors for the equipment, with plans to go to the July Board meeting for approval.

“On June 29, the Supreme Court issued its decision in Michigan v. EPA, ruling that the regulatory finding that underlies the MATS Rule was invalid. In light of this development, Tri-State decided to file an emergency motion for relief with this Court. In parallel, since already planned for July, senior Tri-State officials sought authorization from Tri-State’s Board of Directors to purchase the necessary control equipment but, according to several executives who attended the Board meeting, they explained to the Board that they would only consider the use of the authorization if Tri-State was not able to obtain relief from the HCl requirement. On July 8th, the Board passed a resolution to authorize the purchase of controls that would allow compliance with the HCl MATS limit, but Tri-State’s senior management believe that they communicated to staff that no contract should be executed to purchase such controls until a later date because of the ongoing MATS litigation and the possibility that the controls would not be required. It is now apparent, however, that there was a misunderstanding about this communication.

“Apparently unbeknownst to Tri-State senior management, an authorized TriState employee signed a contract for this equipment in mid-July. As a result, Tri-State has in fact ordered control equipment that would allow Nucla to comply with the HCl MATS limit. One member of Tri-State’s senior management team made this discovery on or about Thursday, November 12, 2015, and immediately notified other senior officials, who notified counsel. However, because a key Tri-State official was out of the country the following week and several were out of the office during the week of Thanksgiving, counsel and Tri-State were not able to gather the facts until the last few days. Since the Court will be holding oral argument on the Motions to Govern on Friday, we wanted to file a correction with the Court as soon as possible.

“Although all the facts are not yet known, it appears that the contract ordering the equipment was signed on July 13, 2015, that the contractor did the necessary design and engineering work between then and early September, and that fabrication of the equipment began on or about September 8, 2015 but has not yet been completed. Tri-State has suspended all work under the contract. If we learn of any other material facts that need to be corrected, we will immediately advise the Court.

“The contract that Tri-State executed allows Tri-State to unilaterally terminate the agreement at any time by paying the costs that the contractor has incurred to date. Moreover, even if the equipment had been fully fabricated, Tri-State would still have to incur substantial additional costs to transport, install, commission, and test the equipment. Although the control equipment has been ordered, Tri-State continues to believe that it should not be required to incur the additional cost of completing fabrication, installing, and operating new pollution control equipment to comply with the MATS Rule unless and until EPA makes a new regulatory finding that is consistent with the Supreme Court’s decision in Michigan v. EPA.”

The Nucla facility is a coal-fired unit located near Nucla, Colorado. The station is rated at 100 MW. The unit has a circulating fluidized bed boiler that provides steam for several turbine/generators.

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.