Xcel Energy (NYSE: XEL) said in its Aug. 4 Form 10-Q financial report that its Southwestern Public Service (SPS) subsidiary has seen some initial success in a legal battle to get rid of a $600 million scrubber project at its coal-fired Tolk plant that it would have to undertake under the U.S. Environmental Protection Agency’s regional haze rule.
In December 2014, the EPA proposed to disapprove the reasonable progress portions of the Texas state implementation plan (SIP) for regional haze and instead adopt a federal implementation plan (FIP). In January 2016, the EPA adopted a final rule establishing a FIP for the state of Texas. As part of this final rule, the EPA imposed SO2 emission limitations that reflect the installation of dry scrubbers on Tolk Units 1 and 2, with compliance required by February 2021.
Xcel said that Investment costs associated with dry scrubbers could be approximately $600 million.
In March 2016, SPS appealed the EPA’s decision and asked for a stay of the final rule while it is being reviewed. In July 2016, the U.S. Court of Appeals for the Fifth Circuit granted the stay motion and decided that the Fifth Circuit, not the U.S. Court of Appeals for the D.C. Circuit, is the appropriate venue for this case. In addition, SPS filed a petition with the EPA requesting reconsideration of the final rule. SPS said it believes these costs would be recoverable through regulatory mechanisms if required, and therefore does not expect a material impact on results of operations, financial position or cash flows.
Tolk is a 1,067-MW plant, comprised of Unit 1 (532 MW) and Unit 2 (535 MW), that went into commercial operation in the 1980s. Air emissions are controlled at Tolk Station with the use of low-sulfur coal and baghouses.
Also, the EPA in 2010 adopted a more stringent NAAQS for SO2. The EPA is requiring states to evaluate areas in three phases. The first phase includes areas near SPS’ Tolk and Harrington coal plants. The Tolk and Harrington plants utilize low-sulfur coal to reduce SO2 emissions. In June 2016, the EPA issued final designations which found the area near the Tolk plant to be meeting the NAAQS and the areas near the Harrington plant as “unclassifiable.” The area near the Harrington plant is to be monitored for three years and a final designation is expected to be made by December 2020.