EPA Wants up to $1.1 Billion in Additional Environmental Controls at Navajo Generating Station

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Owners of the Navajo Generating Station (NGS), one of the largest and most important sources of reliable electricity in the Southwest, are reviewing a proposal from the Environmental Protection Agency today to determine its impact on the viability of the plant’s future operations.

The proposal to require an investment of up to $1.1 billion in additional emission controls at the plant is both complicated and lengthy and will require an appropriate amount of time to assess.

“We appreciate that the EPA appears to have attempted to take into consideration the complex timing issues that this decision creates for the NGS owners,” said John Sullivan, chief resources executive at SRP, which manages NGS.  “Unfortunately, the proposal may not allow the owners enough time to resolve uncertainties facing the plant before they will be required to make a significant financial commitment.”

The EPA’s Best Available Retrofit Technology (BART) proposal seems to take into account early action taken by the NGS owners to improve visibility at the Grand Canyon and other nearby national parks by voluntarily installing low-NOx burners and separated overfire air.  The low-NOx burners have already reduced emissions of nitrogen oxides (NOx) by more than 40 percent at a cost of nearly $45 million.  The plant’s owners believe this improvement represents BART.

“The owners of NGS fully support efforts to protect visibility at our national parks, and we have demonstrated that with our many actions at the plant,” said Sullivan.  “We are prepared again to take further steps at the plant, but only within a reasonable timeframe.”

Before the owners at NGS could consider a $1 billion investment in additional controls, Sullivan said a number of issues must first be resolved including:

-The initial term of the NGS plant site lease and other critical agreements expire starting in 2019.  The extension of the agreements will trigger reviews under several Federal environmental regulations.  These Federal reviews will require at least five years to complete, and likely will be followed by lengthy litigation.

-The NGS owners are renegotiating the site lease agreement with the Navajo Nation.  A new lease agreement that authorizes operation beyond 2019 cannot be issued until it is approved by the Secretary of Interior, which is not a certainty and which cannot occur until the Federal environmental reviews are completed and a Record of Decision (ROD) has been issued.

The owners are concerned that EPA’s proposal to install additional controls may not allow sufficient time to get through the Federal environmental review process and anticipated litigation, secure the necessary air permits, and complete the design and construction of the additional controls.

The NGS owners are concerned that compliance may not be achievable with the stringent emission limits in EPA’s proposal, particularly in a retrofit application.  A preliminary review suggests that the proposal limit is one of the most stringent in the nation.  This issue will need to be further evaluated in the coming weeks.

Sullivan pointed out that under the Regional Haze Rule, the EPA is required to take into account the economic implications of any new regulatory requirements.

NGS is an economic engine that provides significant benefit to the Navajo Nation, to the local economy and the state of Arizona.

The plant directly employs approximately 520 people, more than 85 percent of whom are Navajo.  The Kayenta Mine has more than 400 employees, more than 90 percent of whom are also Native American.

According to a recent study prepared by the W.P. Carey School of Business at Arizona State University for SRP and the Navajo Nation, the closure of NGS – combined with the potential impact on nearby Kayenta Mine, the plant’s coal supplier – could result in an annual loss of nearly 3,400 jobs and more than $20 billion in economic contributions throughout the state for a period measured from 2011 to 2044.  A full copy of the report is available at www.ngspower.com and www.srpnet.com.

Despite his concern with today’s proposal, Sullivan remains hopeful.  “We recognize that EPA has attempted provide some needed flexibility with this rule.  As we all know, the issues surrounding the plant are numerous and complex and we look forward to continuing a constructive dialogue with the EPA and other stakeholders to resolve the issues in a way that accomplishes the objectives of the regional haze rule while avoiding negative impacts to the millions of people who benefit from NGS.”

NGS is located about 80 miles from the Grand Canyon National Park’s main visitor area on the South Rim and just a few miles from the northeast boundary of the park.

Monitoring data shows that wildfires, control burns, windblown dust and emissions from metropolitan areas account for the majority of visibility impairment in nearby parks and wilderness areas.  NOx emissions from all sources, including motor vehicles, industrial facilities and fires generally account for less than 10 percent of regional haze.

Air quality in the region meets all National Ambient Air-Quality Standards which were established by the EPA to protect public health.

The plant provides electricity to hundreds of thousands of customers in Arizona, California and Nevada and 95 percent of the energy needed to move water in the Central Arizona Project canal from the Colorado River across Arizona.

NGS is operated and partly owned by SRP.  The other owners of NGS are Arizona Public Service Co., Los Angeles Department of Water and Power, Tucson Electric Power Co. and NV Energy.  In accordance with Federal statutes, a portion of the electricity generated by NGS is committed to Federal purposes, including the operation of the Central Arizona Project and financial support of certain Arizona Indian water settlements.  The Federal interest in NGS is managed by the U.S. Bureau of Reclamation.

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