Approval and Promulgation of Implementation Plans; New Mexico; Federal Implementation Plan for Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology Determination, 52388-52440 [2011-20682]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 76, Number 162 (Monday, August 22, 2011)]
[Rules and Regulations]
[Pages 52388-52440]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20682]



[[Page 52387]]

Vol. 76

Monday,

No. 162

August 22, 2011

Part II





Environmental Protection Agency





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40 CFR Part 52





Approval and Promulgation of Implementation Plans; New Mexico; Federal 
Implementation Plan for Interstate Transport of Pollution Affecting 
Visibility and Best Available Retrofit Technology Determination; Final 
Rule

Federal Register / Vol. 76 , No. 162 / Monday, August 22, 2011 / 
Rules and Regulations

[[Page 52388]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

EPA-R06-OAR-2010-0846; FRL-9451-1


Approval and Promulgation of Implementation Plans; New Mexico; 
Federal Implementation Plan for Interstate Transport of Pollution 
Affecting Visibility and Best Available Retrofit Technology 
Determination

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is disapproving a portion of the State Implementation Plan 
(SIP) revision received from the State of New Mexico on September 17, 
2007, for the purpose of addressing the ``good neighbor'' requirements 
of section 110(a)(2)(D)(i) of the Clean Air Act (CAA or Act) for the 
1997 8-hour ozone National Ambient Air Quality Standards (NAAQS or 
standards) and the 1997 fine particulate matter (PM2.5) 
NAAQS. In this action, EPA is disapproving the New Mexico Interstate 
Transport SIP provisions that address the requirement of section 
110(a)(2)(D)(i)(II) that emissions from New Mexico sources do not 
interfere with measures required in the SIP of any other state under 
part C of the CAA to protect visibility. We have found that New Mexico 
sources, except the San Juan Generating Station, are sufficiently 
controlled to eliminate interference with the visibility programs of 
other states. EPA is promulgating a Federal Implementation Plan (FIP) 
to address this deficiency by implementing nitrogen oxides 
(NOX) and sulfur dioxide (SO2) emission limits 
necessary at the San Juan Generating Station (SJGS), to prevent such 
interference. EPA found in January 2009 that New Mexico had failed to 
submit a SIP addressing certain regional haze (RH) requirements, 
including the requirement for best available retrofit technology 
(BART). The Clean Air Act required EPA to promulgate a FIP to address 
RH requirements by January 2011. This FIP addresses the RH BART 
requirement for NOX for SJGS. In addition, EPA is 
implementing sulfuric acid (H2SO4) hourly 
emission limits at the SJGS, to minimize the contribution of this 
compound to visibility impairment. This action is being taken under 
section 110 and part C of the CAA.

DATES: This final rule is effective on: September 21, 2011.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-R06-OAR-2010-0846. All documents in the docket are listed in 
the Federal eRulemaking portal index at https://www.regulations.gov and 
are available either electronically at https://www.regulations.gov or in 
hard copy at EPA Region 6, 1445 Ross Ave., Dallas, TX 75202-2733. To 
inspect the hard copy materials, please schedule an appointment during 
normal business hours with the contact listed in the FOR FURTHER 
INFORMATION CONTACT section. A reasonable fee may be charged for 
copies.

FOR FURTHER INFORMATION CONTACT: Joe Kordzi, EPA Region 6, (214) 665-
7186, kordzi.joe@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document wherever ``we,'' 
``us,'' ``our,'' or ``the Agency'' is used, we mean the EPA. Unless 
otherwise specified, when we say the ``San Juan Generating Station,'' 
or ``SJGS,'' we mean units 1, 2, 3, and 4, inclusive.

Overview

    The Clean Air Act requires states to prevent air pollution from 
sources within their borders from impairing air quality and visibility 
in other states. The Act also requires states to reduce pollution from 
significant sources whose emissions reduce visibility in the nation's 
pristine and wilderness areas (such as the Grand Canyon), and 
contribute to regional haze. When a state has not adopted plans as 
required by these provisions, EPA must put such a plan in place, known 
as a Federal Implementation Plan (FIP).
    In this action, EPA is finalizing a FIP for New Mexico to address 
emissions from one source: the San Juan Generating Station coal-fired 
power plant. EPA is finding that the other New Mexico pollution sources 
are adequately controlled to eliminate interference with the clean air 
visibility programs of other states. This FIP can be replaced by a 
state plan that EPA finds meets the applicable Clean Air Act 
requirements. The federal plan will remain in effect no longer than 
necessary.
    In December 2010, EPA proposed to disapprove a portion of the New 
Mexico Interstate Transport State Implementation Plan (SIP), 
specifically the New Mexico Interference with Visibility SIP, and 
proposed a source-specific FIP to cut pollution from San Juan 
Generating Station to address adverse visibility impacts.
    The federal plan also addresses a portion of EPA's 2-year 
obligation under the Clean Air Act's Regional Haze Rule to implement a 
federal plan when the state failed to meet the January 2009 deadline. 
This shortfall is being addressed by establishing emissions limits 
representing Best Available Retrofit Technology (BART) for nitrogen 
oxide (NOx) pollution at the San Juan Generating Station power plant.
    The federal plan will require the San Juan Generating Station to 
cut emissions to improve scenic views at 16 of our most treasured parks 
including the Grand Canyon, Mesa Verde and Bandelier National Monument. 
Pollution from this power plant impacts four states including Arizona, 
Utah, Colorado, and New Mexico. Improved air quality also results in 
public health benefits.
    Public Service Company of New Mexico (PNM) owns the San Juan 
Generating Station power plant. The power plant has four coal-fired 
generating units. It is located in San Juan County, 15 miles west of 
Farmington in northwest New Mexico. The thirty-year-old San Juan 
Generation Station power plant is one of the largest sources of NOx 
pollution in the United States.
    The federal plan requires the San Juan Generating Station coal-
fired power plant to reduce nitrogen oxide and sulfur dioxide pollution 
to 0.05 pounds per million BTU and 0.15 pounds per million BTU 
respectively.
    By addressing nitrogen oxide pollution requirements of both 
Interstate Transport and the Regional Haze Rule, PNM will meet these 
two Clean Air Act requirements for NOx emission limits for the power 
plant with only one round of improvements. This regulatory certainty 
will help guide PNM's business decisions regarding capital investments 
in pollution controls.
    EPA evaluated reliable and proven pollution technologies as part of 
its decision. EPA determined Selective Catalytic Reduction (SCR) to be 
the most cost-effective pollution control to achieve the emission 
reductions outlined in the federal plan. Evaluation of a less expensive 
alternative, Selective Non Catalytic Reduction (SNCR), showed that SNCR 
at the San Juan Generating Station coal-fired power plant achieves far 
less reduction in pollution and less visibility improvement, and does 
not fully meet the requirement of the Act for Best Available Retrofit 
Technology (BART).
    EPA held an extended public comment period on this action, an open 
house, and a public hearing. After careful review of information 
provided during the public comment period, EPA revised its calculation 
of the associated cost investment from $229 million to $345 million. 
Also, in consideration of comments about the time to comply with the 
new emissions limits, EPA

[[Page 52389]]

extended the time for compliance with the nitrogen oxide pollution 
emission limit from 3 years to 5 years, the maximum period allowed by 
the Clean Air Act.
    This investment will reduce the visibility impacts due to this 
facility by over 50% at each one of the 16 national parks and 
wilderness areas in the area, and promote local tourism by decreasing 
the number of days when pollution impairs scenic views. Although 
today's action is taken to address visibility impairments, PNM will 
also reduce public health impacts by cutting NOX pollution 
by over 80% by installing reliable pollution-control technology on its 
four coal-fired power generation units over the next five years.
    EPA will review the regional haze plan that the State submitted in 
July 2011, and if there is significant new information that changes our 
analysis, EPA will make appropriate revisions to today's decision.

Detailed Outline

I. Summary of Our Proposal
II. Final Decision
    A. Interstate Transport
    B. NOX BART Determination for the San Juan Generating 
Station (SJGS)
    C. Compliance Timeframe
III. Analysis of Major Issues Raised by Commenters
    A. Comments on the Costs of the NOX BART 
Determination
    B. Comments on our Proposed NOX BART Emission Limits
    C. Comments on our Proposed SO2 Emission Limit
    D. Comments on our Proposed H2SO4 and 
Ammonia Emission Limits and Other Pollutants
    E. Comments on the Emission Limit Compliance Schedule
    F. Comments on the Conversion of the SJGS to a Coal-to-Liquids 
Plant With Carbon Capture as a Means of Satisfying BART
    G. Comments on Health and Ecosystem Benefits, and Other 
Pollutants
    H. Miscellaneous Comments
    I. Comments in Favor of Our Proposal
    J. Comments Arguing Our Proposal Would Hurt the Economy and/or 
Raise Electricity Rates
    K. Comments Arguing Our Proposal Would Help the Economy
    L. Comments Requesting an Extension to the Public Comment Period
    M. Comments Requesting We Defer Action in Favor of a New Mexico 
SIP Submittal
    N. Comments Generally Against Our Proposal
    O. Comments on Legal Issues
    P. Modeling Comments
IV. Statutory and Executive Order Reviews

I. Summary of Our Proposal

    On January 5, 2011, we published the proposal on which we are now 
taking final action. 76 FR 491. We proposed to disapprove a portion of 
the SIP revision received from the State of New Mexico on September 17, 
2007, for the purpose of addressing the ``good neighbor'' provisions of 
the CAA section 110(a)(2)(D)(i) with respect to visibility for the 1997 
8-hour ozone NAAQS and the PM2.5 NAAQS. Having proposed to 
disapprove these provisions of the New Mexico SIP, we proposed a FIP to 
address the requirements of section 110(a)(2)(D)(i)(II) with respect to 
visibility to ensure that emissions from sources in New Mexico do not 
interfere with the visibility programs of other states. We proposed to 
find that New Mexico's sources, other than the San Juan Generating 
Station (SJGS), are sufficiently controlled to eliminate interference 
with the visibility programs of other states, and for the SJGS, we 
proposed specific SO2 and NOX emissions limits 
that will eliminate such interstate interference. For SO2, 
we proposed to require the SJGS to meet an emission limit of 0.15 
pounds per million British Thermal Units (lb/MMBtu). For 
NOX, we proposed to implement a NOX emission 
limit of 0.05 lbs/MMBtu, based on our BART determination, as discussed 
below.
    Separate from our proposal under Section 110 of the CAA, we 
simultaneously evaluated whether the SJGS met certain other related 
requirements under the Regional Haze (RH) program under Sections 169A 
and 169B of the CAA. Regional Haze SIPs were due December 17, 2007. In 
January 2009, we made a finding that New Mexico had failed to submit a 
RH SIP addressing the requirements of 40 CFR 51.309(d)(4) and (g). 74 
FR 2392 (January 15, 2009). Under the CAA, we are required to 
promulgate a FIP within two years of the effective date of a finding 
that a State has failed to submit a SIP unless the State submits a SIP 
and we approve that SIP within the two year period. CAA Sec.  110(c). 
At the time of the proposed FIP, New Mexico had not yet submitted a 
substantive RH SIP addressing, among other things, the requirement that 
certain stationary sources install BART for NOX. (On July 5, 
2011, New Mexico submitted a RH SIP, which we discuss later in this 
Notice.) Based on our evaluation of the RH BART requirements of section 
40 CFR 51.309(d)(4), we proposed to find that the SJGS is subject to 
BART under section 40 CFR 51.309(d)(4), and/or 51.308(e). We proposed a 
FIP which contained NOX BART limits for the SJGS based on 
our proposed NOX BART determination. We proposed to require 
that the SJGS meet a NOX emission limit of 0.05 lb/MMBtu 
individually at Units 1, 2, 3, and 4. We noted this NOX 
limit is achievable by installing and operating Selective Catalytic 
Reduction (SCR).
    We proposed that both the NOX and SO2 
emission limits be measured on the basis of a 30 day rolling average. 
We also proposed hourly average emission limits of 1.06 x 
10-4 lb/MMBtu for H2SO4 and 2.0 parts 
per million volume dry (ppmvd) ammonia adjusted to 6 percent oxygen, to 
minimize the contribution of these compounds to visibility impairment. 
We solicited comments on a range of 2-6 ppmvd for ammonia, and 1.06 x 
10-4 to 7.87 x 10-4 lb/MMBtu for 
H2SO4. Additionally, we proposed monitoring, 
record-keeping and reporting requirements to ensure compliance with 
these emission limitations.
    Lastly, we proposed that compliance with the emission limits must 
be within three (3) years of the effective date of our final rule. We 
solicited comments on alternative timeframes, up to five (5) years from 
the effective date our final rule. In our proposal, we did not address 
whether the state had met other requirements of the RH program, which 
we will address in later actions. Please see our proposal for more 
details.

II. Final Decision

A. Interstate Transport

    We are disapproving the portion of the SIP revision received from 
the State of New Mexico on September 17, 2007, for the purpose of 
addressing the ``good neighbor'' provisions of the CAA section 
110(a)(2)(D)(i) with respect to visibility for the 1997 8-hour ozone 
NAAQS and the PM2.5 NAAQS. The 2007 SIP submission by New 
Mexico anticipated that the State would submit a substantive RH SIP to 
meet the requirements of section 110(a)(2)(D)(i)(II).
    Section 110(a)(2)(D)(i)(II) of the CAA requires that states have a 
SIP, or submit a SIP revision, containing provisions ``prohibiting any 
source or other type of emission activity within the state from 
emitting any air pollutant in amounts which will * * * interfere with 
measures required to be included in the applicable implementation plan 
for any other State under part C [of the CAA] to protect visibility.'' 
States were required to submit a SIP by December 2007 with measures to 
address regional haze--visibility impairment that is caused by the 
emissions of air pollutants from numerous sources located over a wide 
geographic area. Under the RH program, each State with a Class I area 
must submit a SIP with reasonable progress goals for each such area 
that provides for an improvement in visibility for the

[[Page 52390]]

most impaired days and ensures no degradation of the best days. (The 
``Class I'' federal areas \1\ affected by the SJGS include 16 of our 
most treasured parks, such as the Grand Canyon, Mesa Verde, and 
Bandelier National Monument. Emissions from this power plant impact 
four states including Arizona, Utah, Colorado, and New Mexico.)
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    \1\ CAA 42 U.S.C. 7472(a). The list of mandatory class I federal 
areas where visibility is an important value is codified at 40 CFR 
part 81 subpart D.
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    Because of the often significant impacts on visibility from the 
interstate transport of pollutants, we interpret the ``good neighbor'' 
provisions of section 110 of the CAA described above as requiring 
states to include in their SIPs measures to prohibit emissions that 
would interfere with the reasonable progress goals set to protect Class 
I areas in other states. This is consistent with the requirements in 
the RH program which explicitly require each State to address its share 
of the emission reductions needed to meet the reasonable progress goals 
for surrounding Class I areas. 64 FR 35714, 35735 (July 1, 1999). 
States working together through a regional planning process are 
required to address an agreed upon share of their contribution to 
visibility impairment in the Class I areas of their neighbors. 40 CFR 
51.308(d)(3)(ii).
    The States in the West, including New Mexico, worked through a 
regional planning organization, the Western Regional Air Partnership 
(WRAP), to develop strategies to address regional haze. To help the 
State in establishing reasonable progress goals, the WRAP modeled 
future visibility conditions. The WRAP modeling assumed emissions 
reductions from each State, based on extensive consultation among the 
States as to appropriate strategies for addressing haze. In setting 
reasonable progress goals, States in the West generally relied on this 
modeling. As explained in the notice of proposed rulemaking, we believe 
that the analysis conducted by the WRAP provides an appropriate means 
for designing a FIP that will ensure that emissions from sources in New 
Mexico are not interfering with the visibility programs of other 
states, as contemplated in section 110(a)(2)(D)(i)(II).
    As a result of our disapproval of New Mexico's SIP, submitted to 
meet the requirements of section 110(a)(2)(D)(i)(II) with respect to 
visibility, we are promulgating a FIP to ensure that emissions from New 
Mexico sources do not interfere with the visibility programs of other 
states. We find that New Mexico sources, other than the SJGS, are 
sufficiently controlled to eliminate interference with the visibility 
programs of other states because the federally enforceable emission 
limits for these sources are consistent with those relied upon in the 
WRAP modeling. The SO2 and NOX emissions relied 
upon in the WRAP modeling for the SJGS, however, are not federally 
enforceable. Therefore, we are establishing federally enforceable 
SO2 emissions limits that will address these discrepancies 
and eliminate interstate interference based on current emissions that 
satisfy the assumptions in the WRAP modeling. We are finalizing our 
proposal to require the SJGS to meet an SO2 emission limit 
of 0.15 lb/MMBtu, the rate assumed in the WRAP modeling. We proposed a 
30 day rolling average for units 1, 2, 3, and 4 of the SJGS. However, 
in response to a comment we received, we are changing our proposed 
averaging period for these emission limits from a straight 30 day 
calendar average to one calculated on the basis of a Boiler Operating 
Day (BOD).
    Besides not being federally enforceable, the NOx emissions that 
were assumed in the WRAP modeling cannot be achieved without additional 
NOx controls for the SJGS to prevent interference with visibility 
pursuant to the requirements of section 110(a)(2)(D)(i)(II) of the CAA. 
We are choosing, however, not to use the WRAP assumptions to make a 
determination on the enforceable NOx controls necessary to prevent 
visibility interference, as we are doing for the SO2 
controls. Instead, we are addressing NOx control for the SJGS by 
fulfilling our duty under the BART provisions of the RH rule to 
promulgate a RH FIP for New Mexico to address, among other elements of 
the visibility program, the requirement for BART.\2\ We do not believe 
it is prudent to delay a NOx BART determination for the SJGS, because 
we have determined that the BART requirements are more stringent than 
the visibility transport requirements. Separating the visibility 
transport and BART rulemakings could result in near-term requirements 
for the utility to install one set of controls and capital 
expenditures, to only satisfy our obligation under section 
110(a)(2)(D)(i)(II), followed shortly thereafter by different 
requirements for controls and capital expenditures to satisfy our 
obligation under BART. This could result in unnecessary costs and 
confusion.
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    \2\ See 74 FR 2392.
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    We did receive a New Mexico RH SIP submittal on July 5, 2011, but 
it came several years after the statutory deadline, and after the close 
of the comment period on today's action.\3\ In addition, because of the 
missed deadline for the visibility transport, we are under a court-
supervised consent decree deadline with WildEarth Guardians of August 
5, 2011, to have either approved the New Mexico SIP or to have 
implemented a FIP to address the 110(a)(2)(D)(i) provision. It would 
not have been possible to review the July 5, 2011 SIP submission, 
propose a rulemaking, and promulgate a final action by the dates 
required by the consent decree. Notwithstanding these facts, we did 
comment during the State's public comment period for their proposed RH 
SIP in May 2011 and we did evaluate the technology advocated as BART in 
the State's proposed RH SIP: SNCR, as discussed in further detail 
elsewhere in this Notice.
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    \3\ A State Regional Haze SIP was due under the CAA by Dec. 17, 
2007, and EPA was obligated to either approve an RH SIP or 
promulgate a FIP by January 15, 2011. See CAA Section 110(c)(1)(B).
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B. NOx BART Determination for the San Juan Generating Station (SJGS)

    We find that the SJGS is subject to BART under sections 40 CFR 
51.309(d)(4), and/or 51.308(e). In this action, we are adopting a FIP 
that partially addresses the BART requirements of the RH program for 
New Mexico. We are finalizing our proposal to require the SJGS to meet 
a NOx emission limit of 0.05 lb/MMBtu individually at Units 1, 2, 3, 
and 4. As we discuss elsewhere in our response to comments, we find 
there is ample support for this decision. However, in response to a 
comment we received, we are changing our proposed averaging period for 
these emission limits from a straight 30 day calendar average to one 
calculated on the basis of a boiler operating day (BOD). We also 
received a comment requesting we revise our proposed unit-by-unit NOx 
limitation, and replace it with a plant wide average NOx limitation. As 
we note in our response to this comment, although we are open to 
combining the BOD and plant wide averaging schemes, this presents a 
significant technical challenge in having a verifiable, workable, and 
enforceable algorithm for calculating such an average. Due to our 
obligation to ensure the enforceability of the emission limits we are 
imposing in our FIP, we leave it to New Mexico to take up this matter 
in a future SIP revision, should they deem it worth pursuing. We are 
confident this issue

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can be addressed prior to the installation of the emission controls 
required to satisfy our FIP.
    We are also finalizing our proposal requiring the SJGS to meet an 
H2SO4 emission limit of 2.6 x 10-4 lb/
MMBtu to minimize its contribution to visibility impairment. We are 
promulgating monitoring, record-keeping and reporting requirements to 
ensure compliance with this emission limit. As discussed in our 
response to comments, after careful consideration of the comments we 
received concerning our proposal to require the SJGS to meet an hourly 
average emission limit of 2.0 parts ppmvd for ammonia, we have 
determined that neither an ammonia limit, nor ammonia monitoring is 
warranted, and we are not finalizing ammonia limits or monitoring 
requirements.

C. Compliance Timeframe

    We originally proposed a compliance schedule of 3 years for SJGS 
for the NOX, SO2, ammonia, and 
H2SO4 emission limits, and solicited comments on 
alternative timeframes of less than 3 years and up to 5 years (the 
maximum allowed under the statute).\4\ As noted above, we are no longer 
requiring an ammonia emission limit. Also, as discussed in our response 
to comments, we carefully considered comments urging a longer 
compliance schedule due to site-specific issues such as the congestion 
of existing equipment (which could slow the retrofit process), 
historical information on SCR installation times, and our own 
observation of the site conditions,\5\ and we now conclude that a 
longer compliance schedule is more appropriate. Consequently, 
compliance with the NOX, SO2, and 
H2SO4 emission limits will now be required within 
5 years--rather than 3 years--of the effective date of our final rule. 
(This issue is discussed in further detail in Section III.E., below.)
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    \4\ 76 FR 491, 504.
    \5\ See San Juan Generating Station Site Visit, 5/23/11, which 
is viewable in the docket. As explained in a letter, dated May 17, 
2011, the visit was solely for the purpose of reviewing and 
responding to comments. It was not an opportunity to introduce 
additional comments, and we did not receive any comments as a result 
of this visit.
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III. Analysis of Major Issues Raised by Commenters

    Our January 5, 2011 proposal included a 60 day public comment 
period, which ended on March 7, 2011. We subsequently extended that 
comment period until April 4, 2011.\6\ We also held an open house and a 
public hearing in Farmington, NM, on February 17, 2011.\7\ We received 
in excess of 13,000 comments.
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    \6\ 76 FR 12305.
    \7\ 76 FR 1578.
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    In light of the very large number of comments received and the 
significant overlap between many comments, we have grouped some 
comments together. We have summarized and provided responses to each 
significant argument, assertion, and question contained within the 
totality of the comments. Full responses to comments can be found in 
our Complete Response to Comments for NM Regional Haze/Visibility 
Transport FIP.

A. Comments on the Costs of the NOX BART Determination

    We received many comments related to various aspects of our cost 
analysis that fell into four major categories. First, we received 
general comments opining on the appropriateness of our cost analysis. 
Second, we received comments that were technical and related to 
specific line items in the cost analysis (e.g., additional steel, SCR 
bypass, sorbent injection, etc.). Third, we received comments that 
expressed general concern that the costs of the controls would be 
passed to the SJGS's customer base in the form of electricity rate 
increases. Fourth, we received comments that opined on the use of the 
Regional Haze Rule's (RHR) reliance on the EPA Air Pollution Control 
Cost Manual (the Cost Manual) to estimate the cost of the SCR 
installations. We address the more significant comments within these 
categories individually below.
1. General Cost Comments
    Comment: The National Park Service (NPS) and the U.S. Forest 
Service (USFS) separately presented a great deal of information in 
support of their opinions that Public Service Company of New Mexico's 
(PNM) contractor, Black &Veatch (B&V) overestimated the cost of 
installing SCR on the units of the SJGS. PNM is a part owner and the 
operator of the SJGS. The following is a combined summary of their 
separate comments.
    The NPS and the USFS cited a large number of well-documented recent 
industry studies or surveys, which they use to conclude that PNM has 
overestimated its SCR costs, expressed in dollars per kilowatt. They 
stated that PNM has not provided valid information to justify their 
higher cost estimates for SCR installation at the SJGS. Additionally, 
the USFS stated PNM's contractors went against our guidance which 
recommends using the Cost Manual to ensure a transparent and consistent 
means to conduct cost analyses across the nation. The USFS took issue 
with PNM's estimation of indirect (soft) costs which include: 
engineering costs; construction and field expenses (e.g., costs for 
construction supervisory personnel, office personnel, rental of 
temporary offices, etc.); contractor fees; and start-up and performance 
test costs. Also, the NPS stated that B&V's improperly escalated costs 
and its calculations did not consider the weakening of labor markets 
that has occurred since they set up their spreadsheets in 2007.
    Response: We found that PNM raised some legitimate points about 
costs, and as discussed elsewhere in this notice, we have adjusted 
several of our cost estimates upward based on those points. However, in 
large part, we agree with the NPS that PNM's estimated costs for 
installing SCR on the units of the SJGS are higher than justified. 
Please see our other responses to comments for more details on how we 
have adjusted our cost estimates. The following table illustrates our 
revised costs in terms of $/kW. These costs agree with the ranges 
presented by the NPS and the USFS in their comments, which can be 
viewed in our Complete Response to Comments for NM Regional Haze/
Visibility Transport FIP document:

 Table 1--EPA Revised Estimated Costs of Installing SCR on the Units of
                                the SJGS
------------------------------------------------------------------------
                                Unit 1     Unit 2     Unit 3     Unit 4
------------------------------------------------------------------------
Proposed ($/kW).............       $144       $155       $116       $110
Final ($/kW)................        211        234        179        165
------------------------------------------------------------------------


[[Page 52392]]

    We note, that as required by the BART Guidelines, ``[i]n order to 
maintain and improve consistency, cost estimates should be based on the 
OAQPS Control Cost Manual, [now renamed ``EPA Air Pollution Control 
Cost Manual, Sixth Edition, EPA/452/B-02-001, January 2002] where 
possible.'' 70 FR at 39166 (July 6, 2005). As explained more fully in 
our Complete Response to Comments for NM Regional Haze/Visibility 
Transport FIP document, we also agree with the USFS that owner's costs 
are not an appropriate cost item to include in a BART cost estimate, as 
owners costs are not included in the Cost Manual.
    Comment: PNM and its consultants estimated the cost of retrofitting 
SJGS with SCRs to be between $194 million and $261 million per unit 
(depending on the unit) with a total cost of $908 million for all four 
units. EPA maintains that SCRs can be purchased and installed for much 
less--between $52 million and $63 million per unit for a total of about 
$229 million. EPA's estimates of annual operating costs for the SCRs 
are also much lower than PNM's estimate. PNM's analysis indicates 
annual operating costs for all four SCRs would be approximately $114 
million per year, whereas EPA expects PNM to be capable of operating 
the SCRs for only about $28 million per year. In short, EPA believes 
that SCRs cost $679 million less, or one quarter of the amount 
estimated by PNM. The commenter calls our cost estimate into question, 
since the disparity between these two estimates is large.
    Response: B&V estimated it would cost between $446/kW and $559/kW 
to retrofit SCR on the SJGS units. Five industry studies conducted 
between 2002 and 2007 have reported the installed unit capital cost of 
SCRs to be $79/kW to $316/kW, where the upper end of the range is for 
very complex retrofits that are severely site constrained.\8\ Others 
have noted the anomalously high costs reported for SJGS.9 10 
We revised our cost estimates based on some comments highlighted in 
comments, but even with those changes, our revised costs for SCR are 
from $165/kW to $234/kW,\11\ still well within the accepted range of 
expected costs for such controls.\12\
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    \8\ Revised BART Cost Effectiveness Analysis for Selective 
Catalytic Reduction at the Public Service Company of New Mexico San 
Juan Generating Station, November 2010, pp. 28-29.
    \9\ Comments submitted by United States Department of Interior, 
National Park Service, dated 3/31/11.
    \10\ New Mexico Environment Department, Appendix A, NMED, Air 
Quality Bureau, BART Determination, Public Service Company of New 
Mexico, San Juan Generating Station, Units 1-4, 6/21/10.
    \11\ See Exhibit 1, RTC Revised Cost Analysis.
    \12\ Please see our Complete Response to Comments for NM 
Regional Haze/Visibility Transport FIP document.
---------------------------------------------------------------------------

    B&V's SJGS costs are unusually high for four principal reasons: (1) 
Using a methodology (e.g., Allowance for Funds Used During Construction 
(AFUDC)) that has been disallowed under EPA''s Cost Manual methodology 
and specifically disallowed for SCR (see discussion at footnote 28); 
(2) consistently using assumptions at the upper end of the range for 
key SCR components (e.g., SCR backpressure; stiffening design 
pressure); (3) including costs for equipment that is not necessary for 
a SCR (e.g., balanced draft conversion, sorbent injection, SCR bypass); 
and (4) using excessive contingencies. The BART Guidelines require that 
``documentation'' be provided for ``any unusual circumstances that 
exist for the source that would lead to cost-effectiveness estimates 
that would exceed that for recent retrofits.'' \13\ The B&V analysis 
does not support its unusually high cost estimates.
---------------------------------------------------------------------------

    \13\ 70 FR at 39168 (July 6, 2005).
---------------------------------------------------------------------------

    Further, much of the information that could have supported a claim 
that site specific issues at SJGS result in costs that are outside of 
the normal range is missing. Specifically, the B&V analysis lacked 
information such as project schedules, general arrangement site plans 
showing SCR and duct layout, requests for proposal (RFPs), vendor 
proposals, and a complete description of existing facilities.
    Instead of preparing a site-specific SCR design, B&V in most 
circumstances made a worst case, upper bound assumption that, taken 
together, result in overall costs that are significantly outside of the 
normal range for SCR. However, B&V provided no record support for their 
decision to choose the upper end of the range for nearly every aspect 
of the cost of SCRs. It is unlikely that so many upper bound 
assumptions could be justified, and if B&V believed that they were 
justified, they should have explored that proposition in a risk 
analysis. Therefore, we believe that our approach to considering site 
specific conditions that would lead to costs outside of the normal 
range, is justified.
    Comment: Private citizens submitted comments that the costs to PNM 
will be, alternatively, $250, $500, or $750 million dollars, and that 
PNM's estimates are overstated, and that any investment in the plant is 
an investment in the future, and that the plant and its jobs will not 
be threatened by the proposed emission reductions.
    Response: As we discuss elsewhere in our response to comments, we 
agree that the cost of installing SCR on the four units of the SJGS is 
considerably lower than PNM estimated.
    Comment: The CAA visibility provisions, EPA's own RH regulations, 
and the preambles to those rules all envision a ``source-by-source'' 
approach to BART, which by its nature must account for site-specific 
challenges at each facility. However, despite the significant amount of 
information provided by PNM in its original BART analysis, in 
subsequent exchanges with the New Mexico Environment Department (NMED) 
and EPA, and in meetings between EPA and PNM specifically to discuss 
the site-specific challenges at SJGS, EPA did not to take into account 
many of the most significant costs that are essential in calculating an 
accurate cost estimate of installing SCRs at SJGS.
    Response: We agree that a source-by-source analysis is appropriate, 
but we do not believe that B&V provided an acceptable analysis. First, 
the B&V costs were extrapolated from other facilities, based on 
confidential information that was not provided in response to our 
requests. Second, the B&V costs were estimated using worst-case upper 
bounds in lieu of making a site-specific estimate, as discussed above. 
Third, their costs included components that are not required at this 
site, and further assumed contingency factors beyond those normally 
expected. Therefore, we believe, with the exception of certain issues 
related to site congestion that are addressed separately in other 
comments, site-specific conditions were properly considered.
    Comment: To justify the approach based entirely on the median of 
different control technologies, EPA downplays the complicated process 
of designing and constructing an SCR, thereby not only ignoring the 
technology itself, but also the site specific-factors that must be 
considered at SJGS. SCRs at SJGS would have to be constructed so that 
each SCR can be positioned at the proper point in the flue gas stream, 
which will significantly complicate the foundation and supports that 
will be needed, resulting in additional costs of $35,630,000 that EPA 
failed to recognize or consider.
    Response: All SCRs have to be constructed so that each SCR can be 
positioned at the proper point in the flue gas stream, with proper 
foundation and supports; this is not unique to the SJGS. Over 300 
retrofit SCRs have been installed since the early 1990s in the

[[Page 52393]]

United States. Accordingly, constructability issues are well 
understood. Standard design and construction management methods have 
been developed from these 300+ existing installations.\14\ This 
experience would inform the design and construction of the SJGS SCR, 
resulting in significant economies compared to the estimates presented 
by B&V based on a very rough preliminary design that has not been 
optimized for constructability. The record does not identify any 
unusual site-specific conditions that would result in direct 
installation costs for SJGS that are substantially higher than upper 
bound direct installation costs reported by other SCR design firms for 
similarly complex sites. In fact, B&V has provided no support in the 
record for its assumptions. Finally, the design costs are not a direct 
installation cost, but rather indirect costs discussed elsewhere in our 
response to comments.
---------------------------------------------------------------------------

    \14\ J.A. Hines and others, Design for Constructability--A 
Method for Reducing SCR Project Costs, Mega, 2001, available at: 
https://www.babcock.com/library/pdf/br-1720.pdf; see also Institute 
of Clean Air Companies (ICAC), White Paper, Selective Catalytic 
Reduction (SCR) Control of NOX Emissions from Fossil 
Fuel-Fired Electric Power Plants, May 2009, EPA-R09-OAR-2009-0598-
0032 and Walter Nischt and others, Update of Selective Catalytic 
Reduction Retrofit on a 675 MW Boiler at AES Somerset, ASME 
International Joint Power Generation Conference, July 24-25, 2000, 
available at: https://www.babcock.com/library/pdf/br-1703.pdf.
---------------------------------------------------------------------------

    Comment: EPA suggests that the engineering needed to design four 
SCRs can be completed all at the same time, thus saving time and money. 
While some economies may arise with a multiple SCR installation, as 
lessons learned in designing and installing one SCR are applied to the 
next, a three-year deadline would require PNM to design all four SCRs 
at the same time. Designing all four SCRs at once would require four 
separate design and construction teams, which would eliminate the 
opportunity to apply any experience gained. As a result, the costs 
associated with designing the SCRs will be much higher on a shorter 
timeframe, not lower as EPA appears to suggest. The short, three-year 
deadline also allows no time for additional design work that may be 
needed to address unforeseen engineering challenges that are likely to 
arise at each unit.
    Response: We disagree with this comment and believe it 
mischaracterizes our analysis. In our proposal, we simply noted that 
``multiple unit discounts may apply to much of this equipment.'' \15\ 
Multiple unit discounts were not assumed in our revised cost analysis. 
It is well established that economies arise from constructing multiple 
units at a single site. Economies will arise, for example, from common 
equipment that would serve all four units, such as the ammonia 
injection system and the control system. Economies arise from shop and 
material discounts based on quantity. Our cost analysis, however, did 
not assume any discount for multiple unit discounts. Regardless, for 
other reasons as stated elsewhere in our response to comments, we are 
finalizing a schedule which calls for compliance with the emission 
limits within 5 years--rather than 3 years--of the effective date of 
our final rule.
---------------------------------------------------------------------------

    \15\ Revised BART Cost Effectiveness Analysis for Selective 
Catalytic Reduction at the Public Service Company of New Mexico San 
Juan Generating Station, November 2010, p. 5.
---------------------------------------------------------------------------

    Comment: The proposed FIP costs do not acknowledge, or take into 
account, the $330 million incurred in the past five years implementing 
a comprehensive emission control plan at SJGS. EPA's proposed BART 
determination for the SJGS is too expensive and EPA should accept the 
recently installed pollution control equipment at the SJGS as BART.
    Response: We did, as part of our NOX BART evaluation, 
consider the controls previously installed by PNM as a result of its 
March 10, 2005 consent decree with the Grand Canyon Trust, Sierra Club, 
and NMED. These controls included the installation of low-
NOX burners with overfire air ports, a neural network 
system, and a pulse jet fabric filter. However, when making the 
NOX BART determination, we are obligated by the RHR to 
examine additional retrofit technologies.\16\ In so doing, we have 
determined that SCR is cost effective and results in significant 
visibility improvements at a number of Class I areas, over and above 
the existing pollution controls currently installed.
---------------------------------------------------------------------------

    \16\ ``You are expected to identify potentially applicable 
retrofit control technologies that represent the full range of 
demonstrated alternatives.'' 70 FR at 39164.
---------------------------------------------------------------------------

    Comment: EPA proposes to conclude that, because the SJGS currently 
is subject to a federally enforceable permit limit of 0.30 lb/MMBtu for 
NOX, which is less restrictive than the WRAP modeling's 
assumed NOX rates for those units (as characterized by EPA), 
additional NOX emission controls are required. EPA, however, 
proposes on this basis to determine that the BART emission limit for 
units 1 through 4 at SJGS is not 0.27 (or 0.28) lb/MMBtu but is instead 
0.05 lb/MMBtu based on the application of SCR technology. As a result, 
EPA discontinues its evaluation of other technologies before fully 
assessing their relative cost-effectiveness and other factors mandated 
by section 169A(g)(2) of the CAA. EPA's analytical approach is in 
conflict with its own BART rules and is inconsistent with a logical 
approach to assessing relative cost-effectiveness of various technology 
options.
    Response: We disagree with this commenter's characterization of our 
analysis. As discussed in our proposal (76 FR 491), once we established 
that units 1, 2, 3, and 4 of the SJGS were subject to BART, we 
conducted a full five factor BART analysis (40 CFR 
51.308(e)(1)(ii)(A)), rather than relying on the WRAP modeling. In 
conducting the BART analysis, we identified all available retrofit 
control technologies, including Selective Non Catalytic Reduction 
(SNCR), considering the technology available, the costs of compliance, 
the energy and non-air quality environmental impacts of compliance, any 
pollution control equipment in use at the source, the remaining useful 
life of the source, and the degree of improvement in visibility which 
may reasonably be anticipated to result from the use of such 
technology. In so doing, we did assess other NOX control 
technologies.\17\
---------------------------------------------------------------------------

    \17\ 76 FR at 499.
---------------------------------------------------------------------------

    Comment: Several commenters stated EPA should follow its own 
promulgated RHR and follow New Mexico's recommendation for BART 
determinations These commenters are referring to the proposal that was 
sent to New Mexico's Environmental Improvement Board on February 11, 
2011 (later formally submitted to EPA on July 5, 2011). The proposed 
revision to the SIP finds that BART for SJGS is SNCR--not SCR. One 
commenter believed that the application of the 2005 BART Guidelines 
supports a NOX emission rate for the SJGS of between 0.23 to 
0.39 lb/MMBtu, as opposed to our proposed FIP of 0.05 lb/MMBtu, which 
requires costly SCR technology. One commenter stated the presumptive 
limits should be required ``unless you [the BART-determining authority] 
determine that an alternative control level is justified based on 
consideration of the statutory factors.'' 70 FR at 39171. Except for 
cyclone boilers (which are not present at SJGS), this commenter noted, 
our presumptive NOX BART limits are not based on application 
of SCR; as noted above, they are instead based on the use of combustion 
controls. Further, EPA determined that when current combustion control 
technology would be insufficient to meet the presumptive limits, it 
would

[[Page 52394]]

be appropriate to ``consider whether advanced combustion control 
technologies such as rotating opposed fire air should be used to meet 
these [presumptive] limits.'' Id. at 39172. Another commenter asserted 
that a proper BART assessment would take the presumptive limits into 
account by beginning with the assumption that the established 
presumptive limit for these units is appropriate, and then would 
proceed with an analysis of whether the least stringent control options 
could achieve that limit. A five-factor BART analysis of increasingly 
stringent control options could then properly assess incremental costs 
(and cost-effectiveness) and any benefits of requiring more stringent 
controls.
    Response: We note the RHR states:

    For each source subject to BART, 40 CFR 51.308(e)(1)(ii)(A) 
requires that States identify the level of control representing BART 
after considering the factors set out in CAA section 169A(g), as 
follows:
    States must identify the best system of continuous emission 
control technology for each source subject to BART taking into 
account the technology available, the costs of compliance, the 
energy and non-air quality environmental impacts of compliance, any 
pollution control equipment in use at the source, the remaining 
useful life of the source, and the degree of visibility improvement 
that may be expected from available control technology.\18\
---------------------------------------------------------------------------

    \18\ 70 FR at 39158.

---------------------------------------------------------------------------
The RHR also states:

    States, as a general matter, must require owners and operators 
of greater than 750 MW power plants to meet these BART emission 
limits. We are establishing these requirements based on the 
consideration of certain factors discussed below. Although we 
believe that these requirements are extremely likely to be 
appropriate for all greater than 750 MW power plants subject to 
BART, a State may establish different requirements if the State can 
demonstrate that an alternative determination is justified based on 
a consideration of the five statutory factors.\19\
---------------------------------------------------------------------------

    \19\ 70 FR at 39131.

    We followed the five statutory factors when assessing 
NOX BART at the SJGS, in determining that a different level 
of BART control was warranted.\20\ This analysis included an 
examination of whether other technologies should be BART for the SJGS. 
We also performed our BART evaluation on the basis of increasingly 
stringent levels of control and assessed incremental costs and cost 
effectiveness. Thus, we do not believe we improperly truncated the 
NOX BART assessment for the SJGS.
---------------------------------------------------------------------------

    \20\ 76 FR 491, 499.
---------------------------------------------------------------------------

    We received a New Mexico RH SIP on July 5, 2011. This SIP does 
contain a revised BART analysis that concludes that NOX BART 
for the SJGS should be SNCR and an emission rate of 0.23 lb/MMBtu on a 
30-day rolling average. We will review the State RH SIP submittal, and 
if there is significant new information that changes our analysis, we 
will make appropriate revisions to today's decision. However, the State 
RH SIP recommends SNCR as BART, and we have considered that technology 
in the context of responding to other comments in this notice. For the 
reasons discussed in our proposal (76 FR 491), and in other responses 
to comments, we have concluded that BART for the SJGS is an emission 
limit of 0.05 lbs/MMBtu, based on a 30 BOD average, more stringent than 
the levels achievable by the SNCR technology recommended by the State.
    Comment: To meet a three-year deadline, PNM would have to 
prefabricate as much of the SCRs as possible. In addition, a three-year 
deadline would also require significant overtime hours, expedited 
material costs, double ``heavy long-lift'' crane costs, and a larger 
construction workforce overall. Because these costs would never be 
incurred in the normal course of installing SCRs, PNM did not include 
these costs in its analysis, but they would be unavoidable in the event 
a three-year deadline is required. Such a short construction deadline 
would also exacerbate the shortage of skilled labor caused by the 
significant number of similar projects that are either ongoing or 
planned for the near future in the region. The failure to account for 
the additional labor costs associated with such a short timeframe, 
particularly given other factors affecting the market for skilled 
labor, renders both the three-year deadline and the cost estimate 
prepared by EPA unrealistic.
    Response: The information in the record does not demonstrate a 
shortage of labor necessary to complete the installation of SCRs at the 
SJGS. However, as stated elsewhere in our response to comments, we have 
modified the schedule for compliance with the emission limits to now 
require compliance within 5 years--rather than 3 years--from the 
effective date of our final rule. We believe this compliance schedule 
will provide adequate time to schedule the necessary labor resources 
for the installation of controls at the SJGS.
    Comment: The NPS recommends that in addition to the $/ton metric, 
we evaluate the visibility metric $/deciview as an additional tool to 
report the benefits of emissions controls. The NPS contends that BART 
is not necessarily the most cost-effective solution. Instead, it 
represents a broad consideration of technical, economic, energy, and 
environmental (including visibility improvement) factors. The NPS notes 
that one of the options suggested by the BART Guidelines to evaluate 
cost-effectiveness is $/deciview. The NPS believes that visibility 
improvement must be a critical factor in any program designed to 
improve visibility. The NPS goes on to provide several examples of $/
deciview calculations.
    Two other comments recommend we employ the $/deciview metric. One 
commenter states EPA has not appropriately considered the costs of 
compliance for any proposed BART for the SJGS because it relies on a $/
ton metric. The commenter maintains that cost should be related to the 
amount of visibility improvement that it is projected to achieve and 
proposes the $/dv as the means for making a rational comparison of the 
relative cost-effectiveness of control measures.
    This commenter also states that a method that aggregates projected 
visibility improvement in each affected class I area is not appropriate 
for several reasons. That approach masks the fact that it is cumulative 
over time and space and does not represent actual change at any one 
class I area. That approach also ensures an artificially low measure of 
cost-effectiveness simply by allowing the control cost to be divided by 
a larger value. The commenter suggests that a $/dv metric expressed as 
a range of the values for each affected class I area would be an 
appropriate means for comparing cost-effectiveness of different 
controls. The commenter states that EPA's current measure of cost-
effectiveness in terms of $/ton is virtually meaningless in the context 
of the RH program. Thus, EPA's assessment of the $/ton costs of BART 
candidates for the SJGS is flawed because the premise for its use is 
faulty, i.e., a change in emissions is not a suitable surrogate to 
represent a change in visibility.
    Another commenter believes that a dollar per deciview of visibility 
improvement metric would be more in line with the overall goal of the 
RH program, namely to improve visibility in national parks and 
wilderness areas. To properly gauge cost-effectiveness, EPA must 
consider the fact that installing SCRs at San Juan will cost between 
$78 million and $336 million per deciview, depending on the Class I 
area.
    Response: The BART Guidelines require that cost effectiveness be 
calculated in terms of annualized dollars per ton of pollutant removed, 
or

[[Page 52395]]

$/ton.\21\ The commenters are correct in that the BART Guidelines list 
the $/deciview ratio as an additional cost effectiveness measure that 
can be employed along with $/ton for use in a BART evaluation. However, 
the use of this metric further implies that additional thresholds of 
acceptability, separate from the $/ton metric, be developed for BART 
determinations for both single and multiple Class I analyses. We have 
not used this metric because (1) We believe it is unnecessary in 
judging the cost effectiveness of BART, (2) it complicates the BART 
analysis, and (3) it is difficult to judge. We conclude it is 
sufficient to analyze the cost effectiveness of potential BART controls 
using $/ton, in conjunction with the modeled visibility benefit of the 
BART control. We have addressed the commenter's statement that we 
should not aggregate visibility improvement over Class I areas 
elsewhere in our response to comments.
---------------------------------------------------------------------------

    \21\ 70 FR 39167.
---------------------------------------------------------------------------

2. Comments on Specific Cost Line Items
    The comments that follow have been summarized to capture each one's 
main points and most of the references have been removed. The reader is 
encouraged to refer to our Complete Response to Comments for NM 
Regional Haze/Visibility Transport FIP for more details and references.
    Comment: The NPS stated that PNM has improperly rejected use of the 
Cost Manual in favor of methods not allowed by EPA. The NPS states the 
SCR cost estimates submitted by PNM are severely lacking in the types 
of specific information needed to give them credibility. The NPS goes 
on to provide a great deal of detailed information that supports their 
opinion that specific cost items were overestimated. This information 
includes the following cost item categories:
     Appropriateness of using the Cost Manual.
     Problems in B&V's scaling of cost items from another 
project.
     Ductwork and ammonia grid costs.
     Reactor box and breaching.
     Expansion joints.
     Sonic horns.
     Elevator.
     Structural steel.
     SCR bypass.
     Catalyst.
     NOX monitoring.
     Auxiliary electrical system upgrades.
     Instrumentation and control systems.
     Air preheaters.
     Balanced draft conversion.
     Contingencies.
     Operating Labor.
     Reagent.
     Auxiliary power demand.
     Catalyst life.
     Interest rate.
     Effect on cost of PNM's assumption of an emission rate of 
0.07 lbs/MMBtu.
    The NPS concluded their critique of PNM's cost estimate with their 
own estimate of an average cost of $2,600/ton for the four units of the 
SJGS.
    Response: We agree with the general contention that many individual 
cost items for the installation of SCR on the units of the SJGS were 
overestimated by PNM. Please see elsewhere in our response to comments 
for our opinion regarding the appropriate estimated costs for these and 
other cost items. We note that the NPS estimate of an average cost of 
$2,600/ton for the four units of the SJGS closely agrees with our own 
revised estimate.
    Comment: EPA failed to account for the costs associated with 
ensuring sufficient auxiliary power to operate SCRs at SJGS. EPA 
discounted by nearly 80 percent the estimated cost of the auxiliary 
power upgrades needed to power the SCRs. The theory behind this sharply 
discounted cost estimate is that the SCRs will only be responsible for 
approximately 20 percent of the total draft pressure of the units and 
that therefore the cost of the auxiliary power upgrades should be 
allocated in similar fashion. Without SCRs, no additional auxiliary 
power would be needed. As such, those costs must be included in the 
cost of the SCRs, as they represent one of the site-specific concerns 
that could make the installation of SCR at SJGS more difficult than 
other units. The decision by EPA to exclude these costs underestimates 
the cost of SCRs for SJGS by $73,175,000.
    Response: We disagree that installing SCRs would by itself trigger 
the need to upgrade the auxiliary power system, especially to the 
extent proposed by PNM. The upgrade benefits the entire auxiliary power 
system. The modifications, for example, include new transformers, 
switchgear, and motor control centers that will serve the entire fan 
auxiliary loads of both the Consent Decree projects and the SCR.\22\ 
The modifications also include replacing the existing fans with 
upgraded units. These fans will service more than just the SCRs.
---------------------------------------------------------------------------

    \22\ B&V 10/22/10 Cost Analysis, Sec. 3.0 and 11/4/10 Norem E-
mail to Kordzi, Re: Questions on PNM's Revised Cost Estimate for the 
SJGS SCR Project, Response to Question 3, Table 3 of attachment 1.
---------------------------------------------------------------------------

    This comment advocates attributing 100% of the cost of the 
auxiliary power system upgrade, recognized after the fact, to the last 
project to be implemented, the SCR. We did not ``discount'' the cost of 
the auxiliary power system by 80%, but rather distributed it among the 
control projects planned around the same time that triggered its need 
according to each control's contribution to draft pressure lost. This 
recognizes that the upgrade provides benefits to the entire system and 
includes elements that are more than strictly necessary because of the 
installation of the SCR. Therefore, it is not appropriate to attribute 
the entire cost of the upgrade to the SCR project. We believe our 
approach is consistent with standard engineering practices.
    Comment: EPA failed to account for additional costs associated with 
protecting the air preheater following an SCR Installation. Ammonia 
reacts with sulfur in the flue gas downstream of the SCR forming 
ammonium bisulfate (ABS), which condenses in the air preheater. ABS is 
an acidic substance that forms a sticky deposit on heat transfer 
surfaces, resulting in both corrosion of the equipment and the 
collection of fly ash that plug passages, which ultimately impairs the 
efficiency and reliability of the unit. As such, the installation of a 
retrofit SCR generally requires a modification to the air preheater to 
allow for easier cleaning of the basket surfaces in order to protect 
the heat transfer elements against the potential damage that might 
otherwise result from ABS. EPA deleted the costs of protecting the air 
preheater in its SCR cost analysis, ``pending compelling justification 
that they are required for the SCR.'' EPA's cost analysis recognizes 
that modifications to the air preheater are generally required for 
``units that burn high sulfur coal,'' but EPA assumes that such 
modifications are not necessary ``for a properly designed SCR on a 
boiler that burns low sulfur coal.'' EPA is correct that, in spite of 
the quoted discussion above, Sargent & Lundy did not recommend air 
preheater modifications in the SCR cost analysis for the Navajo 
Generating Station. However, that recommendation was based on the 
specific emission characteristics at Navajo Generating Station, which 
differ significantly from those at SJGS.
    Response: This comment attempts to distinguish the emission 
characteristics of Navajo Generating Station and the SJGS by pointing 
to differences in the coal quality to support air preheater 
modifications at SJGS but not at Navajo. We obtained and analyzed the 
Navajo design basis coal quality. The

[[Page 52396]]

differences in coal quality are either not material (sulfur, heat 
content) or mitigate the potential impacts of ammonium bisulfate 
plugging (higher ash at SJGS). The key factors that determine whether 
ammonium bisulfate plugging will occur are not coal quality, but rather 
the amount of sulfur trioxide (SO3) and ammonia in the 
exhaust gases that reach the air preheater and the air preheater 
temperature regime. The formation of ammonium bisulfate depends on the 
relative amounts of ammonia and SO3 in the exhaust gases. 
When the molar ratio is more than 2:1, ammonium sulfate (not ammonium 
bisulfate) is preferentially formed. The average molar ratio for both 
SJGS and Navajo over the catalyst lifetime is much higher than 2:1. 
Thus, ammonium sulfate would be preferentially formed. Ammonium sulfate 
is a dry powder at all air preheater operating temperatures and does 
not create a fouling problem. Thus, consistent with Sargent & Lundy's 
conclusion for the nearby Navajo Station, which burns a similar coal, 
ammonium bisulfate fouling would not be expected and we do not believe 
that upgrades are justified for the air preheaters due to SCR 
installation.
    Comment: The installation of SCR at SJGS would increase the 
resistance in the flue gas path for the units. To overcome that 
additional resistance, PNM would need to install new higher capacity 
fan rotors and motors because the SCRs will add an additional pressure 
drop in the system of 10 inches of water gauge (w.g.). This change in 
pressure and higher fan pressure ratings would increase the pote