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Daily Rules, Proposed Rules, and Notices of the Federal Government

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 49

[EPA-R09-OAR-2010-0683; FRL-9715-9]

Source Specific Federal Implementation Plan for Implementing Best Available Retrofit Technology for Four Corners Power Plant: Navajo Nation

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
SUMMARY: The Environmental Protection Agency (EPA) is promulgating a source-specific Federal Implementation Plan (FIP) requiring the Four Corners Power Plant (FCPP), a coal-fired power plant located on the Navajo Nation near Farmington, New Mexico, to achieve emissions reductions required by the Clean Air Act's (CAA) Best Available Retrofit Technology (BART) provision. In this final action, EPA is requiring FCPP to reduce emissions of oxides of nitrogen (NOX) and is setting emission limits for particulate matter (PM) based on emission rates already achieved at FCPP. These pollutants contribute to visibility impairment in the numerous mandatory Class I Federal areas surrounding FCPP. For NOXemissions, EPA is requiring FCPP to meet a plant-wide emission limit of 0.11 lb/MMBtu on a rolling 30-day heat input-weighted average. This represents an 80 percent reduction from the current NOXemission rate and is expected to provide significant improvement in visibility. EPA is also finalizing an alternative emission control strategy that gives the owners of FCPP the option to close Units 1-3 and install controls on Units 4 and 5 to each meet an emission limit of 0.098 lb/MMBtu, based on a rolling average of 30 successive boiler operating days. For PM, EPA is requiring Units 4 and 5 at FCPP to meet an emission limit of 0.015 lb/MMBtu, and retaining the existing 20 percent opacity limit. These PM limits are achievable through the proper operation of the existing baghouses. EPA is also requiring FCPP to comply with a 20 percent opacity limit on its coal and material handling operations.
DATES: Effective Date:This rule is effective on October 23, 2012.
FOR FURTHER INFORMATION CONTACT: Anita Lee, EPA Region 9, (415) 972-3958,r9air_fcppbart@epa.gov.
SUPPLEMENTARY INFORMATION:

EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2010-0683. The index to the docket for this action is available electronically athttp://www.regulations.govand in hard copy at EPA Region 9, 75 Hawthorne Street, San Francisco, California. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (e.g.copyrighted material), and some may not be publicly available in either location (e.g.Confidential Business Information (CBI)). To inspect the hard copy materials, please schedule an appointment during normal business hours with the contact listed in theFOR FURTHER INFORMATION CONTACTsection. A reasonable fee may be charged for copies.

Throughout this document, “we”, “us”, and “our” refer to EPA.

Table of Contents I. Background of the Final Rule II. Summary of Final Federal Implementation Plan (FIP) Provisions III. Analysis of Major Issues Raised by Commenters A. Comments on Factor One—Cost of Controls 1. Comments on the Analysis of the Cost of SCR at FCPP 2. Comments on Top-Down Analysis Versus Incremental Cost Effectiveness B. Comments on Factor Two—Economic, Energy, and Non-Air Quality Environmental Impacts 1. Comments on Economic Impacts a. General Comments on Economic Impacts b. Comments on EPA's Economic Analysis 2. Comments on Energy and Non-Air Quality Environmental Impacts C. Comments on Factor Three—Existing Controls at FCPP D. Comments on Factor Four—Remaining Useful Life at FCPP E. Comments on Factor Five—Anticipated Visibility Improvements F. Comments on BART Determinations 1. Comments on the Proposed BART Determination for NOX 2. Comments on the Proposed BART Determination for PM 3. Comments on BART for SO2 4. Other Comments on BART G. Comments on Arizona Public Service's Alternative and EPA's Supplemental Proposal H. Other Comments IV. Administrative Requirements A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations K. Congressional Review Act L. Petitions for Judicial Review I. Background of the Final Rule

FCPP is a privately owned and operated coal-fired power plant located on the Navajo Nation Indian Reservation near Farmington, New Mexico. Based on lease agreements signed in 1960, FCPP was constructed and has been operating on real property held in trust by the Federal government for the Navajo Nation. The facility consists of five coal-fired electric utility steam generating units with a total capacity of 2060 megawatts (MW). Units 1, 2, and 3 at FCPP are owned entirely by Arizona Public Service (APS) which serves as the facility operator, and are rated to 170 MW (Units 1 and 2) and 220 MW (Unit 3). Units 4 and 5 are each rated to a capacity of 750 MW, and are co-owned by six entities: Southern California Edison1 (48 percent), APS (15 percent), Public Service Company of New Mexico (13 percent), Salt River Project (SRP) (10 percent), El Paso Electric Company (7 percent), and Tucson Electric Power (7 percent).

1Arizona Public Service is currently seeking regulatory approvals to purchase Southern California Edison's share of Units 4 and 5.

EPA's proposed BART determination for FCPP, published on October 19, 2010, provided a thorough discussion of the statutory and regulatory framework for addressing visibility through application of BART for sources located in Indian country, and of the factual background for BART determinations at FCPP. 75 FR 64221.

On February 25, 2011, as a result of additional information provided by stakeholders, EPA published a Supplemental Proposal. FR 76 10530. We briefly summarize the provisions of our Proposal and our Supplemental Proposal below.

Part C Subpart II of the 1977 CAA establishes a visibility protection program that sets forth “as a national goal the prevention of any future, and the remedying of any existing, impairment of visibility in mandatory class I Federal areas which impairment results from manmade air pollution.” 42 U.S.C. 7491A(a)(1). EPA promulgated regional haze regulations on April 22, 1999. 64 FR 35765. Consistent with the statutory requirement in 42 U.S.C. 7491(b)(2)(a), EPA's 1999 regional hazeregulations include a provision requiring States to require certain major stationary sources to procure, install and operate BART. This provision covers sources “in existence on August 7, 1977, but which ha[ve] not been in operation for more than fifteen years as of such date” and which emit pollutants that are reasonably anticipated to cause or contribute to any visibility impairment. EPA has determined that FCPP is a BART-eligible source (75 FR 64221).

In determining BART, States are required to take into account five factors identified in the CAA and EPA's regulations. 42 U.S.C. 7491(g)(2) and 40 CFR 51.308. Those factors are: (1) The costs of compliance, (2) the energy and non-air quality environmental impacts of compliance, (3) any pollution control equipment in use or in existence at the source, (4) the remaining useful life of the source, and (5) the degree of improvement in visibility which may reasonably be anticipated to result from the use of such technology. 40 CFR 51.308(e)(1)(ii)(A). EPA's guidelines for evaluating BART are set forth in Appendix Y to 40 CFR Part 51.

In 1998, EPA promulgated the Tribal Authority Rule (TAR) relating to implementation of CAA programs in Indian country.See40 CFR part 49;seealso 59 FR 43956 (Aug. 25, 1994) (proposed rule); 63 FR 7254 (Feb. 12, 1998) (final rule);Arizona Public Service Companyv.EPA,211 F.3d 1280 (DC Cir. 2000),cert. den.,532 U.S. 970 (2001) (upholding the TAR).

In the TAR, EPA determined that it has the discretionary authority to promulgate “such federal implementation plan provisions as are necessary or appropriate to protect air quality” consistent with CAA sections 301(a) and 301(d)(4) when a Tribe has not submitted or EPA has not approved a Tribal Implementation Plan (TIP). 40 CFR 49.11(a).

EPA has previously promulgated FIPs under the TAR to regulate air pollutants emitted from FCPP. In 1999, EPA proposed a FIP for FCPP. That FIP proposed to fill the regulatory gap that existed because New Mexico permits and State Implementation Plan (SIP) rules are not applicable or enforceable in the Navajo Nation, and the Tribe had not sought approval of a TIP covering the plant. 64 FR 48731 (Sept. 8, 1999).

Before EPA finalized the 1999 FIP, the operator of FCPP began negotiations to reduce SO2emissions from FCPP by making upgrades to improve the efficiency of its SO2scrubbers. The parties to the negotiations requested EPA to make those SO2reductions enforceable through a source-specific FIP. Therefore, EPA proposed a new FIP for FCPP in September 2006. 71 FR 53631 (Sept. 12, 2006). In the final FIP, EPA indicated that the new SO2emissions limits were close to or the equivalent of the emissions reductions that would have been required in a BART determination. 72 FR 25698 (May 7, 2007). The FIP also required FCPP to comply with a 20 percent opacity limit on both the combustion and fugitive dust emissions from material handling operations.

APS, the operator of FCPP, and Sierra Club each filed Petitions seeking judicial review of EPA's promulgation of the 2007 FIP for FCPP on separate grounds. The Court of Appeals for the Tenth Circuit rejected both Petitions. The Court agreed with EPA's request for a voluntary remand of a single narrow aspect of the 2007 FIP: The opacity limit for the fugitive dust for the material handling operations. Id. At 1131.

On October 19, 2010 (75 FR 64221) EPA proposed a second FIP under 40 CFR 49.11(a) finding it is necessary or appropriate to establish BART requirements for NOXand PM emissions from FCPP, and proposed specific NOXand PM limits as BART. For NOX, EPA proposed a plant-wide emission limit of 0.11 lb/MMBtu, representing an 80 percent reduction from current NOXemission rates, achievable by installing and operating SCR technology on Units 1-5. For PM, EPA proposed an emission limit of 0.012 lb/MMBtu for Units 1-3 and 0.015 lb/MMBtu for Units 4 and 5 achievable by installing and operating any of several equivalent controls on Units 1-3, and through proper operation of the existing baghouses on Units 4 and 5. EPA also proposed a 10 percent opacity limit from Units 1-5 and a 20 percent opacity limit to apply to FCPP's material handling operations to respond to the voluntary remand EPA took on this issue from the 2007 FIP.

On November 24, 2010, APS, acting on behalf of FCPP's owners, submitted a letter to EPA offering an alternative to reduce visibility-impairing pollution. APS proposed to close Units 1-3 by 2014 and install and operate SCR on Units 4 and 5 to each meet an emission limit of 0.11 lb/MMBtu by the end of 2018. On February 25, 2011, we published a Supplemental Proposal (76 FR 10530) with a technical evaluation of APS' alternative. Our Supplemental Proposal also provides a detailed summary of the legal background for proposing an alternative emission control strategy as achieving better progress towards the national visibility goal (76 FR 10530).

In our Supplemental Proposal, EPA proposed to allow APS the option to comply with the alternative emission control strategy in lieu of complying with our October 19, 2010, proposed BART determination. EPA's alternative emission control strategy involved closure of Units 1-3 by 2014 and installation and operation of add-on post combustion controls on Units 4 and 5 to each meet a NOXemission limit of 0.098 lb/MMBtu by July 31, 2018. EPA proposed that this alternative emission control strategy represents reasonable progress towards the national visibility goal, under CAA Section 169A(b)(2), because it would result in greater visibility improvement in surrounding Class I areas at a lower cost than our October 19, 2010, BART proposal. The proposal to require PM and opacity limits on Units 1-5, as well as 20 percent opacity limits for controlling dust from coal and ash handling and storage facilities, was unchanged.

II. Summary of Final FIP Provisions

EPA is finding today that it is necessary or appropriate to promulgate a source-specific FIP requiring FCPP to achieve emissions reductions required by the CAA's BART provision. Specifically, EPA is requiring FCPP to meet new emissions limits for NOXand PM. These pollutants contribute to visibility impairment in the 16 mandatory Class I Federal areas surrounding FCPP. For NOXemissions, EPA is finalizing a BART determination as well as an optional alternative to BART. FCPP can choose which emissions control strategy to follow and must notify EPA of its choice by July 1, 2013. Our final BART determination requires FCPP to meet a plant-wide heat input-weighted emission limit of 0.11 lb/MMBtu on a rolling 30-calendar day average which represents an 80 percent reduction from current NOXemission rates. This NOXlimit is achievable by installing and operating add-on post-combustion controls on Units 1-5. Installation and operation of the new NOXcontrols on one 750 MW unit must be within 4 years of October 23, 2012. NOXcontrols on the remaining units must be installed and operated within 5 years of October 23, 2012.

Alternatively, FCPP may choose to comply with an alternative emission control strategy for NOXin lieu of complying with EPA's final BART determination for NOX. This alternative emission control strategy requires permanent closure of Units 1-3 by January 1, 2014, and installation and operation of add-on post combustion controls on Units 4 and 5 to meet a NOXemission limit of 0.098 lb/MMBtu each, based on a rolling average of 30successive boiler operating days, by July 31, 2018.

For PM, EPA is requiring Units 4 and 5 to meet a BART emission limit of 0.015 lb/MMBtu within 60 days after restart following the scheduled major outages for Units 4 and 5 in 2013 and 2014. This emission limit is achievable through the proper operation of the existing baghouses. EPA is determining that it is not necessary or appropriate to finalize our proposed PM BART determination for Units 1-3 or our proposed opacity limit of 10 percent on Units 1-5. FCPP must continue to meet the existing 20 percent opacity limit on Units 1-5.

To address our voluntary remand of the material handling requirements from the 2007 FIP, EPA is finalizing our proposal to require FCPP to comply with a 20 percent opacity limit on its material handling operations, including coal handling.

In our final rule, EPA has made several revisions to the proposed rule and Supplemental Proposal based on comments we received during the public comment period. These revisions include: revising the compliance date under BART from within 3 to 5 years2 of the effective date of the final rule to within 4 to 5 years3 of the effective date; revising the interim limits to only include an interim limit for one 750 MW unit rather than all units to match the revised compliance timeframes; adding 6 months to the notification dates to EPA on APS's plans to implement BART or the BART Alternative; revising the averaging time for the NOXlimit under the BART Alternative from a 30-day average to a rolling average of 30 successive boiler operating days; retaining the existing opacity limit of 20 percent instead of setting a new 10 percent opacity limit on Units 1-5; determining that it is not necessary or appropriate at this time to finalize a BART determination for PM for Units 1-3; and revising the effective date of the PM emission limit for Units 4 and 5 to the next schedule major outage rather than following installation of new post-combustion NOXcontrols. We include the rationale for these revisions in our responses to comments. All comments we received are included in the docket and EPA has summarized and responded to all comments in a separate Response to Comments (RTC) document that is also included in the docket for this final rulemaking. In thisFederal Registernotice, EPA is including a summary of the major comments we received and a summary of our responses.

2We proposed to require phased installation of add-on NOXcontrols on at least 560 MW of generation within 3 years of the effective date of the final rule, on at least 1310 MW of generation within 4 years of the effective date, and plant-wide within 5 years of the effective date.

3We are finalizing the rule to require phased installation of add-on NOXcontrols on at least 750 MW of generation within 4 years of the effective date and on the remaining units within 5 years of the effective date.

III. Summary of Major Issues Raised by Commenters

Our October 19, 2010, proposal included a 60-day public comment period that ended on December 20, 2010. On November 12, 2010, EPA published a notice of public hearings to be held in the Four Corners area on December 7-9, 2010 (75 FR 69374). On December 8, 2010, EPA published in theFederal Registera notice that EPA received an alternative proposal from APS and would be extending the public comment period to March 18, 2011, and postponing the previously scheduled public hearings in order to evaluate that alternative proposal (75 FR 76331). Notices of public hearings and rescheduled hearings were published in three newspapers near the Four Corners Power Plant4 . Our supplemental proposal on February 25, 2011, subsequently extended the public comment period until May 2, 2011, and announced four public hearings on the proposed BART determination and supplemental proposal in the Four Corners area on March 29, 30, and 31, 2011. In all, 90 oral testimonies were presented at the public hearings.

4Notices of scheduled public hearings were published in the Farmington Daily Times and the Durango Herald on November 3, 2010 and February 17, 2011, and the Navajo Times on November 4, 2010 and February 17, 2011. Notices of the extended public comment period and postponement of the December public hearings were published in the Farmington Daily Times and the Durango Herald on November 24, 2010 and in the Navajo Times on December 2, 2010.

We received nearly 13,000 written comments. Of these, over 12,800 comments came from private citizens who submitted substantially similar comments. We received an additional 110 unique written comments (not including duplicates, requests for extension of the public comment period, or requests for additional hearings). We do not consider or address letters or comments unrelated to the rulemaking in this notice or in our response to comments document. The unique comments can be broken down by general type as follows: 78 from private citizens, eight from environmental advocacy groups, four from the owners of FCPP, five from state/local government entities, four from public interest advocacy groups, two from tribes, four from utility industry associations, three from federal agencies, one from a U.S. Senator, and one from the operator of the Navajo Mine.

A. Comments on Factor One—Cost of Controls

We received a number of comments on our approach for estimating the cost of SCR at FCCP, the incremental cost effectiveness of controls, and on our top-down approach for evaluating controls.

1. Comments on the Analysis of the Cost of SCR at FCPP

Comment:Some of the owners of FCPP and a utility industry association stated that in analyzing the cost of SCR at FCPP, EPA improperly reworked and reduced the SCR cost estimates submitted for FCPP by eliminating line item costs that are not explicitly included in theEPA Control Cost Manual(citing 75 FR 64227). Commenters noted that APS' estimate was prepared by B&V, an engineering firm with extensive experience with the installation and operation of pollution control equipment and that the prices used in the cost analysis were based on quotes from equipment vendors that reflected current pricing.

Response:EPA disagrees with the comment that EPA improperly reworked and reduced the SCR cost estimates. EPA used a hybrid approach for our cost analysis that relied primarily on the highest of several cost estimates provided by APS, but also followed the BART Guidelines that state “[i]n order to maintain and improve consistency, cost estimates should be based on theOAQPS Control Cost Manual,where possible”,5 to determine whether APS included cost estimates for services or equipment associated with SCR that were either not needed (e.g.,mitigation for increased sulfuric acid emissions or catalyst disposal), or not allowed under theEPA Control Cost Manual(e.g.,legal fees).

5The OAQPS Control Cost Manual is now called the EPA Control Cost Manual. The EPA Control Cost Manual is available from the following Web site:http://www.epa.gov/ttncatc1/products.html#cccinfo.

Our cost analysis relied primarily on the highest cost estimates submitted by APS. EPA accepted all site-specific costs provided by APS for cost categories (e.g.,purchased equipment, installation) that are typically included in a cost estimate conducted in accordance with theEPA Control Cost Manual,and only excluded line item costs that are not explicitly included in theEPA Control Cost Manualor in a limited number of cases where EPA determined alternativecosts were more appropriate (e.g.,costs of catalysts, interest rates). We note that EPA's cost estimate presented in the Technical Support Document (TSD)6 ($718 million total for Units 1-5) is only 18 percent lower than the highest B&V cost estimate and less than 0.6 percent lower than the lowest and most recent B&V cost estimate.

6See “TSD Proposal—Technical Support Document 10-6-10”, Document No. EPA-R09-OAR-2010-0683-0002.

Our detailed, line-by-line analysis7 was included in the docket for our proposed rulemaking and provided an explanation for why we retained, modified, or rejected each line item in the SCR cost estimate for each of the five units at FCPP.

7See “TSD ref [40] Four Corners SCR Cost Analysis (EPA) 8-26-10”, Document No. EPA-R09-OAR-2010-0683-0033.

Comment:One of the owners of FCPP asserted that EPA's estimate of the average cost effectiveness of SCR at FCPP is significantly higher than the level ($1,600 per ton of NOXremoved) that EPA determined was not cost effective in the 2005 BART rules for presumptive BART limits. The commenter asserted that there is no basis for EPA to depart from its own rules by concluding that SCR is BART for FCPP when this technology is many times more expensive than the costs EPA rejected as presumptive BART in the 2005 BART rules. The commenter noted that its cost analysis estimated that the average cost effectiveness of combustion controls for the five units at FCPP would range from $524 to $1,735 per ton of NOXremoved, while the average cost effectiveness of SCR would range from $4,215 to $5,283 per ton. The commenter also noted that EPA's estimate of average cost effectiveness for SCR at FCPP ranged from $2,515 to $3,163 per ton. The commenter stated that, at the low end, only the estimate of the average cost effectiveness of combustion controls is in line with EPA's estimates of cost-effective controls for presumptive BART limits, while the estimate of average cost effectiveness of SCR is significantly higher.

Response:EPA disagrees with this comment. Although the commenters argue that the BART guidelines established a threshold for cost effectiveness against which future BART determinations must be compared, the BART Guidelines did not establish a cost effectiveness threshold for all BART determinations. In developing the presumptive NOXlimits for BART in 2005, EPA did not set the cost effectiveness values estimated for combustion controls as the threshold for determining whether a given control technology was or was not cost effective. The BART Guidelines do not set a numerical definition for “cost effective”, and the analysis of presumptive limits uses cost effectiveness as a means to broadly compare control technologies, not as threshold for rejecting controls for an individual unit or facility that exceed the average cost effectiveness of combustion controls.

Additionally, a comparison of the average cost effectiveness estimates in the 2005 BART guidelines against EPA's cost effectiveness estimates in 2010 for FCPP is not an “apples to apples” comparison. The technical support documentation for the 2005 BART guidelines indicate that cost effectiveness of controls was not determined based on site-specific cost estimates developed for each BART-eligible facility; rather, cost estimates for existing facilities were determined using assumptions for capital and annual costs per kilowatt (kW)8 or kilowatt-hour (kW-hr), and then scaled according to boiler size at the existing facilities. The supporting information for the 2005 BART Guidelines estimated SCR costs9 for FCPP Units 4 and 5 that are comparable to SCR cost estimates generated by the National Park Service (NPS) in 2009 using theEPA Control Cost Manual. 10 The same commenters have previously dismissed the NPS SCR cost estimates based on theEPA Control Cost Manualbecause it does not include site-specific costs.11 In short, the commenter's recommendation to use generalized cost estimates from the 2005 BART Guidelines as a bright line threshold for comparison with site-specific 2010 cost estimates is inconsistent with its own criticisms of theEPA Control Cost Manual.

8In the 2005 BART presumptive limit analysis, EPA estimated capital costs at all facilities nationwide assuming that SCR costs were $100/kW, and then scaling by the size of the facility (kW).

9The 2005 BART guidelines estimated SCR capital costs at FCPP to be $64 million and total annual costs to be $11 million. Cost effectiveness calculations rely on total annual costs and annual NOXreductions from the control technology.

10In the ANPRM, in addition to reporting APS' cost estimates and EPA's revisions to APS' cost estimates, for reference, EPA also reported cost estimates developed by NPS using theEPA Control Cost Manualand provided to EPA during consultations with the FLMs prior to our ANPRM. NPS estimated SCR capital costs to be $53 million and total annual costs to be $10 million. See Table 9 in the October 2010 TSD for the proposed BART determination for FCPP. In its comments on the ANPR, NPS revised its cost estimates for SCR on Units 4 and 5 to $114 million (capital cost) and $18 million (total annual cost)—see Table 12 in the TSD for the proposed BART determination.

11APS and other entities provided comments to EPA on the NPS cost estimates reported in the ANPRM, see document titled “Comments on ANPRM 09 0598 APS Comments and Exhibits” document ID number EPA-R09-OAR-2009-0598-0195.

In determining that a different level of control than the presumptive limit was warranted as BART for FCPP, EPA evaluated the five statutory factors in our assessment for FCPP. This evaluation was detailed in the Technical Support Document for our proposed BART determination and included an analysis of cost effectiveness, energy and non-air quality impacts of controls, existing controls at the facility, the remaining useful life of the facility, and the visibility improvement reasonably anticipated to result from controls. Therefore, EPA has not improperly disregarded the BART guidelines in our analysis for FCPP.

Comment:A number of commenters stated that EPA's BART analysis for FCPP was inconsistent with its own regulations in that it failed to consider control costs as a function of visibility improvement. These commenters typically stated that EPA's BART determination for FCPP must consider the cost effectiveness of control technology options in terms of dollars per deciview-improved.

Response:The BART Guidelines require that cost effectiveness be calculated in terms of annualized dollars per ton of pollutant removed, or $/ton.12 The commenters are correct in that the BART Guidelines list the $/deciview ratio as an additional cost effectiveness metric that can be employed along with $/ton for use in a BART evaluation. However, the use of this metric further implies that additional thresholds or notions of acceptability, separate from the $/ton metric, would need to be developed for BART determinations. We have not used this metric for BART purposes at FCPP because (1) it is unnecessary in judging the cost effectiveness of BART, (2) it complicates the BART analysis, and (3) it is difficult to judge. In particular, the $/deciview metric has not been widely used and is not well-understood as a comparative tool. In our experience, $/deciview values tend to be very large because the metric is based on impacts at one Class I area on one day and does not take into account the number of affected Class I areas or the number of days of improvement that result from controlling emissions. In addition, the use of the $/deciview suggests a level of precision in the CALPUFF model that may not be warranted. As a result, the $/deciview can be misleading. We conclude that it is sufficient to analyze the cost

effectiveness of potential BART controls for FCPP using $/ton, in conjunction with an assessment of the modeled visibility benefits of the BART control.

1270 FR 39167.

EPA considered cost of controls, including the total capital costs, annual costs, and $/ton of NOXpollution reduced in our proposed BART determination. Additionally, in response to comments received on our proposal, EPA included calculations and consideration of incremental cost effectiveness (see Section 3.2 of the Response to Comments document in the docket for this final rulemaking). EPA considered visibility impacts, including the degree of impairment, the number of Class I areas affected by FCPP, the deciview improvement resulting from controls, and the percent change in improvement. EPA determined that these metrics are sufficient in completing our five-factor analysis for FCPP.

Comment:One commenter stated that BART must be determined in the context of reasonable progress rather than in isolation and that the cost effectiveness metric used by EPA (i.e., $/ton of NOXreduced) does not satisfy the statutory requirement to consider the cost to comply with the Regional Haze program because it does not include compliance costs related to requirements for reasonable progress.

Response:Congress identified BART as a key measure for ensuring reasonable progress. We disagree that BART must be determined in the context of reasonable progress. If anything, reasonable progress depends on BART. Because the Class I areas affected by emissions from FCPP are not achieving the glidepath, it is important that states, tribes, and EPA require reasonable measures to be implemented to ensure that progress is made towards the national visibility goal.

The BART guidelines specify that the cost of controls be estimated by identifying the emission units being controlled, defining the design parameters for emission controls, and developing a cost estimate based on those design parameters using theEPA Control Cost Manualwhile taking into account any site-specific design or other conditions that affect the cost of a particular BART control option. The BART guidelines do not require the costs of compliance under BART to consider costs that may be associated with reasonable progress.

Comment:The Navajo Nation commented that EPA should analyze the affordability of controls under the supplemental proposal by performing a detailed analysis, rather than an approximation, of the cost of compliance for installing SCR on Units 4 and 5, including a consideration of the impacts of closing Units 1-3.

Response:EPA disagrees that we should perform a detailed cost analysis of the alternative emission control strategy put forth in the Supplemental Proposal. The Regional Haze Rule, in assessing an alternative measure in lieu of BART (40 CFR 51.308(e)(2)) requires several elements in the alternative plan (e.g.,a demonstration that the alternative will achieve greater reasonable progress than BART, and that reductions are surplus to the baseline date of the SIP), but does not require an analysis of the cost of the alternative plan.

Similarly, an affordability analysis of the alternative emission control strategy is not required under the Regional Haze Rule; however, at the request of the Navajo Nation, pursuant to EPA's customary practice of engaging in extensive and meaningful consultation with tribes, EPA commissioned a study to estimate potential adverse impacts to the Navajo Nation of APS's option to close Units 1-3 and will provide the report to the Navajo Nation by letter as a follow-up to our consultation.

2. Comments on Top-Down Analysis Versus Incremental Cost Effectiveness

Comment:A number of commenters note that EPA's proposed BART analysis was inconsistent with its own regulations in that it used a top-down analytic approach and failed to conduct an incremental cost evaluation. Commenters indicated that in using the top-down analysis, EPA failed to carry out the five-factor analysis for each of the technically feasible retrofit technologies as required by the BART Guidelines (citing 40 CFR part 51, Appendix Y, section I.F.2.c), including combustion control technology which the BART Guidelines identify as presumptive BART.

Response:EPA disagrees with these comments. In the preamble to the final BART guidelines, EPA discusses two options presented in the 2001 proposal and 2004 reproposal of the guidelines for evaluating ranked control technology options (See discussion at 70 FR 39130). Under the first option, States would use a sequential process for conducting the analysis, beginning with a complete evaluation of the most stringent control option. The process described is a top-down approach analogous to the analysis we used in our proposed BART determination for FCPP. If the analysis shows no outstanding issues regarding cost or energy and non-air quality environmental impacts, the analysis is concluded and the top level of technically feasible controls is identified as the “best system of continuous emission reduction”. Therefore, in conducting our BART determination for FCPP, EPA's top-down approach for assessing the five factors was consistent with the discretion allowed under the BART guidelines. EPA additionally notes that the TSD for our proposed rulemaking included analyses of the costs, non-air impacts, and visibility improvements associated with combustion controls at FCPP, but that there is no requirement for a five-factor analysis on all potentially available control options if the top down approach is used and the top level of technically feasible controls is selected (70 FR 39130).

Comment:One of the owners of FCPP asserted that the BART rules require an incremental cost analysis and provided an analysis comparing the costs of combustion controls to the costs of SCR. According to the commenter's analysis, the incremental cost effectiveness of moving from combustion controls to SCR ranges from $6,553 to $8,605 per ton of NOXreduced for the five units at FCPP. This commenter and another FCPP owner asserted that this “extraordinarily high” incremental cost highlights the fact that combustion controls, not SCR, satisfy the cost effectiveness test applied by EPA in adopting the presumptive BART limits in the BART rules.

Response:EPA agrees that the BART Guidelines recommend consideration of both average and incremental cost effectiveness, however, EPA disagrees with the commenter that the incremental cost effectiveness should be a comparison between combustion controls and SCR for this particular facility. As discussed at length in the TSD for our proposed BART determination for FCPP, Region 9 has determined that combustion controls (burner modifications and overfire air, including ROFA) will not be effective at significantly reducing emissions at Four Corners without potential operational difficulties due to inherent design and physical limitations of the boilers. Therefore, in estimating incremental cost, it is inappropriate and misleading to include combustion controls in the analysis for this particular facility. To respond to this comment, EPA conducted an incremental cost effectiveness analysis and included it in our docket for this final rulemaking.13 Based on our incremental cost analysis, EPA has determined that the incremental cost of SCR compared toselective non-catalytic reduction (SNCR), the next most stringent option ($2,500 per ton to $3,300 per ton), is reasonable and does not support the commenter's conclusion that SCR is not BART for FCPP.

13See “Incremental cost.xlsx” in the docket for this final rulemaking.

EPA estimated the total capital cost of BART for NOXto be $718 million and total annual costs (annualized capital costs plus additional operating costs) to be $93 million per year. This final BART determination is expected to reduce emissions of NOXby 80 percent, from 43,000 tons per year to 8,500 tons per year, resulting in a facility-wide average cost effectiveness of about $2,700 per ton of NOXremoved. EPA anticipates that this investment will reduce the visibility impairment caused by FCPP by an average of 57 percent at 16 Class I areas within 300 km of the facility. A detailed summary of the cost and visibility benefits were provided in the Technical Support Document for the proposed rulemaking. As discussed in our Supplemental Proposal, although APS did not provide a cost estimate for the BART Alternative and the RHR does not require an evaluation of costs associated with a BART Alternative, if APS chooses to implement the Alternative, EPA anticipates those costs to be approximately 39 percent lower than the cost of BART. The BART Alternative is expected to reduce emissions of NOXby 87 percent, from 43,000 tons per year to 5,600 tons per year, resulting in a facility-wide average cost effectiveness of roughly $1,600 per ton of NOXremoved.14 EPA anticipates that implementation of the BART Alternative will reduce visibility impairment caused by FCPP by an average of 72 percent at 16 Class I areas within 300 km of the facility.

14EPA estimates facility-wide average cost effectiveness of the BART Alternative to be lower than BART because under the BART Alternative, Units 1-3 can be closed instead of retrofitted with new air pollution controls. On a per unit basis, the cost effectiveness of Units 4 and 5 is not expected to differ between BART or the BART Alternative.

B. Comments on Factor Two—Economic, Energy, and Non-Air Quality Environmental Impacts

We received a number of comments on the economic impacts and on the energy and non-air quality environmental impacts.

1. Comments on Economic Impacts a. General Comments on Economic Impacts

Comment:Several commenters stated that EPA's analysis of historical and expected costs of electricity from FCPP neglect to include public health costs related to air pollution and the negative impacts to tourism resulting from loss of visibility. The commenters concluded that the cost effectiveness metric used to determine BART must account for health costs related to poor air quality.

Response:EPA disagrees with the comment that the cost effectiveness of BART must account for public health costs associated with poor air quality. Neither Section 169A of the CAA, nor the BART Guidelines, require the BART analysis to include or quantify benefits to health or tourism. Moreover, an analysis of health and tourism benefits is unlikely to alter the outcome of our BART determination, which already requires the most stringent control technology available for NOX.

Comment:The Navajo Nation, one federal agency, and two of the owners of FCPP stated that EPA must consider the collateral adverse effects on the Navajo Nation and the surrounding communities of its BART determination. The commenters provided background on the substantial interest that the Navajo Nation has in the continued operation of FCPP. The commenters indicated that FCPP and its coal supplier, the Navajo Mine operated by BHP Billiton (BHP), together provide income to the Navajo Nation that contributes substantially to the Nation's economic viability and its sustainability as an independent sovereign nation. The commenters added that this resource extraction-based economy is the result of a conscious effort of the United States dating from the 1950s to develop the Nation's coal resources. According to the commenter, if FCPP and the Navajo Mine were to close as the result of the imposition of cost-prohibitive emission controls, the resulting revenue and job losses would be significant for the Navajo Nation.

Response:EPA agrees with commenters that the operation of FCPP and the Navajo Mine contribute significantly to the economy of the Navajo Nation and the Four Corners Region.

It is not EPA's intention to cause FCPP to shut down, nor is it within our regulatory authority under the Regional Haze Rule to require shutdown or redesign of the source as BART. As expressed in comments from the Navajo Nation to our Advanced Notice of Proposed Rulemaking,15 EPA understands that the Navajo Nation's primary concern regarding the BART determination is the potential for FCPP closure. Therefore, as discussed in our proposed BART determination, EPA conducted an affordability analysis not typically included in a BART five-factor analysis in order to assess whether requiring SCR on all five units at FCPP would cause the power plant to close.

15Comment letter from President Joe Shirley, Jr. dated March 1, 2010 in the docket for the ANPR: EPA-R09-OAR-2009-0583-0209.

The model was designed to determine which future alternative results in lower power costs: (a) Power produced at FCPP after installation of SCR or, (b) replacing the power from FCPP with the appropriate amount of wholesale power purchases. As discussed in the TSD for our proposed BART determination, the model results suggested that even if the owners of FCPP installed and operated SCR on all five units, the facility could still produce power at a lower cost than the cost to purchase replacement wholesale power on the open market. Thus, EPA concluded in our proposed BART determination that requiring SCR as BART on all five units would not likely result in plant closure. No information was provided by the commenter to change this conclusion in the proposal.

Comment:The Navajo Nation asserted that EPA failed to consult with the Nation prior to publishing the supplemental proposal and failed in its trust responsibility to consider the economic impacts of closing Units 1-3. A federal agency commenter noted that EPA's current analysis focuses primarily on increased costs to rate payers and the companies' profitability, and stated that the analysis needs to incorporate the loss in revenue, jobs, and royalties resulting from the closure of Units 1-3 under the supplemental proposal.

Response:A timeline of correspondence and consultation with the Navajo Nation and other tribes for EPA actions on FCPP and Navajo Generating Station is included in the docket for the final rulemaking.16 EPA notes that the Regional Administrator of EPA Region 9 called President Joe Shirley on February 9, 2011 to inform him of EPA's Supplemental Proposal. However, government-to-government consultation with the Navajo Nation on FCPP did not occur until May 19, 2011, with additional consultation occurring on June 13, 2012, prior to issuing our final rulemaking. The Navajo Nation raised concerns about the potential adverse impacts of the BART Alternative and requested that EPA conduct an analysis to estimate those impacts.

16See document titled: “Timeline of all tribal consultations on BART.docx” in the docket for this final rulemaking.

Although the Regional Haze Rule does not require a cost analysis of a BART alternative, at the request of the Navajo Nation, as part of EPA's customarypractice of engaging in extensive and meaningful consultation with tribes and tribal authorities with regard to relevant Agency actions, EPA did commission an analysis to estimate potential adverse impacts on the Navajo Nation, with respect to coal- and power plant-related revenues, of the optional BART Alternative to retire Units 1-3. The report will be provided to President Shelly by letter as a follow-up to our consultation with the Navajo Nation.

Comment:One owner of FCPP stated that EPA's proposal to require SCR at FCPP presents significant challenges and risks with regard to its resource planning. The commenter pointed out that implementation of the BART proposal would require the commenter to make a significant capital investment in FCPP, which could only be recovered through long-term operation of the plant. According to the commenter, this would have the effect of locking FCPP into the commenter's generation portfolio for a considerable period or risk stranding those investments.

Response:EPA appreciates the perspectives shared in this comment, but we disagree that our five-factor BART analysis should consider the potential loss of an owner's flexibility to respond to possible future economic or regulatory scenarios. EPA cannot give substantial consideration in our BART analysis to external factors that are of uncertain magnitude and that may or may not occur. EPA further notes that the RHR allows for the development of BART alternatives that achieve greater reasonable progress than BART and EPA appreciates the fact that the owners of FCPP put forth an alternative that gives them more flexibility and results in greater emission reductions at FCPP.

b. Comments on EPA's Economic Analysis

Comment:One public interest advocacy group concurred with the EPA's analysis that the potential increase to APS rate payers as a result of SCR is expected to be less than 5 percent, as described in the TSD. The commenter stated that EPA's estimates are reasonable and that the average increase in the cost of generation at FCPP as a result of SCR implementation would be 22 percent, or $0.0074 per kWh, as stated in the TSD.

One of the owners of FCPP stated that installation of BART controls would increase its average residential customer monthly bills by $5.10 (3.8 percent) and larger industrial customer monthly bills by $17,400 (6.4 percent). The commenter also indicated that installing SCR and baghouses on Units 1-3 would increase the cost of electricity production on a $/MWh basis by more than 50 percent which, in conjunction with other market and regulatory uncertainties, may make the units uneconomical. The commenter also raised concerns related to the economic viability of Units 4 and 5 if SCR were installed on those units.

Another of the owners of FCPP, who also owns part of San Juan Generating Station and Navajo Generating Station, indicated that if SCR was required on all three power plants, its customers would face a rate increase of 4 to 6 percent, which would be significant because the local economy is fragile and has endured an 8 percent rate increase (not adjusted for inflation) since 1992.

Response:EPA agrees with the first commenter that based upon our analysis the potential increase to APS rate payers as a result of SCR is expected to be less than 5 percent. EPA cannot assess the estimated residential and industrial rate increase claimed by the second and third commenters with our economic analysis because the commenters did not provide information for us to evaluate their conclusions. However, EPA notes that the installation of baghouses on Units 1-3 is no longer relevant because EPA has determined that it is not necessary or appropriate at this time to set new PM limits for Units 1-3. This is because the Mercury and Air Toxics Standard (MATS) rule, which sets a filterable PM limit of 0.03 lb/MMBtu, is now final17 and EPA is finalizing in this rulemaking the option to allow APS to comply with either BART or the BART alternative, which involves closure of Units 1-3.

17See 77 FR 9304, February 16, 2012.

Comment:One of the owners of FCPP expressed concern that EPA's analysis focuses on the effects on APS and Southern California Edison ratepayers, and not on the other owners of FCPP. This commenter's specific concerns include that the use of a “return on rate”-based methodology would not apply to organizations of the commenter's type (a publicly owned utility) because it is not an investor-owned utility. In addition, the commenter stated that the EPA analysis did not attempt to determine the impact of different assumptions, such as an uncertainty with the future price of coal, on the conclusions of the analysis. Specifically, the “small difference” that EPA estimates between FCPP with SCR installed and the cost of purchasing power to replace FCPP generation suggests that a small change in an underlying assumption (return on rate, coal price, carbon pricing, etc.) could result in model results that show SCR to be a higher cost option than purchasing power. The commenter also raised the concern that EPA's analysis did not examine different “payback periods,” but instead relied on a payback period of 25 years, which may be inappropriate because the useful life of the plant is far from certain. The commenter said that EPA should recognize that there is a real risk that one or more owners may decide not to invest in SCR, which would force the shutdown of FCPP unless another owner could be found in a timely manner. The commenter also said that shutdown of FCPP would have significant adverse consequences on the Navajo Nation.

Response:The commenter is correct that EPA calculated rate impacts for only two of the four investor-owned utilities that own FCPP and excluded others, including an owner that operates as a publicly owned utility. The analysis estimating the increase in electricity generation costs is applicable to all owners of FCPP, but the rate impact analysis provided in the model was not intended to capture the rate impacts of all owners. APS and Southern California Edison (SCE) were selected because their combined ownership shares account for nearly 75 percent of the plant's output. In addition to our expectation that the utilities with the largest ownership share in FCPP would generally experience greater ratepayer impacts from capital expenditure projects like SCR installation, we also assumed that ratepayers of investor-owned utilities would likely experience larger impacts than public power customers due to the fundamental difference between their respective approaches to setting rates. Specifically, rates for public power utilities, in contrast to investor-owned utilities, do not include recovery for a margin above cost allowed as part of a regulated rate of return. Thus, all other variables being equal, one would expect the same capital investment to result in a larger rate impact for customers of investor-owned utilities than for customers of public power entities. Therefore, EPA continues to believe that our analysis of ratepayer impacts for only APS and SCE are appropriately conservative to demonstrate worst-case impacts to ratepayers of all six owners.

EPA agrees with the commenter that there are many company-specific factors and a wide range of assumptions that would affect a given owner's decision to make further substantial investments (such as SCR) at FCPP. Although many of those factors were outside the focus of the modeling because they were either unrelated to BART or were related to regulatory uncertainties in thefuture, we included a qualitative discussion in Appendix B to the TSD regarding decision variables that EPA assumed each owner must consider before making capital expenditures. Additionally, EPA notes that the use of low, medium and high future projected prices for the Palo Verde Index in Appendix B to the TSD for the proposed rulemaking represents a sensitivity analysis for the market comparison.

With respect to the comment on the “payback period”, the economic analysis for the proposed BART determination did not identify “payback periods”. Rather, the commenter appears to be referring to the 25-year period used in the discounted cash flow model. EPA does not disagree with the commenter's stated concern that a shorter plant life, and thus shorter discounting periods, would yield different economic results. However, EPA disagrees with commenters that a shorter useful life should be considered in the economic analysis because there is no enforceable obligation on APS to cease operations on a given (earlier) date.

2. Comments on Energy and Non-Air Quality Environmental Impacts

Comment:One private citizen stated that no consideration was given to the effect of removing FCPP generation from the grid. According to the commenter, the events of February 2, 2011, show there are times when gas-fired generation cannot replace coal-fired generation because there is not enough gas transportation capacity.

Response:EPA disagrees with the commenter that we should consider the effect of removing FCPP generation from the grid. As stated elsewhere, it is not EPA's intention, nor is it within our regulatory authority, to require closure or require a redefinition of the source, in order to comply with the BART requirement of the Regional Haze Rule. Furthermore, the owners of FCPP did not provide evidence that the installation of SCR would cause FCPP to close.

EPA also notes that APS proposed to purchase the shares of Units 4 and 5 currently owned by Southern California Edison in order to close Units 1-3 (of which APS is sole owner) and install SCR on Units 4 and 5 as an alternative to BART. APS has received approval from the Arizona Corporation Commission and the California Public Utilities Commission to purchase Southern California Edison's share of Units 4 and 5. APS is also seeking approval from the Federal Energy Regulatory Commission to implement its proposal.18 Decisions on investing in pollution controls or shutting down units are made by the owners in conjunction with their oversight boards or public utility commissions. These oversight bodies are also responsible for assuring the adequacy of electrical generating capacity, whether from coal, gas or nuclear fuels or renewable sources.

18On March 22, 2012, the California Public Utilities Commission (PUC) approved the sale of SCE's ownership share in FCPP to APS. On April 18, 2012, the Arizona Corporation Commission voted to allow APS to purchase SCE's ownership share in FCPP.

Comment:Thirty-seven private citizens commented that FCPP causes significant threats to public health due to its effects on air quality. In addition, a number of environmental and public interest advocacy groups provided comments on health and ecosystem impacts of the pollutants emitted by FCPP.

Regarding health impacts, the commenter noted that the same pollutants that contribute to visibility impairment also harm public health—the fine particulates that cause regional haze can cause decreased lung function, aggravate asthma, and result in premature death in people with heart or lung disease. The commenter added that NOXand volatile organic compounds (VOCs) can also be precursors to ground-level ozone, which is associated with respiratory diseases, asthma attacks, and decreased lung function. According to the commenter, ozone concentrations in parks in the Four Corners region approach the current health standards, and likely violate anticipated lower standards.

The same commenter also contended that consideration of non-air quality impacts extends to impacts on wildlife and habitat as well as natural and cultural heritage. According to the commenter, haze-causing emissions also harm terrestrial and aquatic plants and animals, soil health, and water bodies by contributing to acid rain, ozone formation, and nitrogen deposition.

With these health and environmental considerations in mind, in addition to visibility and economic considerations discussed in other sections of this document, the commenter urged the EPA to finalize more stringent BART determinations for FCPP.

The commenter noted that FCPP is a significant source of mercury emissions and provided information on the health and ecosystem effects of mercury, as well as on the deposition of mercury and the levels of mercury found in the Four Corners area. In addition, the commenter stated that FCPP emits more than 16 million tons per year (tpy) of CO2, and that such emissions contribute significantly to climate change which is likely to result in increasing temperatures and increase drought in the Southwest. The commenter noted that the supplemental proposal would reduce emissions of both mercury and CO2.

One environmental advocacy group stated that a formal Health Impact Assessment should be conducted by independent experts before EPA's final decision to answer such questions as whether shutting down Units 1-3 is sufficient to protect local health, and what health impacts would result from delaying pollution controls on Units 4 and 5 until 2018.

Response:EPA agrees that there are potential benefits to health and the environment from reducing emissions of NOX. However, quantifying health benefits is not within the scope of the BART five factor analysis required under the CAA (§ 169A(g)). The BART Guidelines provide additional information on how to analyze “non-air quality environmental impacts, and focuses on adverse environmental impacts associated with control technologies, i.e., generation of solid or hazardous wastes and discharges of polluted water, that have the potential to affect the selection or elimination of a control alternative” (see 70 FR 39169). Thus, although the BART Guidelines do state that relative environmental impacts (both positive and negative) of alternatives can be compared with each other, they state that “if you propose to adopt the most stringent alternative, then it is not necessary to perform this analysis of environmental impacts for the entire list of technologies”. EPA agrees with commenters that controlling pollutant emissions may have co-benefits for reducing ozone production and acid deposition. EPA does not interpret the BART Guidelines to require quantification of human health or environmental co-benefits in determining BART, particularly if the most stringent BART option is finalized. Similarly, EPA does not interpret the BART guidelines to require human health or environmental assessments of alternative compliance strategies as long as we have determined that the alternative strategy achieves better progress towards the national visibility goal.

Comment:The commenter stated that human exposure to environmental hazards is an important factor in assessing impacts of FCPP. The commenter encouraged EPA to pursue health studies in collaboration with the Navajo Nation to study local risksassociated with exposure to criteria pollutants, indoor air pollutants, and other contributing air pollutants, from which improved public health and effective rulemakings under the CAA may be achieved.

Response:Assessing human exposure and quantifying health benefits are outside the scope of the requirements of the Regional Haze Rule. EPA sets National Ambient Air Quality Standards (NAAQS) to establish levels of air quality that are protective of public health, including the health of sensitive populations, for a number of pollutants including particulate matter. These “sensitive” populations include asthmatics, children, and the elderly. At this time the Navajo Nation is not identified as out of attainment with any of the NAAQS. However, EPA recognizes that there are significant concerns about risk and exposure to air pollutants on the Navajo Nation and EPA will continue discussions with the Navajo Nation and will involve other federal agencies, as appropriate, to help address these concerns.

C. Comments on Factor Three—Existing Controls at FCPP