Xcel Energy 2015 Annual Report Download - page 154
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NSP-Minnesota
In 2009, the Minnesota Pollution Control Agency (MPCA) approved a SIP (the Minnesota SIP) and submitted it to the EPA for
approval. The MPCA’s source-specific BART limits for Sherco Units 1 and 2 require combustion controls for NOx and scrubber
upgrades for SO2. The MPCA supplemented its Minnesota SIP in 2012, determining that CSAPR meets BART requirements, but also
implementing its source-specific BART determination for Sherco Units 1 and 2 from the 2009 Minnesota SIP. In June 2012, the EPA
approved the Minnesota SIP for EGUs and also approved the source-specific emission limits for Sherco Units 1 and 2. The
combustion controls were installed first and the scrubber upgrades were completed in December 2014, at a cost of $46.9 million.
NSP-Minnesota has included these costs for recovery in rate proceedings.
In August 2012, the National Parks Conservation Association, Sierra Club, Voyageurs National Park Association, Friends of the
Boundary Waters Wilderness, Minnesota Center for Environmental Advocacy and Fresh Energy appealed the EPA’s approval of the
Minnesota SIP to the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit). In June 2013, the Eighth Circuit ordered this case
to be held in abeyance until the U.S. Supreme Court decided the CSAPR case. In January 2016, the Eighth Circuit issued their
opinion which upheld the EPA’s approval of the Minnesota SIP.
SPS
Harrington Units 1 and 2 are potentially subject to BART. Texas developed a SIP (the Texas SIP) that finds the CAIR equal to BART
for EGUs. As a result, no additional controls beyond CAIR compliance would be required. In May 2012, the EPA deferred its review
of the Texas SIP in its final rule allowing states to find that CSAPR compliance meets BART requirements for EGUs. In December
2014, the EPA proposed to approve the BART portion of the Texas SIP, with the exception that the EPA would substitute CSAPR
compliance for Texas’ reliance on CAIR. In January 2016, the EPA adopted a final rule that defers its approval of CSAPR compliance
as BART until the EPA considers further adjustments to CSAPR emission budgets in relation to the 2012 particle NAAQS.
In May 2014, the EPA issued a request for information under the CAA related to SO2 control equipment at Tolk Units 1 and 2. In
December 2014, the EPA proposed to disapprove the reasonable progress portions of the Texas SIP and instead adopt a FIP. The EPA
proposed to require dry scrubbers on both Tolk units to reduce SO2 emissions to help achieve reasonable progress goals for Texas and
Oklahoma national parks and wilderness areas. In January 2016, the EPA adopted a final rule establishing a FIP for the state of Texas.
As part of this final rule, the EPA imposed SO2 emission limitations that reflect the installation of dry scrubbers on Tolk Units 1 and 2,
with compliance required by February 2021. Investment costs associated with dry scrubbers could be approximately $600 million.
SPS plans to appeal the EPA’s decision. SPS believes these costs would be recoverable through regulatory mechanisms if required,
and therefore does not expect a material impact on results of operations, financial position or cash flows.
Reasonably Attributable Visibility Impairment (RAVI) — RAVI is intended to address observable impairment from a specific source
such as distinct, identifiable plumes from a source’s stack to a national park. In 2009, the DOI certified that a portion of the visibility
impairment in Voyageurs and Isle Royale National Parks is reasonably attributable to emissions from NSP-Minnesota’s Sherco Units 1
and 2.
In December 2012, a lawsuit against the EPA was filed in the U.S. District Court for the District of Minnesota (Minnesota District
Court) by the following organizations: National Parks Conservation Association, Minnesota Center for Environmental Advocacy,
Friends of the Boundary Waters Wilderness, Voyageurs National Park Association, Fresh Energy and Sierra Club.
In May 2015, NSP-Minnesota, the EPA and the six environmental advocacy organizations filed a settlement agreement in the
Minnesota District Court. The agreement anticipates a federal rulemaking that would impose stricter SO2 emission limits on Sherco
Units 1, 2 and 3, without making a RAVI attribution finding or a RAVI BART determination. The emission limits for Units 1 and 2
reflect the success of a recently completed control project. The Unit 3 emission limits will be met through changes in the operation of
the existing scrubber. The Minnesota District Court issued an order staying the litigation for the time needed to complete the actions
required by the settlement agreement. The plaintiffs agreed to withdraw their complaint with prejudice when those actions are
completed. Plaintiffs also agreed not to request a RAVI certification for Sherco Units 1, 2 and/or 3 in the future.
After a public comment period, the EPA notified the Minnesota District Court, in July 2015, that the settlement agreement is final.
The EPA has seven months to recommend and adopt a rule which will set the agreed-upon SO2 emissions. In October 2015, the EPA
proposed a rule that would set the agreed-upon SO2 emission limits. No public comments were received on this proposal. A final rule
is anticipated in March 2016. NSP-Minnesota does not anticipate the costs of compliance with the proposed settlement will have a
material impact on the results of operations, financial position or cash flows.
Implementation of the NAAQS for SO2 — The EPA adopted a more stringent NAAQS for SO2 in 2010. In 2013, the EPA designated
areas as not attaining the revised NAAQS, which did not include any areas where Xcel Energy operates power plants. However, many
other areas of the country were unable to be classified by the EPA due to a lack of air monitors.