PNM: Bids show new pollution controls too costly

May 19, 2012 • State News

ALBUQUERQUE, N.M. (AP) — Public Service Company of New Mexico says bids to install Environmental Protection Agency-ordered pollution controls at the San Juan Generating Station have confirmed its belief that the EPA underestimated the price.

The Albuquerque Journal reports ( that PNM says the lowest bid is more than double the federal agency’s estimate of $345 million to equip the coal-fired plant with selective catalytic reduction, or SCR, technology to cut pollutants that cause regional haze.

In documents filed Thursday with the EPA, PNM said it received four bids to install SCR ranging from about $750 million to about $805 million. None, it says, includes “necessary owners’s expenses” related to engineering, project management and insurance, which are estimated to add $48 million to the project.

“Those bids support the SCR retrofit cost estimates on which PNM has relied through the rule-making process and contradict EPA’s much lower cost estimate,” the filing said.

In the [auth] filing, a supplement to PNM’s request for the EPA to reconsider its retrofit order, PNM contends that EPA’s SCR estimate is “fatally flawed.” Because the actual costs are so much higher, “EPA must reconsider the final rule,” it said.

Both PNM and the state have challenged the order in federal court.

The EPA Region 6 office did not directly respond to PNM’s filing Friday.

“EPA is continuing to work closely with the state and PNM to review alternatives in support of their recent letter,” spokesman Mike McCorkhill said in an email. “We are committed to carefully reviewing information as it becomes available.”

He referenced an April 26 letter from Gov. Susana Martinez requesting a voluntary stay of the rule to allow time to consider alternative plans and avoid litigation, and a May 8 letter from PNM general counsel Patrick Apodaca expressing PNM’s willingness to investigate alternatives.

Cost has been a central issue in the long-running controversy. PNM has contended that installing SCR would be around $750 million and initially add about $85 a year to a customer’s utility bill. The state has submitted a PNM-backed alternative plan that would be less expensive.

The EPA rule, issued in August, gives PNM and the plant’s other eight owners five years to cut pollutants that reduce visibility in national parks and wilderness areas and contribute to regional haze. The most cost-effective way would be SCR, the EPA said.

The agency contended that PNM and its consultants overestimated numerous cost items, failed to follow EPA’s cost control manual and included unnecessary equipment in arriving at the higher cost estimate.

Two months earlier, the state sent EPA the alternative plan, backed by the Environment Department and PNM, proposing an alternative technology, selective non-catalytic reduction, or SNCR, which it says would produce similar visibility improvements, but for $77 million, or about a $12-a-year impact on customers. The EPA has not acted on the plan.

PNM put out a request for bids on SCR in January, saying it had to take initial steps to get the project under way because of the five-year time limit.

“Without a stay, we are spending money every day to comply with an EPA requirement that the court may overturn,” PNM spokesman Don Brown said. “So a stay is critical for us, one, to stop spending significant amounts of money, and two, to create some breathing room for discussions with EPA and other parties on potential alternatives.”

On Thursday, seven environmental groups, including the National Parks Conservation Association, New Energy Economy and Western Resource Advocates, invited the governor and PNM to meet to develop a transition approach from coal. Among the key considerations, they said would be setting fixed retirement dates for the coal-fired boilers at San Juan.

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