in the united states court of appeals for …...agency and lisa jackson, administrator, epa, )))...

IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

) WILDEARTH GUARDIANS, ) )

Petitioner, ) v. )

) No. 11-9552 U.S. ENVIRONMENTAL PROTECTION ) AGENCY and Lisa Jackson, Administrator, EPA, ) )

Respondents. ) )

PUBLIC SERVICE COMPANY OF NEW ) MEXICO, )

Petitioner, ) v. ) No. 11-9557

) U.S. ENVIRONMENTAL PROTECTION ) AGENCY and Lisa Jackson, Administrator, EPA, ) )

Respondents. ) ) SUSANA MARTINEZ, GOVERNOR OF THE STATE OF NEW MEXICO, and the NEW MEXICO ENVIRONMENT DEPARTMENT,

)))

) Petitioners, ) No. 11-9567

v. ) ) U.S. ENVIRONMENTAL PROTECTION AGENCY and Lisa Jackson, Administrator, EPA,

))

) Respondents. )

MOTION OF PETITIONER PUBLIC SERVICE COMPANY OF NEW MEXICO FOR STAY OF AGENCY RULE

Dated: November 25, 2011

Appellate Case: 11-9557 Document: 01018751933 Date Filed: 11/25/2011 Page: 1

i

TABLE OF CONTENTS

TABLE OF EXHIBITS ..........................................................................................................ii

TABLE OF AUTHORITIES................................................................................................iv

BACKGROUND......................................................................................................................1

ARGUMENT ............................................................................................................................4

I. PNM Has a High Likelihood of Success on the Merits........................................... 4

A. The Fundamental Principle of State Primacy Under the CAA Visibility Provisions Renders EPA’s Final Rule Unlawful. .............................................. 5

1. The CAA § 169A BART FIP................................................................................ 6

2. The CAA § 110(a)(2)(D)(i)(II) Interstate Transport FIP................................. 8

B. EPA Improperly Determined the Costs of Compliance with, and the Visibility Improvements Achievable Under, Its BART Determination, Making Its Final Rule Invalid.............................................................................. 11

1. The Cost of Compliance ...................................................................................... 11

2. Visibility Effects .................................................................................................... 13

C. EPA’s Determination that Its BART Limit Is Achievable Is Unsupported and Unlawful. ......................................................................................................... 14

II. A Stay Is Necessary To Avoid Irreparable Injury. .................................................. 15

III. Equitable Considerations Weigh Heavily in Favor of a Stay. ............................... 18

IV. A Stay of the Final Rule Is in the Public Interest.................................................... 19

CONCLUSION ......................................................................................................................20


ii

TABLE OF EXHIBITS

Exhibit 1 Navajo Nation’s Joinder in the Petitions for Reconsideration and Stay of EPA’s Final Rule: “Approval and Promulgation of Implementation Plans; New Mexico; Federal Implementation Plan for Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology Determination” filed by the Public Service Company of New Mexico and the State of New Mexico

Exhibit 2 Declaration of Patrick J. Themig in Support of Petition of Public Service

Company of New Mexico for Stay of Effective Date of Federal Implementation Plan

Exhibit 3 Request for Administrative Stay of EPA’s Final Rule: “Approval and

Promulgation of Implementation Plans; New Mexico; Federal Implementation Plan for Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology Determination” (Docket No. EPA-R06-OAR-2010-0846)

[Attachments 1 - 5 omitted] Exhibit 4 Petition of Public Service Company of New Mexico for Reconsideration

and Stay of EPA’s Final Rule: “Approval and Promulgation of Implementation Plans; New Mexico; Federal Implementation Plan for Interstate Transport of Pollution Affecting Visibility and Best Available Retrofit Technology Determination” (Docket No. EPA-R06-OAR-2010-0846)

[Attachments 1 - 3 omitted] Attachment 4: New Mexico BART Determination for San Juan Generating Station [Attachments 5 - 6 omitted]

Exhibit 5 New Mexico State Implementation Plan Revision To Satisfy the

Requirements of Clean Air Act 110(a)(2)(D)(i)(II) with Respect to Visibility for the 8-Hour Ozone and PM 2.5 NAAQS Promulgated in July 1997

Exhibit 6 Sargent & Lundy, “San Juan Generating Station Regional Haze

Reduction Project: Conceptual Design Cost Estimate” (Oct. 21, 2011)


iii

Exhibit 7 Declaration of Joseph S. Scire, CCM, in Support of Motion of Petitioner Public Service Company of New Mexico for Stay of Agency Rule

Exhibit 8 RMB Consulting & Research, Inc., “Analysis of the Achievability of the

FIP NOx Limit for San Juan Generating Station and Comparison to Other Ultra-Low NOx Units” (Oct. 21, 2011)

Exhibit 9 EPA, “Transport Rule Engineering Feasibility Response to Comments,”

Docket Number EPA-HQ-OAR-2009-0491 (July 2011) Exhibit 10 Declaration of N. Evelin Wheeler in Support of Petition of Public

Service Company of New Mexico for Stay of Effective Date of Federal Implementation Plan

Exhibit 11 Declaration of Maureen Gannon in Support of Petition of Public Service


Exhibit 12 Declaration of Terry Horn in Support of Petition of Public Service


Exhibit 13 Sargent & Lundy, “SCR Study Summary” (with cover letter to Dr. Al

Armendariz, Administrator, EPA Region 6 (July 20, 2011) Exhibit 14 Declaration of Gerard T. Ortiz in Support of Petition of Public Service



iv

TABLE OF AUTHORITIES

CASES

American Corn Growers Association v. EPA, 291 F.3d 1 (D.C. Cir. 2002)........................................................................ 3, 6, 11, 12, 19

Bond v. United States, 131 S. Ct. 2355 (2011).......................................................................................................19

Chamber of Commerce v. Edmondson, 594 F.3d 742 (10th Cir. 2010)..................................................................................... 4, 17

Crowe & Dunlevy, P.C. v. Stidham, 640 F.3d 1140 (10th Cir. 2011)........................................................................................17

Kansas v. United States, 249 F.3d 1213 (10th Cir. 2001)........................................................................................20

Kansas Health Care Assocation v. Kansas Department of Social & Rehabilitation Services, 31 F.3d 1536 (10th Cir. 1994)..........................................................................................17

Natural Resources Defense Council v. Jackson, 650 F.3d 662 (7th Cir. 2011) ............................................................................................13

Public Utility Commissioner v. Bonneville Power Administration, 767 F.2d 622 (9th Cir. 1985) ...............................................................................................8

RoDa Drilling Co. v. Siegal, 552 F.3d 1203 (10th Cir. 2009)........................................................................................15

Telecommunications Research & Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984) .............................................................................................8

Train v. Natural Resources Defense Council, 421 U.S. 60 (1975) .............................................................................................5, 8, 10, 11

Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) .................................................................................................................4


v

STATUTES

Administrative Procedure Act, 5 U.S.C. § 706(2).............................................................4, 5

All Writs Act, 28 U.S.C. § 1651(a) .........................................................................................8

Clean Air Act (“CAA”), 42 U.S.C. §§ 7401-7671q

CAA § 110, 42 U.S.C. § 7410.............................................................................................5

CAA § 110(a), 42 U.S.C. § 7410(a)....................................................................................3

CAA § 110(a)(2), 42 U.S.C. § 7410(a)(2) ................................................................... 5, 10

CAA § 110(a)(2)(D)(i)(II), 42 U.S.C. § 7410(a)(2)(D)(i)(II) ............2, 3, 4, 6, 8, 10, 11

CAA § 110(a)(2)(J), 42 U.S.C. § 7410(a)(2)(J)..................................................................5

CAA § 110(c), 42 U.S.C. § 7410(c) ......................................................................... 3, 5, 8

CAA § 110(k), 42 U.S.C. § 7410(k) ...................................................................................3

CAA § 110(k)(1), 42 U.S.C. § 7410(k)(1) .........................................................................9

CAA § 110(k)(2), 42 U.S.C. § 7410(k)(2) .........................................................................9

CAA § 169A, 42 U.S.C. § 7491 .........................................................................................2

CAA § 169A(b)(2), 42 U.S.C. § 7491(b)(2)......................................................................3

CAA § 169A(b)(2)(A), 42 U.S.C. § 7491(b)(2)(A) ..........................................................6

CAA § 169A(g)(2), 42 U.S.C. § 7491(g)(2) ..................................................................3, 6

CAA § 169A(g)(7), 42 U.S.C. § 7491(g)(7) ......................................................................3

CAA § 307(b)(1), 42 U.S.C. § 7607(b)(1) .........................................................................8

CAA § 307(b)(2), 42 U.S.C. § 7607(b)(2) .........................................................................8

CAA § 307(d)(7)(B), 42 U.S.C. § 7607(d)(7)(B) ............................................................20

CAA § 307(d)(9), 42 U.S.C. § 7607(d)(9) .........................................................................4


vi

ADMINISTRATIVE MATERIALS

40 C.F.R. § 51.301 ...................................................................................................................14

40 C.F.R. § 51.308(d)(1)(i)(B) ................................................................................................19

40 C.F.R. § 51.308(d)(1)(ii).....................................................................................................19

40 C.F.R. § 51.308(e).................................................................................................................6

40 C.F.R. § 51.308(e)(1)(ii)(A) ...............................................................................................14

70 Fed. Reg. 39,104 (July 6, 2005) .......................................................................6, 12, 13, 14

76 Fed. Reg. 491 (Jan. 5, 2011)..................................................................................... 3, 9, 10

76 Fed. Reg. 1109 (Jan. 7, 2011)............................................................................................15

76 Fed. Reg. 36,450 (June 22, 2011) .....................................................................................14

76 Fed. Reg. 52,388 (Aug. 22, 2011).......................................................1, 4, 7, 9, 10, 12, 14


1

Pursuant to Rule 18 of the Federal Rules of Appellate Procedure, Petitioner

Public Service Company of New Mexico (“PNM”) moves for a stay, pending

completion of judicial review, of the U.S. Environmental Protection Agency (“EPA”

or “Agency”) rule entitled, “Approval and Promulgation of Implementation Plans;

New Mexico; Federal Implementation Plan for Interstate Transport of Pollution

Affecting Visibility and Best Available Retrofit Technology Determination.” 76 Fed.

Reg. 52,388 (Aug. 22, 2011) (“Final Rule”). In the alternative, PNM asks the Court to

stay the Final Rule pending final EPA action on PNM’s petition for administrative

reconsideration and stay and the petition for administrative reconsideration and stay

filed by Petitioners Governor Susana Martinez and the New Mexico Environment

Department (“NMED”), including any final EPA action at the conclusion of such

proceedings if EPA grants either or both of those petitions.1 If the Court grants

PNM’s alternative stay request, PNM reserves the right to seek a continuation of the

stay pending completion of judicial review.

Respondents and Respondent-Intervenors oppose this motion.

BACKGROUND

PNM is an owner and the operator of the San Juan Generating Station (“San

Juan”), the subject of EPA’s Final Rule. San Juan is a four-unit coal-fired plant that

1 On November 3, 2011, the Navajo Nation joined the Petitions for Reconsideration and Stay filed by the Governor, NMED, and PNM. Exh. 1. In addition, on November 23, 2011, the Governor and NMED filed a motion in this Court to stay the Final Rule pending review (“NMED Stay Mot.”).


2

supplies electricity to over two million consumers in New Mexico and other states.

Themig Declaration (“Decl.”) ¶¶ 2, 5, Exh. 2. San Juan is a critical source of

electricity for New Mexico, as there are no readily available baseload generation

alternatives for PNM’s customers, and it is a major contributor, through employment

and tax payments, to the economies of New Mexico and the Four Corners region. Id.

¶¶ 5-7. The Final Rule jeopardizes San Juan’s ability to maintain its level of

operations and will lead to higher electric rates for consumers and other adverse

economic effects on PNM’s employees and the communities San Juan serves.2

The Final Rule establishes a federally enforceable emission limit for nitrogen

oxides (“NOx”) of 0.05 pounds per million British thermal units (“lb/mmBtu”),

requiring installation of very expensive emission controls known as selective catalytic

reduction (“SCR”) for each of San Juan’s electric generating units (“EGUs”). EPA

purports to base this emission limit on the “best available retrofit technology”

(“BART”) provisions of the Clean Air Act (“CAA” or “Act”), CAA § 169A, 42 U.S.C.

§ 7491, and the “visibility” clause of the Act’s Interstate Transport provision, CAA

§ 110(a)(2)(D)(i)(II), 42 U.S.C. § 7410(a)(2)(D)(i)(II).

Under the CAA’s BART provisions, states determine, on a case-by-case basis

2 PNM’s operations and the Final Rule are discussed in PNM’s Request for Administrative Stay of EPA’s Final Rule at 2-6 (Sept. 16, 2011) (“PNM Stay Request”), Exh. 3, and in the Petition of Public Service Company of New Mexico for Reconsideration and Stay of EPA’s Final Rule at 2-8 (Oct. 21, 2011) (“PNM Pet.”), Exh. 4.


3

using a five-factor analysis,3 emission limits reflecting BART for certain individual

facilities that emit air pollutants that may reasonably be anticipated to cause or

contribute to visibility impairment in “Class I” areas (certain federally-protected parks

and wilderness areas). CAA § 169A(g)(2), (7), 42 U.S.C. § 7491(g)(2), (7). States

submit BART determinations to EPA in state implementation plans (“SIPs”) for EPA

approval or disapproval. CAA § 169A(b)(2), 42 U.S.C. § 7491(b)(2); CAA § 110(a),

(k), 42 U.S.C. § 7410(a), (k); see Am. Corn Growers Ass’n v. EPA, 291 F.3d 1, 5-9 (D.C.

Cir. 2002). If a state does not meet its BART obligations, EPA may be authorized to

establish BART limits by promulgating a federal implementation plan (“FIP”). CAA

§ 169A(b)(2); CAA § 110(c), 42 U.S.C. § 7410(c). EPA received New Mexico’s SIP,

which addresses BART for San Juan under the CAA § 169A “regional haze” visibility

provisions, on July 5, 2011 (“Regional Haze SIP” or “BART SIP”), after EPA had

issued a proposed BART FIP4 for New Mexico but before EPA issued its Final Rule.

EPA’s Final Rule also invokes CAA § 110(a)(2)(D)(i)(II), which requires SIPs

to have “adequate provisions” prohibiting emissions that interfere with “measures

required to be included in the applicable implementation plan for any other State …

to protect visibility.” In 2007, New Mexico submitted to EPA a § 110(a)(2)(D)(i)(II)

3 The factors are compliance costs; energy and environmental impacts of compliance; the source’s existing controls; the source’s remaining life; and the degree of visibility improvement expected from using BART. CAA § 169A(g)(2), 42 U.S.C. § 7491(g)(2). 4 76 Fed. Reg. 491 (Jan. 5, 2011).


4

SIP for visibility pursuant to EPA’s guidance (“Interstate Transport SIP”).5 In its

Final Rule, however, EPA announced its determination that New Mexico’s 2007 SIP

is inadequate and took final action disapproving that SIP. 76 Fed. Reg. at 52,389.

For the reasons discussed below, neither the BART nor the Interstate

Transport provisions of the CAA authorized EPA to promulgate the Final Rule.

ARGUMENT

The prerequisites for a stay are met here.6 PNM has a substantial likelihood of

success in its challenge to the Final Rule; PNM and its customers will suffer

irreparable harm absent a stay; the balance of equities supports granting a stay; and a

stay is in the public interest. See Winter v. Natural Res. Def. Council, 555 U.S. 7, 20

(2008) (describing stay factors); Chamber of Commerce v. Edmondson, 594 F.3d 742, 764

(10th Cir. 2010) (same). Accordingly, the Court should stay EPA’s Final Rule pending

review or, if it declines to do so, should grant PNM’s alternative stay request.

I. PNM Has a High Likelihood of Success on the Merits.

The standard of review of EPA’s Final Rule under CAA § 307(d)(9), 42 U.S.C.

§ 7607(d)(9), is the same as that under the Administrative Procedure Act, 5 U.S.C.

5 Together with its Regional Haze SIP, New Mexico on July 5, 2011, also submitted to EPA an additional Interstate Transport SIP that confirms that its Regional Haze SIP satisfies the CAA § 110(a)(2)(D(i)(II) Interstate Transport obligation (“2011 Supplemental Interstate Transport SIP”). Exh. 5; see NMED Stay Mot. at 6. 6 Pursuant to Fed. R. App. P. 18, PNM requested a stay from EPA. Exh. 3. PNM renewed and supplemented that request on October 21, 2011, in its Petition for Reconsideration filed with EPA. Exh. 4. Governor Martinez and NMED also sought a stay from EPA. EPA has not responded to any of these stay requests.


5

§§ 706(2), and provides that agency action may be set aside if it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” Under

that standard, PNM is likely to succeed on the merits.

A. The Fundamental Principle of State Primacy Under the CAA Visibility Provisions Renders EPA’s Final Rule Unlawful.

Under CAA § 110, states have primary responsibility to implement CAA

requirements, including the Act’s visibility protection provisions. States are

responsible for development of SIPs that they submit to EPA for approval. EPA

must approve any SIP submittal that meets the CAA’s minimum standards. If a state

fails to submit a required SIP, or if EPA disapproves a SIP, then EPA may propose a

FIP for the state under CAA § 110(c). If, after EPA proposal of a FIP, a state

submits an approvable SIP, EPA may not promulgate a final FIP. The Supreme

Court has held:

The Act gives the Agency no authority to question the wisdom of a State’s choices of emission limitations if they are part of a plan which satisfies the standards of § 110(a)(2), and the Agency may devise and promulgate a specific plan of its own only if a State fails to submit an implementation plan which satisfies those standards.

Train v. Natural Res. Def. Council, 421 U.S. 60, 79 (1975) (describing CAA § 110(c))

(emphases added); see CAA § 110(a)(2)(J) (including BART and other visibility

requirements among the standards listed in § 110(a)(2)). To determine whether a SIP

“satisfies” the Act’s visibility standards, EPA must review any SIP that is submitted

and, following notice-and-comment rulemaking, approve or disapprove it. If EPA

approves the SIP, it must terminate any § 110(c) FIP rulemaking. Only if it


6

disapproves the SIP does EPA have authority to promulgate a final FIP.

Regarding implementation of the CAA’s visibility provisions, the Act directs

that states, not EPA, have primary decision-making authority, including the authority

to make BART determinations. See, e.g., CAA § 169A(b)(2)(A), (g)(2); 40 C.F.R.

§ 51.308(e). The states’ primacy in determining BART is central to the CAA’s

regional haze program. See Am. Corn Growers, 291 F.3d at 8 (holding that CAA gives

states “broad authority over BART determinations”); NMED Stay Mot. at 8-10.

It was unlawful for EPA to disregard or (with respect to the 2007 Interstate

Transport SIP) disapprove New Mexico’s SIP submittals. For the reasons discussed

below, EPA had no authority to promulgate the BART FIP or the

§ 110(a)(2)(D)(i)(II) FIP rule.

1. The CAA § 169A BART FIP

The EPA BART FIP and the New Mexico BART SIP developed in parallel.

EPA proposed its SCR-based BART FIP for San Juan’s NOx emissions in January

2011. NMED in February 2011 proposed a BART SIP, covering those same

emissions, that calls for fundamentally different, less costly technology: selective

noncatalytic reduction (“SNCR”). BART could be based on either technology, but not

both. Because EPA must defer to state consideration and balancing of the BART

factors (see NMED Stay Mot. at 9), and because New Mexico’s proposed SNCR limit

meets the EPA-determined “presumptive” BART limit (0.23 lb/mmBtu) for units of

San Juan’s type (see 70 Fed. Reg. 39,104, 39172 (July 6, 2005) (EPA rules governing


7

BART determinations; listing presumptive BART limits for EGUs’ NOx emissions by

unit type)), there were no impediments to EPA approval of the BART SIP. Thus, in

comments to New Mexico, EPA merely described the two incompatible technologies

and raised no legal objections to the BART SIP requiring SNCR. See NMED Stay

Mot. at 3-4.

Yet, on August 4, 2011, thirty days after New Mexico had submitted its SIP to

EPA for approval, EPA promulgated the Final Rule compelling installation and use of

SCR at San Juan. As discussed above, EPA lacked authority under CAA § 110(c) to

promulgate a FIP in the face of an inconsistent pending SIP submittal. EPA instead

had a duty to determine whether the submitted SIP satisfies the CAA BART

standards.

EPA tries to justify ignoring New Mexico’s BART SIP and imposing a BART

FIP by claiming that a consent decree’s deadline in WildEarth Guardians v. Jackson, No.

09-cv-02453 (N.D. Cal.), required it to adopt the BART FIP. See 76 Fed. Reg. at

52,390, 52,412, 52,416. But that consent decree on its face applies only to EPA action on

the state’s Interstate Transport SIP, which had been pending before EPA since 2007 and

which EPA should have approved. That decree required no action on BART.7

7 Notice of Stipulated Extensions to Consent Decree Deadlines at 2, WildEarth Guardians v. Jackson, No. 09-cv-02453 (N.D. Cal., Apr. 28, 2011) (requiring EPA, by August 5, 2011, to “approve a SIP, promulgate a FIP, or approve a SIP in part with promulgation of a partial FIP for New Mexico to meet the requirement of 42 U.S.C.


8

Even if the WildEarth deadline applied to promulgation of a BART FIP, it

could not authorize what CAA § 110(c) and Train prohibit: promulgation of a FIP

where EPA has made no determination whether a relevant pending SIP submittal is

approvable. Rather, EPA had an obligation to seek an extension of the deadline (as it

had before and as the consent decree allowed). See Consent Decree ¶ 9, WildEarth

Guardians v. Jackson, No. 09-cv-02453 (N.D. Cal., Feb. 23, 2010). Absent such an

extension, EPA could have applied for mandamus relief here to protect this Court’s

exclusive future jurisdiction to review any EPA SIP approval or FIP promulgation.8

2. The CAA § 110(a)(2)(D)(i)(II) Interstate Transport FIP

As noted above, the Final Rule is also partly premised on CAA

§ 110(a)(2)(D)(i)(II), the Interstate Transport provision that requires a state’s SIP to

prevent emissions from interfering with CAA-required visibility-protection measures

§ 7410(a)(2)(D)(i)(II) regarding interfering with measures in other states related to protection of visibility”). 8 28 U.S.C. § 1651(a); Telecomm. Research & Action Ctr. v. FCC, 750 F.2d 70, 76 (D.C. Cir. 1984) (“[T]he authority of the appellate court is not confined to the issuance of writs in aid of jurisdiction already acquired by appeal but extends to those cases which are within its appellate jurisdiction although no appeal has been perfected. … In other words, section 1651(a) empowers a federal court to issue writs of mandamus necessary to protect its prospective jurisdiction.”) (citations and internal quotation marks omitted); see also, e.g., Pub. Util. Comm’r v. Bonneville Power Admin., 767 F.2d 622, 626 (9th Cir. 1985) (Kennedy, J.) (“where a statute commits review of final agency action to the court of appeals, any suit seeking relief that might affect the court’s future jurisdiction is subject to its exclusive review”). The CAA commits review of any final EPA action under the Act to the Courts of Appeals. CAA § 307(b)(1), (2), 42 U.S.C. § 307(b)(1), (2), 42 U.S.C. § 7607(b)(1), (2) (assigning judicial review of “any … final action” taken by EPA under the CAA exclusively to the Courts of Appeals).


9

in other states’ SIPs. As with BART, EPA had no authority to promulgate an

Interstate Transport FIP while approvable SIP submittals were pending before it.

EPA guidance to states required them to prepare and submit Interstate

Transport SIPs before states submitted (and before EPA approved) SIPs to address

regional haze, including BART, requirements. EPA thus instructed states that they:

may make a simple [Interstate Transport] SIP submission confirming that it is not possible at this time to assess whether there is any interference with measures in the applicable SIP for another State designed to “protect visibility” … until regional haze SIPs are submitted [by states] and approved [by EPA].9

At a time when states had not submitted regional haze BART SIPs—and long

before EPA approval of any such SIPs, most of which EPA still has not approved or

disapproved—New Mexico in 2007 submitted to EPA an Interstate Transport SIP

with respect to visibility impacts that adhered to EPA’s Guidance.10 See 76 Fed. Reg.

at 494; NMED Stay Mot. at 5. EPA failed to act on that SIP within the time required

by the Act. CAA § 110(k)(1), (2), 42 U.S.C. § 7410(k)(1), (2) (requiring EPA to

approve or disapprove a SIP no later than 18 months after its receipt by EPA).

In July 2011, at the same time it submitted to EPA its Regional Haze SIP with

its SNCR-based BART limit of 0.23 lb/mmBtu for San Juan, New Mexico submitted

9 EPA, Guidance for State Implementation Plan (SIP) Submissions to Meet Current Outstanding Obligations Under Section 110(a)(2)(D)(i) for the 8-Hour Ozone and PM2.5 National Ambient Air Quality Standards, at 9-10 (Aug. 15, 2006), available at http://www.epa.gov/ttn/oarpg/t1/memoranda/section110a2di_sip_guidance.pdf (last visited Nov. 25, 2011) (hereinafter “Guidance”) (emphasis added). 10 EPA’s Final Rule asserts for the first time that the Interstate Transport SIP failed to satisfy EPA’s Guidance, 76 Fed. Reg. at 52,418, but that argument is without merit.


10

to EPA its 2011 Supplemental Interstate Transport SIP incorporating that limit. Exh.

5. That limit easily meets the 0.27-0.28 lb/mmBtu level that EPA announced San

Juan must meet to avoid prohibited interstate impacts and to satisfy

§ 110(a)(2)(D)(i)(II). See 76 Fed. Reg. at 497-98; 76 Fed. Reg. at 52,424.

Presented by New Mexico with two successive Interstate Transport SIPs, each

of which was approvable (the first as comporting with EPA’s Guidance, the second as

meeting EPA-announced specific emission limit requirements for San Juan’s

emissions), EPA refused to approve either and instead promulgated an Interstate

Transport FIP, invoking CAA § 110(a)(2)(D)(i)(II). EPA had no authority to do that.

EPA cannot issue a FIP if a state submits a SIP that “satisfies the standards of

§ 110(a)(2)”; EPA may “promulgate” its own plan “only if a State fails to submit an

implementation plan which satisfies those standards.” Train, 421 U.S. at 79. New

Mexico submitted two complementary plans that meet “the standards” of

§ 110(a)(2)(D)(i)(II) as interpreted by EPA itself. Accordingly, it was unlawful for EPA

to disapprove or disregard the states’ plans and impose its own, far different plan.

At the time of the 2007 Interstate Transport SIP, EPA had not approved

regional haze SIPs for any state. Thus, “it [was] not possible at [that] time” for EPA

to conclude that any New Mexico emissions will interfere with measures yet to be

incorporated in another state’s EPA-approved SIP to implement visibility-protection

requirements. Guidance at 9-10. Those circumstances have not changed. Because it

was (and still is) impossible, within the terms of EPA’s Guidance, to determine


11

whether New Mexico’s SIP adequately prevents interference with “required,” EPA-

approved measures in other states’ SIPs, and because the 2007 SIP was (and remains)

approvable as conforming to that Guidance, EPA’s disapproval of that SIP and

promulgation of its § 110(a)(2)(D)(i)(II) FIP were improper.

EPA also could (and should) have approved the 2011 Supplemental Interstate

Transport SIP. That SIP indisputably meets the emission limits that EPA declared are

sufficient to fulfill the state’s Interstate Transport obligation with respect to San Juan’s

emissions. If EPA concluded that the WildEarth consent decree deadline cut off the

time needed for review and approval of that 2011 SIP, EPA should have sought an

extension in the district court. Failing that, EPA could and should have sought

mandamus relief here. See supra at 8 & n.8. EPA plainly was not authorized to “devise

and promulgate a specific plan of its own,” Train, 421 U.S. at 79, particularly where

the SIP before it met EPA’s own announced criteria for SIP approvability.

B. EPA Improperly Determined the Costs of Compliance with, and the Visibility Improvements Achievable Under, Its BART Determination, Making Its Final Rule Invalid.

Two critical factors in the five-factor analysis for determining emission limits

for regional haze BART are the cost of compliance and visibility improvement. See

supra note 3; Am. Corn Growers, 291 F.3d at 7. EPA’s analysis of these two factors is

fatally flawed, rendering its Final Rule invalid.

1. The Cost of Compliance

In any BART evaluation of emission control costs, site-specific factors must be


12

taken into account. See id. at 6-7; 70 Fed. Reg. at 39,127, 39,166 & n.15. EPA’s

BART rules reflect the necessarily site-specific nature of a BART analysis. See, e.g., id.

at 39,164, 39,166. Yet EPA’s BART assessment for San Juan ignored site-specific

costs. A proper cost analysis supports the conclusion that SCR is not BART for San

Juan.

In reaching its BART determination, EPA excluded significant costs identified

by PNM and its consultant Black and Veatch (“B&V”). For the first time in its Final

Rule, EPA asserted that it rejected those costs because PNM did not provide adequate

“documentation” supporting them, which EPA characterized as inconsistent with its

Air Pollution Control Cost Manual (“Cost Manual”). 76 Fed. Reg. at 52,392.

The documentation EPA insists on in its Final Rule is of such an extensive and

detailed nature that it cannot reasonably be deemed an appropriate requirement of a

BART cost assessment. See PNM Pet. at 17-19, Exh. 4. EPA apparently would

require something approximating a complete project design of the type necessary to

support actual installation of a control technology, something that cannot be

appropriate in an evaluation of whether such a technology should be required in the

first place. Further, EPA’s own cost assessment contains nothing approaching this

level of documentation. See id. at 19-20. If EPA believes this documentation standard

is binding, it had an obligation to provide that level of support for its BART FIP for

San Juan; EPA cannot escape such an obligation by its simple reliance on its Cost

Manual, which is not a legislative rule and provides, according to EPA’s BART rules,


13

merely a starting point for assessing costs. 70 Fed. Reg. at 39,127, 39,166 n.15.

Further analysis conducted since the comment period in EPA’s FIP rulemaking

confirms that EPA’s cost assessment is substantially flawed. To prepare to issue a

Request for Proposal to potential SCR vendors, PNM contracted with Sargent &

Lundy (“S&L”) to conduct a detailed cost assessment with the level of documentation

EPA now asserts is required.11 The S&L analysis confirms that B&V’s estimate is

correct and demonstrates that EPA greatly understated SCR costs at San Juan, thereby

artificially overstating the cost-effectiveness of its BART FIP. Thus, unless EPA

withdraws its Final Rule and BART determination (or at least revises its Final Rule to

provide for a regulatory “safety valve” that will suspend its BART determination

when the facts indisputably demonstrate that its cost estimate was incorrect),12 the

Final Rule is unsupportable. See Natural Res. Def. Council v. Jackson, 650 F.3d 662, 665-

66 (7th Cir. 2011) (modeled predictions must yield to real-world outcomes).

2. Visibility Effects

The Final Rule is premised on visibility benefits calculations that conflict with

EPA’s own rules. EPA relied on a projection of “cumulative” changes estimated to

result from SCR at San Juan, which EPA derived by aggregating small estimated

improvements in visibility at sixteen separate areas to yield an artificially inflated

11 This S&L cost assessment, dated October 21, 2011, was presented to EPA with, and discussed in, PNM’s Petition for Reconsideration. Exh. 6. 12 See PNM Pet. at 35-38, Exh. 4.


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“improvement” that no one will actually experience. See 76 Fed. Reg. at 52,420. The

BART rules do not support this method but instead call for BART analysis of

improvements that people may actually perceive by analyzing effects on the single

area that receives the largest impact. 70 Fed. Reg. at 39,170 (states should identify and

analyze the most affected Class I area, making modeling of other areas unnecessary).

EPA’s visibility modeling also is flawed. PNM and New Mexico used recent

versions of EPA’s preferred visibility computer model, CALPUFF, to project

anticipated visibility improvements from available controls. EPA rejected this

modeling and instead relied on an older version of CALPUFF, which the model’s

developer has determined significantly overstates SCR’s visibility effects.13 EPA’s

rejection in the Final Rule of New Mexico’s well-supported modeling in favor of its

own flawed modeling resulted in an improper overestimate of the degree of visibility

improvement achievable with SCR. EPA’s action on this issue was arbitrary.

C. EPA’s Determination that Its BART Limit Is Achievable Is Unsupported and Unlawful.

BART emission limits must be determined to be “achievable”—at the

individual facility being reviewed—using “available” technology. 40 C.F.R.

§ 51.308(e)(1)(ii)(A); id. § 51.301 (definition of “BART”). EPA’s Final Rule imposes

an exceptionally stringent 0.05 lb/mmBtu NOx limit that includes emissions even

13 See Scire Decl. ¶ 15, Exh. 7. EPA has proposed to approve Nevada’s regional haze SIP, 76 Fed. Reg. 36,450 (June 22, 2011), which relies on a more recent CALPUFF version, PNM Pet. at 44-45, Exh. 4, even as EPA rejects using recent versions here.


15

during periods of start-up, shutdown, and malfunction. An analysis by RMB

Consulting & Research, Inc. (“RMB”), explains this NOx limit appears to be the

lowest for any similar EGU and is not achievable at San Juan.14 Similarly, EPA

recently concluded that a NOx limit below 0.06 lb/mmBtu is not achievable through

retrofit of SCR on coal-fired EGUs. 76 Fed. Reg. 1109, 1115 (Jan. 7, 2011); EPA,

“Transport Rule Engineering Feasibility Response to Comments,” EPA-HQ-OAR-

2009-0491, at 13 (July 2011), Exh. 9. Because EPA’s 0.05 lb/mmBtu limit is not

“achievable,” as EPA BART regulations require, the Final Rule is contrary to law.

II. A Stay Is Necessary To Avoid Irreparable Injury.

If EPA’s Final Rule is not stayed pending judicial review, PNM and its

customers will suffer irreparable harm. The Final Rule requires PNM to expend

considerable resources that are unrecoverable from EPA even if the Final Rule is

invalidated. Moreover, because EPA’s 0.05 lb/mmBtu limit is infeasible, the Final

Rule threatens curtailment of service to avoid noncompliance, jeopardizing the

continued generation of a reliable supply of electricity to consumers.

The harm as described herein is substantial, likely to occur before a decision on

the merits, and supported by sufficient evidence. See, e.g., RoDa Drilling Co. v. Siegal,

552 F.3d 1203, 1210 (10th Cir. 2009) (discussing harm factors).

14 RMB, “Analysis of the Achievability of the FIP NOx Limit for San Juan Generating Station and Comparison to Other Ultra-Low NOx Units” (Oct. 21, 2011). Attachment 2 to PNM Pet., Exh. 8.


16

PNM and Its Customers Will Suffer Substantial Injury. Planning,

designing, procuring, fabricating, and installing SCR requires making substantial

financial commitments long before the equipment can become operational. EPA’s

Final Rule requires PNM to have SCR operational by September 2016. PNM cannot

defer expenditures necessary for the work while this case is litigated and still meet

EPA’s deadline. To avoid potential noncompliance, PNM is undertaking immediate

and extensive planning and logistical coordination. Wheeler Decl. ¶ 3, Exh. 10. Fees

for engineering, planning, and construction will have to be paid by July 2012, and

other payments will be needed to cover equipment costs shortly thereafter. Id. ¶ 6.

Required environmental permitting also is underway. Gannon Decl. ¶ 4, Exh.

11. PNM estimates it will have to prepare and file its application to amend San Juan’s

CAA operating permit by May 1, 2012, to meet the Final Rule’s deadline. Id. ¶ 6. The

estimated cost for the permitting associated with the SCR project is $200,000. Id.

PNM does not have sufficient internally generated cash flow to pay for the

SCR project and will have to raise substantial funding for it in the capital markets.

Horn Decl. ¶ 4, Exh. 12. Assuming a two-year appeal period, PNM estimates its

carrying costs alone for the SCR project will be about $5.6 million. Id.

In a July 2011 report,15 S&L provided a preliminary cost estimate of at least

15 S&L’s July 2011 report (Exh. 13) discusses the conceptual design for SCR at San Juan and analyzes its costs. That analysis has since been further refined for the


17

$741 million for the SCR project. Wheeler Decl. ¶ 4 & PNM Exh. NEW-2 (attached

to Wheeler Decl.), Exh. 10. PNM will incur substantial costs associated with the SCR

project before final resolution of the present challenges to the Final Rule. See Wheeler

Decl. ¶¶ 5-7. For example, PNM’s share of estimated costs for the SCR project

(excluding permitting costs and anticipated costs associated with balanced draft

conversion) totals about $21.3 million through the end of 2012. Id. ¶ 7. PNM’s share

of estimated costs through the end of 2013 totals approximately $112.8 million. Id.

The SCR project entails significant capital costs that PNM will seek to recover

in its rates. Ortiz Decl. ¶ 8, Exh. 14. Those costs will be passed along in the form of

higher retail-customer bills. Id. Based on PNM’s share of SCR project costs through

the end of 2012, the estimated rate impact for a typical residential customer is $20.33

(an increase of 2.31%) over a one-year recovery period. Id. ¶¶ 11-12. No mechanism

is available to PNM and its customers to recover from EPA the costs incurred to

comply with the Final Rule if that rule is invalidated. “Imposition of monetary

damages that cannot later be recovered for reasons such as sovereign immunity

constitutes irreparable injury.” Edmondson, 594 F.3d at 770-71; see also Crowe &

Dunlevy, P.C. v. Stidham, 640 F.3d 1140, 1157 (10th Cir. 2011); Kan. Health Care Ass’n v.

Kan. Dep’t of Social & Rehabilitation Servs., 31 F.3d 1536, 1543 (10th Cir. 1994).

The Harm Is Likely. The harm PNM and its customers will suffer in having

purpose described supra at 13. In the present section of this motion, references to SCR project costs relate to the July 2011 S&L report.


18

to proceed with the SCR project during these cases’ pendency is hardly speculative.

To the contrary, that PNM will incur significant costs during the appeal is a certainty.

As noted above, PNM has already begun the process of executing the SCR project,

and, absent a stay, the project’s costs will be incurred during the pending appeal.

PNM Has Provided Adequate Evidence of Harm. PNM submitted to

EPA declarations factually supporting its request for a stay and for Agency

reconsideration and likewise presents those declarations here in support of this

motion. This substantial evidence supports issuance of a stay.

III. Equitable Considerations Weigh Heavily in Favor of a Stay.

The balance of equities strongly supports issuing a stay. The irrecoverable

costs of complying with the rule during the pendency of these cases will significantly

harm PNM and its customers, who depend on a reliable supply of affordable

electricity from San Juan for their homes, livelihoods, and businesses. Like PNM,

electricity consumers would have no means of redress from EPA.

The public will not suffer harm from a stay. The Final Rule imposes emission

limits to reduce further the already-controlled emissions from San Juan16 that make at

most a very limited contribution to visibility impairment—a wholly aesthetic

consideration. Indeed, Congress, in enacting the CAA’s regional haze program,

recognized that remedying and preventing manmade visibility impairment is a “goal”

16 See PNM Stay Request at 3, Exh. 3.


19

to be pursued under a “reasonable progress” standard and that emission reductions to

meet the goal should be phased in over decades-long periods. See Am. Corn Growers,

291 F.3d at 10; 40 C.F.R. § 51.308(d)(1)(i)(B), (d)(1)(ii). A stay pending resolution of

this appeal will not affect the pace of visibility-related emission reductions

contemplated by Congress.

Finally, issuance of a stay will not excuse San Juan from having to install and

operate BART to reduce its emissions further. To the contrary, the outcome PNM

seeks is establishment of BART emission limits through the CAA’s state-based BART

determination process, as given effect by New Mexico’s Regional Haze SIP. Staying

EPA’s Final Rule pending litigation will not release San Juan from further emission

controls based on properly determined BART requirements.

IV. A Stay of the Final Rule Is in the Public Interest.

The public interest strongly supports staying EPA’s Final Rule. For the reasons

described above, EPA’s rule usurps New Mexico’s role under the Act and improperly

disregards its SIP submittals.17 The CAA gives states broad BART authority and

policy-making primacy, Am. Corn Growers, 291 F.3d at 8, and New Mexico properly

availed itself of its statutory prerogative in that regard. Yet EPA promulgated BART,

displacing New Mexico’s approvable BART determination. Accordingly, the harm to

17 “States are not the sole intended beneficiaries of federalism”; nongovernmental parties may properly challenge enactments as “in contravention of constitutional principles of federalism.” Bond v. United States, 131 S. Ct. 2355, 2364, 2365 (2011).


20

the public interest and to New Mexico’s sovereign rights absent a stay strongly

supports issuance of a stay. See, e.g., Kansas v. United States, 249 F.3d 1213, 1227-28

(10th Cir. 2001) (claims of violations of state sovereignty warrant issuance of a stay).

CONCLUSION

For all of the foregoing reasons, as well as those presented in NMED’s motion,

the Final Rule should be stayed pending completion of proceedings in these cases.

Alternatively, this Court should issue a stay pending final action on the

petitions for Agency reconsideration. Under CAA § 307(d)(7)(B), 42 U.S.C.

§ 7607(d)(7)(B), some issues central to EPA’s promulgation of the Final Rule cannot

fully be addressed and decided by this Court before final EPA action on the petitions

for reconsideration. While a number of merits issues in these cases are addressed in

one or both of those petitions, in PNM’s view, the issues addressed in Argument I.A.

supra could be considered and decided by this Court without EPA resolution of the

reconsideration petitions. The remaining issues could not fully be briefed prior to

final EPA action responding to the petitions. How EPA resolves the petitions will

affect not only the issues that could be addressed in these cases but also—if EPA

grants reconsideration and rescinds its Final Rule—whether any case or controversy

will continue to exist. If a stay of that rule pending judicial review is not granted, a

stay of the rule pending final action on the reconsideration petitions would be in the

interests of judicial economy and would avert harm to PNM that would result from

delay in resolving the petitions.


21

/s/ Richard L. Alvidrez

Respectfully submitted, /s/ Norman W. Fichthorn

Richard L. Alvidrez Henry V. Nickel MILLER STRATVERT P.A. Norman W. Fichthorn 500 Marquette, Suite 1100 HUNTON & WILLIAMS LLP P.O. Box 25687 Albuquerque, NM 87125

2200 Pennsylvania Ave., N.W. Washington, DC 20037

(505) 842-1950 Email: [email protected]

(202) 955-1500 Email: [email protected]

Counsel for Public Service Company of New Mexico

Counsel for Public Service Company of New Mexico

/s/ Patrick V. Apodaca

Patrick V. Apodaca Senior Vice President, General Counsel and Secretary Public Service Company of New Mexico 414 Silver Ave., S.W., MS 1200 Albuquerque, NM 87158 (505) 241-2700 Email: [email protected]



CERTIFICATE OF DIGITAL SUBMISSION AND PRIVACY REDACTIONS

The undersigned certifies that:

1. All required privacy redactions have been made; and 2. This digital submission was scanned for viruses with McAfee Virus Scan

Enterprise 8.5i, version 6541, which was last updated on November 25, 2011. According to this program, this submission is free of viruses.


/s/ Norman W. Fichthorn Norman W. Fichthorn


CERTIFICATE OF SERVICE

I hereby certify that on this 25th day of November, 2011, a copy of the

foregoing Motion of Petitioner Public Service Company of New Mexico for Stay of

Agency Rule was served electronically on counsel for all parties through the Court’s

CM/ECF system.

/s/ Norman W. Fichthorn Norman W. Fichthorn


in the united states court of appeals for …...agency and lisa jackson, administrator, epa, )))...

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