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The Tennessee Valley Authority reported in its Feb. 3 quarterly Form 10-Q filing with the SEC that is pursuing approval from the U.S. Environmental Protection Agency for a second one-year extension on the Mercury and Air Toxics Standards (MATS) compliance deadline for the two Paradise coal power units in western Kentucky that it plans to retire.
“In October 2015, TVA submitted a request to the EPA for an administrative order under the Clean Air Act that would allow operation of Paradise Units 1 and 2 for a year beyond the MATS compliance date of April 16, 2016,” said the Form 10-Q. “The additional year is necessary to allow these units to continue to operate while the new combined cycle facility is being built at the site. Without the additional year, TVA would be forced to shut down Paradise Units 1 and 2 as of the MATS compliance date, without replacement capacity being available, which would cause adverse consequences to transmission system reliability. TVA expects to retire Paradise Units 1 and 2 once this replacement capacity is available.”
The initial MATS compliance deadline was in April 2015, with one-year extensions of that fairly easily obtainable from state agencies. EPA has a more stringent review process, based around grid reliability concerns, for any second one-year extension to April 2017.
During 2014, the TVA board approved the construction of two natural gas-fired generation facilities. One facility, with an expected generation capacity of about 1,000 MW, will be constructed at the Allen site at a cost not to exceed $975 million. The second facility, with an expected generation capacity of about 1,000 MW, will be constructed at the Paradise site at a cost not to exceed $1.1 billion.
A lawsuit has been filed challenging TVA’s Paradise decision. An injunction or court order that delays TVA’s plans at Paradise could increase the project’s cost, TVA noted. Upon completion of each facility, existing coal-fired units at each site will be retired with the exception of Paradise Unit 3, which would continue to be operated on the Paradise site.
Prior to making the decision to retire Paradise Units 1 and 2, TVA completed an Environmental Assessment in November 2013 under the National Environmental Policy Act (NEPA). In July 2014, the Kentucky Coal Association and several individuals filed suit in the U.S. District Court for the Western District of Kentucky alleging that TVA violated NEPA and the Energy Policy Act of 1992 in deciding to switch to natural gas generation at the site.
The plaintiffs demand that TVA prepare an Environmental Impact Statement, and are asking the court to preliminarily enjoin TVA from taking any further action relating to these matters pending compliance with NEPA. The court denied the plaintiffs’ motion for a preliminary injunction in December 2014 and dismissed the case in February 2015. In March 2015, the plaintiffs appealed the court’s decision to the U.S. Sixth Circuit Court of Appeals, and in October 2015, the Sixth Circuit affirmed the court’s decision.
TVA pointed out in the quarterly report that the decision to idle or retire coal-fired units from TVA’s generation fleet is being influenced by several factors, including the two agreements into which TVA entered in April 2011 to resolve a dispute under the Clean Air Act (called the “Environmental Agreements”), environmental legislation, the cost of adding emission control equipment and other environmental improvements, fuel prices, conditions of its aging plants, and demand for energy. Under the Environmental Agreements, TVA committed, among other things, to retire, on a phased schedule, 18 coal-fired units.
During the first quarter of fiscal 2016 (October-December 2015), TVA provided notice to the EPA of its election to retire Colbert Unit 5 and Allen Units 1-3 on or before Dec. 31, 2018, and Colbert Units 1-4 on or before June 30, 2019. Colbert Units 1-4 will be removed from service before June 30, 2016.
As of Dec. 31, 2015, TVA had retired 19 coal-fired units with a summer net capability of 3,210 MW, including Johnsonville Fossil Plant Units 5-10, which were retired on Dec. 31, 2015. The retirements of sixteen of these units, with a summer net capability of 2,148 MW, were carried out to comply with the Environmental Agreements. TVA said it continues to evaluate the appropriate mix of generation and assess the status of individual power generating facilities.
Also related to the coal plants, TVA has committed to a programmatic approach to the elimination of wet storage of coal combustion residual within the TVA service area. Under this program (called the “CCR Conversion Program”), TVA has committed to: convert all operational coal plants to dry CCR storage; close all wet storage facilities; and meet all applicable state and federal regulations. To carry out its CCR Conversion Program, TVA is undertaking the following actions:
· Dry generation and dewatering projects – Conversion of coal plant CCR wet processes to dry generation or dewatering is complete at Bull Run Fossil Plant and underway at Kingston, Gallatin, Cumberland, Shawnee, and Paradise Fossil Plants.
· Landfills – Lined and permitted dry storage facilities have been constructed at Bull Run and Kingston Fossil Plants, are under construction at Gallatin, and are in the planning or engineering phases at Cumberland, Paradise, and Shawnee.
· Wet CCR impoundment closures – TVA is planning to close wet CCR impoundments in accordance with federal and state requirements when coal plants are converted to dry CCR processes and dry storage landfills become operational, or plant operations cease. Closure project schedules and costs are driven by the selected closure technology (e.g., cap and close in place or clean closure). As environmental studies are performed and closure methodologies are determined, detailed project schedules and estimates will be prepared.
· Groundwater monitoring – Compliance with the EPA’s CCR rule will require additional engineering and analysis as well as implementation of a comprehensive groundwater monitoring program.
The CCR Conversion Program is scheduled to be completed by 2022 with two exceptions. First, a new landfill at Shawnee will be required to accommodate the addition of air pollution controls and is scheduled to be completed by 2026. Once the new landfill is in service, the existing bottom ash pond and dry stack will be closed in accordance with federal and state requirements. Second, the ponds at Gallatin Fossil Plant are pending additional studies to determine the final closure methodology and schedule.
Through Dec. 31, 2015, TVA had spent about $795 million on its CCR Conversion Program. TVA expects to spend an additional $1.3 billion on the CCR Conversion Program through 2022. Once the CCR Conversion Program is completed, TVA will continue to undertake certain CCR projects to support long-term plant generation, including building new landfill sections under existing permits and closing existing sections once they reach capacity.