Negotiated Agreement Provides for Greater Emissions Reductions at Lower Cost Than Initially Proposed

EPA’s final rule to limit emissions from NGS relied on the details of a negotiated agreement, between the power plant owners and environmental groups, which EPA expects to result in greater emissions reductions at a lower cost than EPA’s initial proposal. The agreement increased the level of emissions reductions from EPA’s proposed 70 percent to 90 percent, with estimated annual costs dropping from between $91.9 million and $128.3 million to $89.6 million. According to a project engineer for the Salt River Project, with its compliance determined on an annual basis, the plant can operate its emission control equipment most days at a rate greater than that needed to cut emissions by 90 percent to make up for those days on which emissions are not controlled because the equipment is not operating. Second, the agreement delays the initial installation of emission control equipment by almost 3 years, from January 1995 to November 1997, which allows the plant operators to complete the project in a more cost-effective manner. EPA initially estimated an approximately 14 percent improvement primarily on the basis of a study by the National Park Service, although the agency revised its estimate to approximately 7 percent to reflect the results of other analyses and studies. EPA noted that its revised estimate may be understated because it does not take into account other visibility improvements (1) below the rim of the Grand Canyon, (2) in seasons other than winter at the Grand Canyon, and (3) year round at other nearby national parks. This estimate translates into an increase in the average visual range from about 124 miles to about 133 miles. In addition to improvements during certain winter weather conditions, EPA also estimated visibility improvements on other winter days. EPA and the Owners Used Contingent Valuation to Estimate the Monetary Value of Visibility Benefits

Both EPA and the plant owners estimated, using contingent valuation, the monetary value of visibility improvements from reducing sulfur dioxide emissions from NGS. Although relying on the same methodology, the studies were technically different. The information included numerous analyses of the plant’s effects on visibility at the Grand Canyon and the visibility improvements that might be expected from the addition of emissions controls. EPA initially estimated that reducing the sulfur dioxide emissions by 90 percent would improve the winter seasonal average visibility by approximately 14 percent. EPA Revised Its Estimate to an Approximately 7 Percent Improvement in Visibility

Following a public comment period, EPA revised its estimate that reducing NGS’ sulfur dioxide emissions by 90 percent could improve the winter seasonal average visibility above the rim of the canyon from its initial estimate of approximately 14 percent to approximately 7 percent.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Environmental Protection Agency's (EPA) decision to limit sulfur dioxide emissions from the Navajo Generating Station, focusing on: (1) the effect on emissions reductions and the associated costs that resulted from the negotiated agreement used by EPA in making its decision compared to its initial proposal; (2) the visibility improvements the agency estimated would result from the emissions controls and the means by which these improvements were determined; and (3) how contingent valuation was used to estimate the monetary value of visibility improvements.

What GAO Found

GAO noted that: (1) the negotiated agreement is expected to result in greater emissions reductions at less cost than EPA had initially proposed; (2) the agency initially proposed limiting sulfur dioxide emissions at the Navajo Generating Station by approximately 70 percent at an annual cost estimated between $91.9 million and $128.3 million; (3) the negotiated agreement is expected to increase emissions reductions to approximately 90 percent at an estimated annual cost of approximately $89.6 million; (4) the lower costs resulted from several factors, according to the plant operators; (5) according to a project engineer for the Salt River Project, with its compliance determined on an annual basis, the plant can operate its emission control equipment most days at a rate greater than that needed to cut emissions by approximately 90 percent to make up for those days on which emissions are not controlled because the equipment is not operating; (6) also, delaying the initial installation of the emission control equipment by almost 3 years, from January 1995 to November 1997, allows the project to be completed in a more cost-effective manner; (7) EPA estimated that reducing the sulfur dioxide emissions at the Navajo Generating Station by approximately 90 percent would improve winter seasonal average visibility at the Grand Canyon approximately 7 percent--from about 124 miles to about 133 miles; (8) most of this improvement was estimated to result from improvements during certain winter weather conditions; (9) EPA initially estimated an approximately 14 percent improvement in the winter seasonal average visibility primarily on the basis of a National Park Service study of visibility in the vicinity of the Grand Canyon; (10) EPA revised this estimate to approximately 7 percent after considering the results of other analyses; (11) however, EPA noted that its revised estimated may be understated because it did not include visibility improvements: (a) below the rim of the Grand Canyon; (b) in seasons other than winter at the Grand Canyon; and (c) year round at other nearby national parks; (12) both EPA and the Navajo Generating Station's owners used contingent valuation to estimate the monetary value of visibility improvements; and (13) although relying on the same methodology, the studies were different and yielded widely different results.