* EPA wants to reduce haze in national parks * Emission control equipment to cost about $1 billion * Coal plant upgrades could boost water and power costs Feb 4 (Reuters) - Arizona challenged in federal court U.S. environmental regulators efforts to force Arizona power companies to spend up to $1 billion to install pollution control equipment at three coal plants to reduce haze in the region's national parks. Arizona's Attorney General Tom Horne said in a statement last week the emission control measures proposed by the U.S. Environmental Protection Agency (EPA) would not affect health or be reduce emissions visible to the human eye. "This is an absurd action that would significantly raise utility rates for most Arizonans without providing any benefit to anyone," Horne said in a statement. Officials at the EPA were not immediately available for comment. On behalf of the Arizona Department of Environmental Quality, which filed a plan to reduce emissions in 2011 that was replaced by the EPA's proposal, Horne filed with the U.S. Ninth Circuit Court of Appeals challenging the EPA's plan to impose new haze restrictions. The EPA in December proposed strict controls on nitrogen oxide emissions that could require the installation of selective catalytic reduction technology at the Apache, Cholla and Coronado coal plants to reduce haze in the Grand Canyon and other nearby national parks. Nitrogen oxides react with other chemicals in the atmosphere to form ozone, which causes a white or brown haze in the air that has been associated with asthma and other breathing disorders, the EPA said. "This attempt by the EPA has nothing to do with ensuring clean air and everything to do with trying to eliminate coal as a source of electricity," Horne said. Since President Barack Obama entered office in 2009, power companies have announced plans to shut more than 40,000 MW of coal-fired capacity due to stricter environmental regulations and weak natural gas prices from record shale production that has depressed power prices. Those low power prices have made it uneconomic for many generators to invest in emissions control equipment needed to keep their older coal plants compliant with the administration's stricter environmental regulations. COAL POWERS MOST Arizona power plants can generate about 26,400 MW of electricity with about 13,000 MW fueled by natural gas, 6,200 MW coal and 3,900 MW nuclear. But despite the lower capacity, the coal plants produce about 40 percent of the state's electricity because coal plants like the nuclear reactors generally run around the clock. Nuclear produced about 28 percent of the state's power and gas produced about 27 percent, according to federal energy data. Arizona Electric Power Cooperative operates the 549-MW Apache natural gas, oil and coal-fired power plant, which has two 175-MW coal-fired units, in Cochise. Arizona Public Service, a unit of Arizona power company Pinnacle West Capital Corp, operates the 1,027-MW Cholla coal plant in Joseph City. Arizona power and water company Salt River Project operates the 773-MW Coronado coal plant near St. John's. NAVAJO THREATENED In addition to the three plants named in the lawsuit last week, Horne said "if the EPA is successful in implementing this plan ... the Navajo plant ... would likely also be threatened in the future." The EPA recommended the owners of the 2,250-MW Navajo coal plant in Arizona install equipment to reduce haze in national parks that could cost as much as $1.1 billion. Navajo produces power used to deliver drinking water to consumers for the Central Arizona Project Water in the state's two largest cities, Phoenix and Tucson, among other things. Horne warned if the EPA forces Navajo to shut, power prices for the Central Arizona Project Water would increase by at least 20 percent. "The federal government appears bent on causing serious economic damage to the average consumer in the name of environmental protection when the environmental benefits it wishes to confer simply do not exist," Horne said. The Navajo plant is owned by Salt River Project, the U.S. Bureau of Reclamation, Los Angeles Department of Water & Power, Arizona Public Service, NV Energy Inc's Nevada Power Co and UniSource Energy Corp's Tucson Electric Power.