Arbitration panel set to review city's claims on San Juan Generating Station acquisition

John R. Moses
Farmington Daily Times

FARMINGTON – The City of Farmington's first bid to stop various decommissioning actions at the San Juan Generating Station via arbitration failed when an emergency arbitrator found the city did not prove it would suffer irreparable harm if the actions continued as planned.

A three-member non-emergency arbitration panel is being been named and will soon consider the city’s request for a temporary restraining order on decommissioning activities and that negotiations begin to transfer the power plant’s assets to the city – the only owner among several that chose to try and extend the plant’s working life instead of shutting it down and demolishing it.

Despite the emergency arbitrator’s finding, a city spokesperson remained optimistic about proceedings in front of a larger arbitration panel.

“The City has a pending temporary restraining order motion that will be heard by three-arbitrator panels,” Farmington Public Affairs Administrator Georgette Allen said via email Nov. 1. “We’re moving forward with arbitration and remain optimistic in our efforts to restart San Juan Generating Station.”

Defendants in the federal lawsuit that was dismissed as the parties proceed through arbitration are SJGS co-owners Public Service Company of New Mexico ("PNM"), Tucson Electric Power Company, Incorporated County of Los Alamos, New Mexico, and Utah Associated Municipal Power Systems.

“Farmington is filing this Notice of Voluntarily Dismissal Without Prejudice because this Court lacks appropriate subject matter jurisdiction and cannot issue an effective Order enjoining Defendants’ actions which are continuing to have an immediate irreparable harm on Farmington, and Farmington intends to seek the relief it needs in the pending arbitration,” its filing in federal court Oct. 6 states in part.

The City of Farmington, the plaintiff, also owns part of the power station.

PNM was running the station and has been in charge of decommissioning activities.

“PNM is pleased by the single-arbitrator decision not to delay the closure procedures at the San Juan Generating Station,” PNM Director of Corporate Communications Raymond Sandoval via email. “A delay would have carried significant costs, and if required to implement such a delay, we would have had no choice but to seek appropriate recovery from the City of Farmington to ensure that those costs were not passed on to our customers.”

PNM, likewise, expressed optimism about the upcoming arbitration process.

“We remain confident that the evidence and arguments that we will now fully present as the arbitration moves to a three-member arbitration panel will further demonstrate that the City’s claims are without merit,” Sandoval said.

PNM noted last month that the actual shutdown of the plant involves even more parties who are signed to shutdown and cleanup agreements and are affected financially by the city’s challenge to the shutdown.

As part of the decommissioning process, state environmental officials were notified officially of the shutdown, as the facility holds an air permit that the city wants to keep in place.

“PNM did issue a letter to NMED within the 30-day required window indicating the San Juan site had ceased operation” Sandoval said. “ This notice was provided on October 28th.”

Enchant Energy and the City of Farmington have been in communication with state environmental regulators about the permit issue.

“The permit is still active, even though PNM provided notice that the facility is not operating,” said New Mexico Environment Department Communications Director Matthew Maez via email Nov. 1. “They are required to submit that notice to us but doing so does not nullify the permit.”

This Sept. 20, 2022 image shows the San Juan Generating Station behind a chain link fence near Waterflow, New Mexico.

Bid for expedited relief fails

The city on Oct. 5 filed with the American Arbitration Association seeking arbitration for its claims as well as an emergency arbitration track aimed at faster relief than the regular arbitration process could grant.

That emergency arbitration process commenced before the main arbitration panel was named, and mirrored the claims and requests for relief set out in its case.

The city highlighted San Juan County Ordinance No. 121, which it said was being misrepresented by the parties that want to shut down the plant permanently.

The city had argued that the non-extenders were painting the ordinance as one that required PNM to immediately start filing demolition plans. The county’s legal office clarified that issue at the request of County Manager Mike Stark.

“Due to its position as one of the premier taxpayers and job-providers in the County, the County Commission’s goal has always been to keep SJGS open and producing energy,” the county attorney wrote.

They said the definition of “retirement” was “carefully crafted” to mean “the complete and permanent closure of a Qualifying Generating Facility. Retirement occurs on the date that the Qualifying Generating Facility ceases combustion of fuel and permanently ceases to generate electricity.”

The ordinance does not consider a temporary shutdown, or a shutdown to install carbon capture equipment, to be a permanent retirement of the facility, the county stated.

“The Emergency Arbitrator should therefore disregard all of Respondents’ arguments that refer to or rely on Ordinance No. 121 as an excuse for their misconduct,” the county legal department stated in an open letter.

Ordinance specifics aside, the arbitrator was not swayed by the city’s argument below.

“Respondents’ efforts, if permitted to continue without such interim orders will cause irreparable harm to Claimant as Claimant cannot be awarded the SJGS, which, once modifications are complete, fully capable of resuming operations as Claimant bargained for,” the city had argued. “The status quo requires that the SJGS be left intact with all of its tools, spare parts, machine shops, permits, licenses and governmental authorizations so that it can continue operations if the Panel decides in Claimant’s favor.”

The arbitrator weighed in on Oct. 26 with this finding:

“The Emergency Arbitrator finds that Claimant has failed to show that immediate and irreparable loss or damage shall result in the absence of the emergency relief for which Claimant has applied under R-39, as set forth in Claimant's Demand for Arbitration and submissions filed in support thereof,” Emergency Arbitrator Judith B. Greene wrote. “Accordingly, the Emergency Arbitrator hereby denies Claimant's R-39 application for emergency relief in its entirety, without prejudice to Claimant's right to assert any claim or claims for relief on a non-emergency basis in accordance with the governing AAA Rules.”

The process cost $15,950, a fee split among all the parties.

The city has reserved its right to bring the matter back to the courts.