Lawsuit threatened against Farmington over financial impacts of SJGS takeover plans

John R. Moses
Farmington Daily Times

FARMINGTON – Farmington's City Council will meet with its legal team Dec. 20 to discuss the next moves in its plans to take over the San Juan Generating Station.

The City Council scheduled the meeting citing possible or pending litigation to get legal advice behind closed doors after arbitrators turned down the city's bid to stop an auction of what the city considers key equipment at the power station.

The meeting comes as other owners of the San Juan Generating Station said that they may sue the City of Farmington for millions of dollars if the city's future actions delay work at the closed station and cost them money.

Public Service Company of New Mexico (PNM) told the Daily Times on Dec. 19 that legal action will come unless Farmington drops its maneuvers to stop decommissioning of the power plant – and that the damages to be sought by PNM and the other owners will be due to costly delays in decommissioning the facility.

It is unclear whether any specific communications between PNM and the city sparked the closed meeting as neither side responded to requests for copies of recent communications.

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

Farmington owns a portion of the power plant. The facility was shut down Sept. 30 and is undergoing decommissioning work that the city sought to limit, first through a lawsuit and now through an arbitration process.

The plant’s owners are PNM, Tucson Electric Power Company, the City of Farmington, The Incorporated County of Los Alamos and Utah Associated Municipal Power Systems.

The closed meeting at the end of a scheduled 9 a.m. City Council work session comes as the city faces fresh setbacks on two fronts in its drive to take ownership of the coal-fired generating station and reopen the shuttered facility with technology designed to bring pollution levels into compliance under new air quality laws.

The city on Dec. 14 lost a second bid for emergency relief through arbitration to halt the sale of some of the generating station’s components at auction. The arbitration panel rejected a claim by the city that it faces unrecoverable harm if the parts are sold.

On Dec. 19, the Federal Energy Regulatory Commission accepted a petition to end the power plant’s joint ownership agreement that had been signed by the plant’s owners, including Farmington. The agreement expired on Sept. 30 under terms previously agreed to by all parties, and federal regulators rejected arguments by Farmington that accepting termination of the agreement would damage the city’s efforts to take over the power station through arbitration.

San Juan Mine sealed as Westmoreland lays off 60, moves to reclamation phase

“We accept PNM’s notice of cancellation, effective October 1, 2022, as requested.  We find that cancelling the San Juan Agreement as of October 1, 2022 is just and reasonable and not unduly discriminatory or preferential,” FERC wrote in its decision. “In this case, by its terms, the San Juan Agreement terminates after September 30, 2022.  …  PNM indicates that the Station ceased generation of power on September 30, 2022.  Therefore, the terms for termination of the San Juan Agreement have been met.”

City seeks advice

“The City is disappointed with the arbitration panel's 3-0 ruling denying Farmington's second request for emergency relief related to San Juan Generating Station,” the city said in a statement released by Public Affairs Administrator Georgette Allen on Dec. 19.

“The arbitrators considered well beyond the contractual agreements, to include broader interpretations like the environmental transition act in the state of New Mexico,” the statement said. “With the auctions of critical equipment proceeding, the City leadership will be receiving advice from legal counsel as a closed agenda item of the December 20 City Council meeting to determine next steps.”

The city did not return a request for comment on the FERC decision, and declined to release documents about the arbitration process without a formal records inspection request from the Daily Times. Information about the costs incurred so far in the arbitration process were also not made available Dec. 19.

The group of owners who are decommissioning the power plant under an agreement signed off on by FERC want the next step to be no more legal action by Farmington.

SJGS carbon capture feasibility study done, but critic thinks plant reopening unfeasible

“Regardless of the attempted legal approaches or venues, the facts remain unchanged,” PNM Director of Corporate Communications Ray Sandoval said Dec. 19. “ If Farmington continues to pursue further actions, PNM will be put in the position of seeking judgment for the damages, as our responsibility is to protect our customers from these expenses.  Unfortunately the citizens of Farmington could have to bear those substantial costs.”

The San Juan Generating Station, pictured in 2005 in Waterflow, is the subject of ongoing legal action as the City of Farmington moves to reopen and retrofit the closed facility.

Equipment up for auction

At issue in the city's second request for an emergency injunction was an auction at the power plant of equipment used to move power from the facility. PNM said that auction is slated to close Dec. 20.

The three-member arbitration panel that decided the matter found that no irreparable harm could come to the City of Farmington from the sale of plant components that could be replaced in the future.

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