Enchant Energy CEO: 'This area could become a leader in CO2 in the world'

IEEFA research editor: 'If this thing that Enchant Energy is proposing was workable, PNM would be doing it'

Hannah Grover
Farmington Daily Times
  • IEEFA releases a report describing Enchant Energy's proposal as providing false hope and fiscal risk.
  • Farmington mayor says the city will not take on additional liability.

FARMINGTON — Depending on who you ask, carbon capture is either a vital tool to combat climate change or an expensive technology with few success stories.

Farmington hopes that carbon capture is the technology that will save jobs at the San Juan Generating Station and keep a property tax base in place. It has partnered with a new firm known as Enchant Energy to explore this possibility.

Enchant Energy CEO Jason Selch and Board Chairman Larry Heller visited Farmington this week to present details of their proposal and a recently completed pre-feasibility study. Their presentation can be viewed online at enchantenergy.com and their meeting with the Farmington City Council can be watched at fmtn.org.

Selch and Heller said the San Juan Generating Station is the best place in North America for a large-scale carbon capture coal-fired power plant.

"If it wasn't for a 20-mile hop skip and a jump to the Cortez pipeline we wouldn't be having this conversation," Heller said.

The proximity to the pipeline caught Heller and Selch's attention. They had previously spent a year unsuccessfully trying to purchase Kinder Morgan's carbon dioxide operation. 

More:Enchant Energy CEO says San Juan Generating Station carbon capture may cost $1.23 billion

Enchant Energy maintains it can pay for the operating costs through selling carbon dioxide to oil fields, and Selch said they have been meeting with companies like Occidental Petroleum that may be interested in buying the carbon dioxide. Those operating costs include paying for the 29 percent of the generated electricity that will be used to power the carbon capture technology.

It hopes to pay for the $1.3 billion project through tax equity financing, meaning it will finance the 45Q tax credits that it could receive from removing 6 million tons of carbon dioxide from the power plant each year. 

If it works, Selch said the carbon capture project will save jobs, change the power produced to being low emissions and possibly lead to more industries coming to San Juan County. 

"This area could become a leader in CO2 in the world," Selch said.

Heller said there is the potential that the Farmington area could begin manufacturing amines — the chemical used to extract carbon dioxide from flue gas. 

Enchant Energy CEO Jason Selch answers a question, Tuesday, July 16, 2019, during a meeting at San Juan College.

IEEFA report criticizes Enchant Energy's carbon capture proposal 

Their visit came days after the Institute for Energy Economics and Financial Analysis released a report calling Enchant Energy a “novice company” with a carbon capture pitch that offers false hope to Farmington — as well as fiscal risk.

IEEFA researches and analyzes financial and economic issues surrounding the energy sectors as well as the environment. On its website, it describes its mission as accelerating the “transition to a diverse, sustainable and profitable energy economy.”

The report outlines what it describes as several major flaws in the proposition to install carbon-capture technology. This includes the proposed timeline, the market for carbon dioxide, long-term project liabilities, finding customers for the electricity and financing the project. It states that it is highly unlikely that the project will ever become operational.

Enchant Energy Board Chairman Larry Heller speaks about the plans for carbon capture at San Juan Generating Station, Tuesday, July 16, 2019, during a meeting at the San Juan College School of Energy.

“We’ve seen these kinds of things before,” said Karl Cates, an IEEFA research editor and the co-author of the report.

He said people come into communities with promises of keeping a coal-fired power plant open, but are not willing to spend their own money. He said these proposals usually center on government funding and highlighted that Enchant Energy has already applied for a U.S. Department of Energy grant to fund a more in-depth feasibility study.

The IEEFA report compared Enchant Energy's proposal to keep the San Juan Generating Station open with the unsuccessful efforts to prevent Navajo Generating Station from closing.

Enchant Energy Board Chairman Lawrence Heller speaks, Tuesday, July 16, 2019, during a meeting at San Juan College.

Cates said he would like to warn Farmington against taking on liabilities.

“We see a theme being repeated in Farmington,” Cates said.

IEEFA remains skeptical about the viability of carbon capture and has published a previous report describing it as a "holy grail" that continues to elude the coal industry.

“If this thing that Enchant Energy is proposing was workable, PNM would be doing it,” Cates said.

Instead, PNM has proposed replacing the power from San Juan Generating Station with natural gas and solar.

“It embraces this national trend very specifically away from coal,” Cates said about PNM’s proposed replacement plan.

More:PNM proposes plan to move toward renewable energy sources, close SJGS

Mayor Duckett says Farmington will not take on additional liabilities

Mayor Nate Duckett emphasized on July 16 that the city will not be taking on new liabilities.

“One of the important components for council to consider in anything going forward is the protection of the liabilities of the City of Farmington,” Duckett said during the City Council work session on July 16. “And I want to make sure that people understand that is a critical component of any negotiation that we have with Enchant Energy and the potential for future lifespan of that plant.”

San Juan Generating Station is pictured on Friday, Dec. 22, 2017 in Waterflow.

He reiterated and expanded upon that statement during a subsequent stakeholder meeting on the evening of July 16 at San Juan College’s School of Energy.

More:Is carbon capture the solution for San Juan Generating Station?

He said there are four things that the city will focus on while drawing up a contract with Enchant Energy. Those include protecting the financial standing of the city, keeping electric rates low for Farmington Electric Utility System customers, protecting the environment and retaining a 5 percent ownership in the plant.

Duckett said the city will not finance the carbon capture technology.

How San Juan Generating Station went from powerhouse to possible closure

"This is Enchant's deal," he said. "We're excited about the partnership. We see it as a great public-private partnership." 

Duckett said it is important to remember what is at risk if the carbon capture plan does not work. He said the power plant will close and hundreds of people will lose their jobs.

More:How San Juan Generating Station went from powerhouse to possible closure

"The upside is far greater than the risk the City of Farmington is in in being a partner here," Duckett said.

Farmington has paid nearly $1 million in efforts to save power plant

Duckett said the city has paid nearly $1 million so far in legal fees trying to find a way to keep the San Juan Generating Station open. These legal fees are not necessarily directly connected to the carbon capture proposal. 

Selch said the future contract with the city could provide a way for the city to recoup some if not all of the legal expenses.

He said once the contract is finalized it will be published on the Enchant Energy website.

San Juan Citizens Alliance concerned about project's viability

San Juan Citizens Alliance Energy Coordinator Mike Eisenfeld said he believes it is smart for Farmington to avoid taking on additional liabilities.

Eisenfeld attended the meeting on July 16 at San Juan College and remained concerned about the project’s viability. He said the two main concerns are the timeline and the size of the project.

Selch and Heller said it could take three to four years to install the carbon capture technology on the power plant, and Enchant Energy may not be able to start construction until late 2022 or early 2023. Eisenfeld said he thinks it is ambitious to anticipate the project being completed by 2025 or 2026.

In addition, the project is larger than any previous carbon capture project and relies on tax equity financing greater than any previous tax-equity financed project.

More:Carbon capture technology, SJGS's future discussed at energy conference

Eisenfeld said the city should be looking at increasing renewable energy production in San Juan County rather than hoping for carbon capture technology to save the power plant.

“In my opinion, to not take a hard look at renewables is simply unacceptable,” Eisenfeld said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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