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PNM commissioned a study in 2010 to look at carbon capture for the San Juan Generating Station. This is why the utility chose not to pursue it. Hannah Grover, hgrover@daily-times.com

Rob Mayes says PNM made its decision based on different factors than the City of Farmington is evaluating

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FARMINGTON — Public Service Company of New Mexico Senior Vice President for Public Policy Ron Darnell said his company chose not to install carbon capture technology on the San Juan Generating Station because it is expensive and unproven.

Darnell's comments came during a stakeholder meeting on July 30 at San Juan College. He was referring to Farmington's plans to partner with Enchant Energy to install carbon capture technology on the power plant.

The city hopes this will allow San Juan Generating Station to remain open after 2022, and its top administrator made it clear during the meeting that the City of Farmington is proceeding on schedule with its plans for a facility takeover, and a carbon capture makeover.

“Over the next couple of weeks, we will be bringing forward a purchase agreement to the City Council where we will be transferring the ownership,” said City Manager Rob Mayes.

Darnell thanks coal miners, power plant workers 

Darnell started his speech by talking about the coal miners and the power plant workers.

“First and foremost, I want to say that we need to acknowledge the work of PNM employees and the coal miners who have provided our state with affordable and reliable energy for nearly half a century,” Darnell said. “These workers are not only the economic engine for the region, but they provided the power for the entire state of New Mexico so we could keep our lights on, energize our workforce and introduce new companies to our economy. And they deserve our appreciation. They deserve our gratitude.”

After asking the crowd to applaud the workers, Darnell continued by saying those workers deserve the truth about what led up to the decision to close the power plant.

“They deserve the truth so that they can make informed decisions regarding their own futures,” Darnell said.

PNM previously investigating carbon capture possibilities

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Enchant Energy wants to install carbon capture on San Juan Generating Station. Here's how the technology works. Hannah Grover, hgrover@daily-times.com

Darnell said PNM and other owners of the San Juan Generating Station previously commissioned a study to look at what it would take to install and operate carbon capture technology at the San Juan Generating Station.

That study was done in 2010 by Sargent & Lundy, which is the same firm hired by Enchant Energy to do a similar study. The results of the initial scoping study have been released and Enchant Energy maintains that the scoping study shows the project will be feasible despite being larger than any other carbon capture project in the world. These include the Boundary Dam Power Plant in Canada and the Petra Nova project in Texas.

Sargent & Lundy will complete a more in-depth study prior to Enchant Energy searching for investors.

More: Challenges loom as Farmington works to keep San Juan Generating Station open

But Darnell said the 2010 study led to PNM’s decision not to pursue carbon capture.

“There are much better options and we would be betting far too much on unproven, costly technology that wouldn’t benefit the communities we work in, the environment we vowed to protect or the customers we serve,” he said. “At the end of the day, this technology would cost well over $1.5 billion, would need 80 percent more water than what we currently use and would need 25 percent of the power it generates to be fed back into the operation to run the machinery.”

When the 2010 study took place, there had not been a successful installation of carbon capture technology on a coal-fired power plant. Since then, two coal-fired power plants have been retrofitted with the technology.

Darnell talks about Energy Transition Act

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The Energy Transition Act has been described as New Mexico's "Green New Deal," but what does that mean? Hannah Grover, hgrover@daily-times.com

Darnell said PNM did not pursue carbon capture because it is unproven and the cost of the electricity produced is too high.

“We would rather use the $40 million set out by the Energy Transition Act to help unlock the potential of our workers in this region than to make a risky bet on unproven costly technology,” Darnell said.

More: The Energy Transition Act outlined a path away from coal. The first steps are underway

PNM helped draft the Energy Transition Act, which enabled the utility to ask the New Mexico Public Regulation Commission to approve a financing mechanism known as securitization. This would allow PNM to sell low-interest bonds to pay for the unrecovered investments into the San Juan Generating Station. Some of the bond proceeds would also be used for severance, decommissioning, reclamation, economic development and job training.

However, the PRC would have to approve the securitization before the $40 million would be available for the community.

More: PRC: Energy Transition Act doesn't apply to PNM's plan to close San Juan Generating Station

Farmington city manager addresses PNM's assertions

Mayes said PNM and the City of Farmington make decisions based on different factors.

“The City of Farmington and PNM are not enemies in this process,” he said. “PNM has made the decision to do what they’re doing based on their facts and their circumstances, which are entirely different than the City of Farmington’s.”

FEUS Integrated Resource Plan: Farmington plans power generation for the future

PNM and Farmington Electric Utility System drafted Integrated Resource Plans that were released in 2017. Both documents evaluated closing the San Juan Generating Station in 2022.

PNM’s Integrated Resource Plan found that it would save customers money to close the power plant in 2022 when the coal purchase contract expires. Meanwhile, Farmington’s report found that it would cost the city millions of dollars to replace the power from the San Juan Generating Station and that could increase utility rates.

PNM Integrated Resource Plan: PNM plan would eliminate coal power by 2031

While PNM is a for-profit utility with investors and shareholders, Farmington Electric Utility System is a municipal-owned utility. PNM is regulated by the New Mexico Public Regulation Commission and must meet renewable portfolio standards set by the state. Meanwhile, Farmington Electric Utility System is regulated by the City of Farmington and is not subject to those same renewable portfolio standards.

In addition, Farmington will be impacted by lost tax revenue if the San Juan Generating Station does close.

Mayes said the city’s objective is to try to extend the jobs at the San Juan Generating Station and the San Juan Mine without taking on additional risks to the city.

He said Farmington is not opposing PNM’s plans or the filings the utility made with the PRC for abandonment, financing and replacement power.  

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

The city will need the PRC to approve PNM’s abandonment of the San Juan Generating Station before it can take ownership of the plant. Once Farmington takes ownership, the city plans to transfer 90 to 95 percent of that ownership to Enchant Energy.

Enchant Energy will then pay for the carbon capture technology to be installed. The company hopes to use tax-equity financing to pay for the estimated $1.3 billion project.

Rather than relying on electricity to recoup the investment into the power plant, Enchant Energy would rely on tax credits and on sales of carbon dioxide. The carbon dioxide could be used in the extraction industry to force oil from depressurized reservoirs.

“It will either work or it won’t,” Mayes said. “Investors will either be there or they won’t and if it does, we’ve saved the jobs for this community.”

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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