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The Daily Times toured the San Juan Generating Station. Here's a look inside the coal-fired power plant at the center of the state's energy debate. Farmington Daily Times

Enchant Energy Chief Operating Officer Peter Mandelstam says the proposal for San Juan Generating Station is evolutionary, but not revolutionary.

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FARMINGTON — Enchant Energy hopes to team up with New Mexico Institute of Mining and Technology and San Juan College to study possible storage wells for carbon dioxide in the state and in San Juan County, according to Chief Operating Officer Peter Mandelstam.

This was one of the announcements Mandelstam made while updating the San Juan County Commission and the Farmington City Council about the progress Enchant Energy has made toward the end goal of keeping the San Juan Generating Station open after 2022 through a carbon capture retrofit.

Mandelstam spoke to the two governing bodies during separate meetings on Dec. 17.

These wells would be certified by the U.S. Environmental Protection Agency for the permanent storage of carbon dioxide in rock formations deep underground. These are known as Class VI wells.

Because the carbon dioxide is intended to be permanently stored in Class VI wells, it would not be available for Enchant Energy to sell. However, Enchant Energy can receive higher tax credits under the 45Q tax credit for permanently sequestering the carbon dioxide than it can receive if it sells the carbon dioxide.

MORE: Environmentalist joins Enchant Energy's efforts to keep San Juan Generating Station open

Mandelstam expresses optimism 

While the proposal has many critics who say it is an expensive, risky endeavor, Mandelstam expressed optimism that the project can not only be successful but also be a building block for similar efforts in the future.

“I keep looking for a deal killer,” he said when asked about delays that could cause Enchant Energy to back out of the project.

Mandelstam emphasized that Enchant Energy is committed to keeping the power plant open through 2035 using carbon capture technology.

“We believe in this project,” he said. “The schedule is important, but we’re here to stay and there's no absolute deadline that would kill the project..”

While Enchant Energy may be committed to the project, it still has a long road ahead of it before the goal can be realized.

Timeline includes 2023 completion goal

The company’s timeline has the carbon capture retrofit completed in 2023 and, currently, Mandelstam said the project is meeting the timeline.

But that could change if there are lawsuits, including potential litigation about the applicability of the Energy Transition Act to Public Service Company of New Mexico’s application to end its operations at the power plant.

And the success of the project also depends on Enchant Energy successfully negotiating an agreement with the power plant owners who no longer want to utilize it after 2022.

MORE: Environmentalist joins Enchant Energy's efforts to keep San Juan Generating Station open

Farmington City Manager Rob Mayes said the majority owner — PNM — has been negotiating in good faith. He said the negotiations with the other owners of the power plant have been going well.

“There’s no legal question that we have rights to all of the necessary assets to continue operation of the plant at no cost,” Mayes said.

He said the city has transferred those rights to Enchant Energy.

However, PNM filed a document with the New Mexico Public Regulation Commission last week stating that it interprets the ownership agreement it has with Farmington and the other owners as meaning PNM must negotiate with Farmington, but does not have to negotiate with a third party like Enchant Energy.

Farmington has signed an agreement with Enchant Energy that the city says assigns Enchant Energy its legal right to negotiate for transfer of ownership.

“In one way, shape or form, the assets will be transferred and we will build carbon capture,” Mandelstam said.

Enchant Energy hopes to negotiate an agreement with PNM that allows the company to start construction of the carbon capture project in 2021.

Mandelstam: Project is evolutionary but not revolutionary

Mandelstam said Enchant Energy’s plan for the San Juan Generating Station is the largest project of its kind ever announced, but he does not see it as a revolutionary project.

Instead, he described it as an “evolutionary” project taking the lessons from the Petra Nova project in Texas and scaling it up.

MORE: Enchant Energy partners with Petra Nova's technology provider

Enchant Energy plans to use three carbon capture units similar to the ones Mitsubishi Heavy Industries America built for Petra Nova to capture the carbon dioxide.

Mitsubishi will provide these units. Mandelstam said part of the ongoing negotiations with Mitsubishi includes an agreement that Mitsubishi will guarantee its equipment can capture a certain amount of carbon dioxide annually. He said Mitsubishi has preliminarily agreed to do so.

Mandelstam: Natural gas more expensive, dirtier

While critics have described the carbon capture project at San Juan Generating Station as risky and expensive, Mandelstam said it is less risky than building a natural gas plant.

When San Juan County Commissioner John Beckstead asked if there would be enough room at the San Juan Generating Station for Public Service Company of New Mexico to build a natural gas plant, Mandelstam said the fluctuating nature of natural gas makes such a plant a risky investment, however he said PNM and the New Mexico Public Regulation Commission would have to make that decision.

While natural gas prices can be controlled by national and even international markets, Mandelstam said the coal contract being negotiated with Westmoreland Coal Company will ensure a constant price for fuel through 2035.

 “Building San Juan will be cleaner and cheaper... than any natural gas plant that PNM or anyone else could build in San Juan County,” Mandelstam said.

Mayes told the County Commission that there is “ample space” at the power plant site for PNM to build a natural gas generating station there.

During a different agenda item presented at the Farmington City Council work session, Farmington Electric Utility System Director Hank Adair said the city does not necessarily agree with Mandelstam's assessment of natural gas being risky.

One of Farmington Electric Utility System's main generation assets is a natural gas-fired power plant.

However, following Mandelstam's presentation, Adair said rates would increase by at least 5% if the San Juan Generating Station closes in 2022.

He said replacing the city's share in the San Juan Generating Station with a combined-cycle natural gas plant would cost an estimated $97 million.

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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