While the San Juan Generating Station has closed, hopes of someday bringing back the coal jobs and the power plant remain.
Enchant Energy and the City of Farmington are pushing forward with efforts to transform the shuttered facility into the largest carbon capture project in the world.
Negotiations to transfer the ownership of the power plant to Farmington haven’t yielded results as the other power plant owners have concerns about continued liability and the viability of the carbon capture project.
This led to Farmington filing suit in an attempt to acquire the plant in the final month before it closed.
Meanwhile, project costs have increased because of inflation and other issues.. Enchant submitted its final Front-End Engineering and Design study to the U.S. Department of Energy on Sept. 29. This shows the project costs have increased from an estimated $1.4 billion when the preliminary FEED study was conducted to $1.6 billion. The FEED study itself cost $9.4 million, according to Enchant Energy CEO Cindy Crane who spoke with NM Political Report by phone on Friday.
Should the ownership transfer not go through, Crane said the company is looking for other possible carbon capture projects.
She said that while Enchant is excited about the results of the FEED study, the company is disappointed that the negotiations to transfer ownership haven’t been successful.
Operating before retrofit is completed
Crane said concerns about power shortfalls have led to interest in the power produced by the San Juan Generating Station.
“I would say there is a very growing interest in our power with all the shortfalls that everybody has here in the Western US,” she said. “There is just a tremendous appetite and desire for reliable power right now.”
Entering into agreements to supply power relies on Enchant being able to acquire ownership of the plant. That means Farmington’s litigation must be successful.
If the transfer is successful, Enchant hopes that the closure will not be long and has plans for bringing it back online before the carbon capture retrofit is completed.
This relies on being able to receive a variance from the New Mexico Environment Department. The Energy Transition Act includes new emission limits that go into effect on Jan. 1. NMED is going through a rulemaking process to instate these new limits.
Without a variance, the coal-fired power plant will not be able to meet those limits. Crane said she believes a variance is possible, citing the ability for entities to apply to receive variances under the Air Quality Control Act. A variance would require approval from the Environmental Improvement Board.
Enchant would have to prove that the variance wouldn’t cause conditions that could harm public health or safety and that it would not lead to air pollution levels in excess of any primary national ambient air quality standards.
Should the company successfully obtain the variance, only one unit could be brought online. Crane said a new cooling tower must be constructed for unit one before it can be brought online again.
Crane said it will take about three years to construct the carbon capture facility and the earliest that it could come online for commercial use would be 2026. She said the permitting process before construction begins will take a year to 15 months.
That could mean the plant would operate without the carbon capture equipment for several years.
Once the carbon capture retrofit is complete, the biggest customer for the electricity will be the carbon capture unit itself.
Crane said it will take about 365 megawatts of electricity to operate the carbon capture, which she compared to having all the electricity from unit one go to carbon capture.
As Enchant fell behind the timeline it had publicly presented, questions about its feasibility became more common. Eventually, Westmoreland Coal, the owner of San Juan Mine, decided it could no longer wait. With the power plant closing, the mine wouldn’t have any customers. The San Juan Mine is located directly adjacent to the coal-fired power plant. Westmoreland had to make a choice. It would be more expensive to just maintain the mine in hopes that Enchant would succeed and mining could resume.
Steve Pierro, the mine manager, said the mine is being sealed.
Sealing the mine is done when companies expect permanent closure. While it is possible to reopen a sealed mine and resume operations, it is a very difficult process.
Crane said Enchant is looking at other options for coal, including potentially bringing it in from other sites or finding some other company to acquire and operate the San Juan Mine.
She said those discussions have confidentiality agreements in place that limit her ability to discuss them.
The Navajo Transitional Energy Company has invested in Enchant Energy and owns the nearby Navajo Mine, which is across the San Juan River from the San Juan Generating Station.
If coal isn’t mined at the San Juan Mine, it would have to be trucked in. That means thousands of tons of coal traveling to the power plant every day.
Crane said Enchant’s discussions are not far enough along to determine whether a traffic study would need to be completed.
San Juan Generating Station once received coal from a now-closed mine called the La Plata Mine that was also located in San Juan County. When that mine was operating, large trucks used a specially-designed haul road to transport the coal.
One of the key aspects of the project is that the carbon dioxide from the flue gas will be captured and can then be pumped underground for permanent storage or used in enhanced oil recovery.
However, a suitable place to pump the carbon has not yet been found.
Crane said a test site that Enchant worked with New Mexico Institute of Mining and Technology on was unable to sequester all of the carbon that would need to be placed underground.
She said Enchant has worked with NM Tech to identify other locations within the geologic formation that could hold the carbon.
At the same time, tax credits have become more favorable for carbon capture projects.
Should the project be successful, Enchant could receive $85 per ton of carbon dioxide sequestered underground as long as construction begins before 2033.
Additionally, the infrastructure package that was passed last year includes funding for carbon capture demonstration and pilot projects.
Crane said Enchant is looking at using a combination of federal money, tax equity financing and debt to pay for the $1.6 billion project.
Enchant has already secured $25 million in federal funding for the FEED study and to look into sequestration wells.
Farmington’s efforts to keep the plant open
The City of Farmington has spent more than $2.2 million in legal fees trying to keep it open since 2017.
Invoices show an early focus was at the New Mexico Public Regulation Commission where the city intervened in the integrated resource plan case of the Public Service Company of New Mexico, the plant’s primary owner.. The integrated resource plan serves, essentially, as a road map of where the utility wants to go in terms of generation assets. The 2017 plan called for closing the power plant.
While this wasn’t the first time that closure was on the table, it was the first time PNM initiated such a proposal. Past closure threats had been because of emissions.
PNM wasn’t alone in wanting to close the power plant. The San Juan Generating Station has nine owners, although some of them, including two California-based utilities, chose to stop receiving power from the power plant. This allowed two units to close in 2017.
With the exception of Farmington, the owners all said they would be taking advantage of an offramp in a 2017 partnership agreement to leave the power plant.
That agreement also had a clause that could benefit Farmington. If any owner wanted to stay and continue using the San Juan Generating Station, that owner could acquire the other owners’ shares for free.
Before Farmington did that, it needed to find a partner in that endeavor.
The Washington D.C. based law firm Thompson Hine began meeting with potential investors. Invoices show meetings with JP Morgan Chase, Kindle Energy, Braemar Energy Ventures, Rockport Capital Partners, Keybank and others. The meetings picked up in late 2018. Ultimately, it wasn’t a big-name company swooping in to save the power plant. Jason Selch and Lawrence Heller, founders of Enchant Energy, were looking for one last venture in the energy world. The San Juan Generating Station provided the opportunity to take carbon dioxide from emissions and sell it to oil companies in the Permian Basin to inject into wells as a way of forcing oil out of the ground.
At the time, there were two utility-scale coal power plants in the world operating with carbon capture technology. That has since been reduced to one—Boundary Dam in Canada.
Meanwhile, NRG sold its stake in the carbon capture Petra Nova operations in Texas for $3.6 million to a Japanese oil and gas company. That is a fraction of the costs to start the Petra Nova project. The U.S. Department of Energy provided a $195 million grant to NRG in 2016 for the project.
San Juan College trains workforce
The announcement that San Juan Generating Station could be kept open energized people in the community.
San Juan College started a program to train workers in carbon capture. Rhonda Schaefer, a spokesperson for the school, said the college’s industrial processes operator program now includes the skills needed to work in amine-based carbon capture.
“This knowledge is one of many topics and skills that position IPOP graduates to work not only in carbon capture facilities, but also in multiple industries such as water treatment and management, food processing, energy, power generation, pharmaceuticals, agriculture, mining, beverage bottling, electric utilities and more,” she said in an email. “It is, in effect, a tool in their knowledge-based toolbox.”
Schaefer said there are 21 students enrolled in the IPOP that could work in the carbon capture industry upon completion.
PNM transfers funds to state as part of Energy Transition Act requirements
Thanks to the Energy Transition Act, PNM transferred about $40 million to three state departments to help the community.
This transfer occurred in July after unit one closed.
The Energy Transition Act Committee will host a meeting on Oct. 12 to discuss how to spend these funds to assist the displaced workers and to diversify the economy.
Various projects have been submitted for consideration.
“The plant closure has significant positive and negative implications. One positive impact is the anticipated release of ETA funds to help secure the self-sustenance of communities that were impacted by the plant,” Duane “Chili” Yazzie, a member of ToohBAA, a Shiprock Farmers Cooperative, said in a press release. “Our farmers group in Shiprock applied for the funds in the hope that it will help address one of the great needs that our farmers have, with the provision of skilled labor. With the funds, we expect to acquire equipment operators, diesel mechanics, planners and administrators who will help organize our farming activity to optimize our agricultural potential. We look forward to an expedited release of those funds.”
The closure of the power plant means that it will no longer be using the water from the San Juan River for operations. The carbon capture retrofit would require more water than PNM used to operate units one and four, both of which closed this year. Units two and three have been closed since 2017.
The San Juan River is a tributary of the Colorado River, where federal officials have said significant water usage cuts of two to four million acre feet are needed. The dwindling reservoirs on the Colorado River have led to questions about the future of hydropower resources.
“We now have an opportunity to protect and manage water sources in the Four Corners region,” Jessica Keetso of Tó Nizhóni Aní said in a press release. “A transition to solar, wind, renewable, clean-energy investments helps eliminate the waste and misuse of water. Precious water sources have been used to feed giant power plants all over the Four Corners region for over half a century. These water sources are limited and have been compromised in many regions. It’s time to make sure that transition and cleanup happen in an organized and speedy manner, and that ETA investments bring an opportunity for coal-impacted communities to drive economic diversification.”