SJGS 0618

The San Juan Generating Station.

Developers of what would be the world's largest coal-based carbon-capture project, originally planned to begin operation in 2022, now plan to continue operating the 847-MW San Juan Generating Station as a legacy coal plant until 2025.

Pandemic-related delays and other factors have put plans for the conversion project at San Juan behind schedule. Enchant Energy of Farmington, New Mexico, now anticipates completing the carbon-capture retrofit in 2025, about 18 months later than previously planned. Enchant will seek nearly a billion dollars in federal loan money to convert San Juan's two units one at a time while operating the other, bringing the carbon capture on in two phases.

Public Service Company of New Mexico, the plant's current operator, will exit San Juan in June 2022, at which point all but one of the plant's current owners will give up their rights to the plant, which first started producing in 1973.

The City of Farmington, a nearby community with a 5-percent stake in San Juan, relies on the plant to serve a portion of its municipally owned electric utility, and also as a major employer in the area. Farmington plans to retain its stake in San Juan and, as the only current owner interested in continuing its operation, would also inherit the remaining 95 percent of the plant, which it agreed to sign over to Enchant in 2019.

Enchant has received millions of dollars in U.S. Department of Energy grants to conduct a front-end engineering and design study (see CEM No. 1557). It is also working with the New Mexico Institute of Mining and Technology, which received $17.5 million in DOE research grants to study storing captured carbon dioxide in nearby subterranean wells with a U.S. Environmental Protection Agency Class VI designation (see CEM No. 1588).

Enchant hoped to use investment money to begin construction on the carbon-capture conversion this year to avoid shutting down the plant. Company executives now plan to pursue $906 million in DOE loans for the conversion and $90.3 million in loans from the U.S. Department of Agriculture's Rural Utility Service that would enable it to address deferred maintenance at the plant.

Peter Mandelstam, chief operating officer for Enchant, said PNM's refusal to grant early access to Enchant and the City of Farmington has delayed the start of construction, while testing for the FEED study during the pandemic further drew out the start date.

Stack-testing of flue gas took 87 days to complete during the pandemic. Mandelstam in an interview with California Energy Markets said the testing is out of the FEED study's scope but is critical for Mitsubishi Heavy Industries, the contractor designated to build the carbon-capture island, to fine-tune the process. MHI is reviewing the results, and Mandelstam said he expects the completed study within a month.

Enchant CEO Cindy Crane, who retired in 2018 as CEO of PacifiCorp's Rocky Mountain Power, Utah's largest investor-owned utility, said in a phone interview that Enchant is in negotiations with potential offtakers for both pre- and post-decarbonization power. She said the company has executed a term sheet for long-term power-purchase agreements and a separate one for short-term offtake during the two and a half years during which Enchant would run part or all of San Juan as a traditional coal-fired plant. Interested parties are focused on optimizing pre- and post-decarbonization resources from both a power-supply and market perspective, she said.

Potential offtakers include utilities, energy-intensive industries, power marketers and organizations that represent public power utilities and rural cooperatives. Crane said Enchant has bids on active requests for proposals, all of which are scheduled to conclude by the end of this year. She declined to comment on whether any current San Juan owners are among the potential offtakers.

PNM and others remain skeptical as to whether Enchant will be able to follow through on the project at this point or sell power, whether from a pre- or post-decarbonization plant.

"PNM has continually participated in good faith negotiations with Farmington and Enchant over the last 4 years," PNM spokesman Ray Sandoval said in an emailed statement. "We have seen little progress in reaching an agreement as part of this process," he added.

Mandelstam said Enchant drafted and submitted an agreement to PNM, but acknowledged that the utility has no obligation to provide Enchant early access to the site.

"We have been steadfast in our assertion that full transparency of the viability of this project is important for the folks in San Juan County including our current San Juan plant employees," Sandoval said, adding that PNM desires the economic support that the project would bring to the local community.

Mike Eisenfeld of the regional environmental organization San Juan Citizens Alliance said Enchant's plan to run San Juan as a legacy coal plant presents significant legal hurdles and could expose the company to litigation.

SJCA is one of nine groups that signed a letter to DOE seeking an environmental impact statement for the project. Mandelstam said an EIS procedure would slow the process down and that a less intensive environmental assessment is adequate, since the project involves no new pollution and would eventually decrease emissions.

Eisenfeld said his organization has not yet been very involved because the project is so far behind schedule. Enchant is trying to prepare for transfer of the facility without customers, permits or investors, he said, adding that people asking questions about those issues are not getting clear answers.

Other developers have been looking at San Juan's transmission assets for potential solar development, which SJCA supports (see CEM No. 1618). The U.S. Department of the Interior's Bureau of Land Management has significant holdings in the area, and Eisenfeld said he expects federal land use to take a 180-degree turn under Interior Secretary Deb Haaland. With power from renewable energy resources so inexpensive, Enchant has "already priced themselves out of the market," he added.

In the absence of a viable agreement in place to transfer operations, PNM will carry out its plan to close the plant in June 2022.

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Associate Editor - California Energy Markets

Abigail Sawyer grew up in northwestern New Mexico near two massive coal-fired power plants. She spent many hours gazing out the car window at transmission lines on family road trips across the Southwest and now reports on the region from San Francisco.