New emissions rules could lead to new plant

Feb 13 - McClatchy-Tribune Regional News - Kurt Madar The Daily Times, Farmington, N.M.

State legislators repealed one of New Mexico's two carbon cap-and-trade laws Feb. 6, and Farmington electric utility officials are hoping the second one will be repealed in March.

If so, it could mean a new natural gas power plant for the area, which would provide more power and an increase in revenue for the city.

In 2008, officials began planning a new natural gas plant before New Mexico became one of only a handful of states to pass strict carbon cap laws.

"Both of those rules required greenhouse gas reductions," said Farmington Electric Utility Director Maude Grantham-Richards. "The only way to reduce emissions is to burn less gas. Every year it decreases."

The laws required power plants to reduce the amount of carbon dioxide released per megawatt hour by 3 percent per year. This level of reduction quickly would put any new power plant out of compliance.

Because the city would seek bonds for at least part of the plant, and bonds typically are issued for 20 years or longer, building a new natural gas plant under the old carbon cap regulations would be fiscally irresponsible, officials say.

"Based on the reduction's starting point, the plant would no longer meet requirements within eight years," Grantham-Richards said. "That would mean we would have to start reducing capacity or buying carbon offsets."

Buying offsets would mean an increase in what people pay for electricity.

"We are committed to keeping our customers' power bills as

low as possible," Grantham-Richards said.

Even if the second carbon-cap rule is repealed in March, it is still uncertain what sort of new power generator the electric utility might build.

"Our intent would be to do so, but it isn't our decision," Grantham-Richards said. "We would have to present options to the Council. We could buy, participate in more coal, nuclear or build natural gas. Those are the options."

There are some definite bonuses to pursuing natural gas.

"There are a lot of reasons to use natural gas as far as the environment," said Mike Sims, the electric system's generation and system control manager. "It's cleaner burning and has half the carbon dioxide footprint of coal. It also uses less water."

The San Juan Basin has one of the largest deposits of natural gas in the country, and the infrastructure for retrieving and transporting it already is in place.

"We could take something that we produce locally and make it more valuable," said Farmington City Councilor Jason Sandel, who also is executive vice president of Aztec Well Servicing. "Electricity is worth far more than natural gas."

Sandel is a big supporter of the city building a new natural gas plant.

"Not only would it generate a lot of revenue for the city, it also could help us get away from coal," Sandel said. "Owning part of San Juan Generating Station is going to cost the city a lot of money."

The coal-fired plant is in the middle of an Environmental Protection Agency-required retrofit to reduce its emissions, a process that could cost the city $26 million.

Building a new natural gas plant wouldn't take away those costs. The city would still remain a part owner in the coal plant, but it could go a long way to helping defray them. They also wouldn't have to pursue further costly coal-generated power production.

When it comes to generating revenue, one of the options would be to build a larger plant that would allow the city to sell electricity to other utilities, something the city already does in very small amounts.

"We don't sell very much right now," Grantham-Richards said. "We do not build facilities to make sales because our commitment is to our customers."

The problem is that it's hard to predict how a community is going to grow.

"We build the facility based on predictions of future growth so there is always some power available for sale right after the facility is constructed," Grantham-Richards said. "But as the community grows, that amount goes down. We aren't in the power business to take risks."

Farmington's Electric Utility System gets its power from a variety of different sources.

"Utilities always look for diversity of fuels," Grantham-Richards said. "Last year's cold spell made it so that all the gas facilities couldn't flow gas, which caused massive brownouts."

In 2011, the city got 32.5 percent of its power from natural gas, 22 percent from coal, 17 percent from hydroelectric and 28 percent from purchasing.

Building a new plant won't be cheap. When the city built Bluffview Power Plant, it cost $60 million. To build a new plant at current prices would cost $100 million. The goal would be to build a plant similar to Bluffview that is a combined cycle plant.

"A combined cycle plant has gas and steam turbines together," Sims said. "Both Animas and Bluffview are combined cycle plants."

Natural gas power generation also requires far fewer employees, both in the plant and during extraction.

"San Juan Generating Station employs approximately 400 people," Sims said. "And coal extraction also employs around 400 people. With natural gas, once the well is drilled, it doesn't take that many employees to keep it operating."