State, EPA make deal on plant

Incorporating most of a compromise plan the New Mexico Environment Department submitted to the Environmental Protection Agency in October, the settlement calls for closing of two of the plant’s four coal-fired units by Dec. 31, 2017, and replacing them with a 150- to 200-megawatt natural gas powered unit.

The two remaining units would be equipped with state-proposed selective non- catalytic reduction pollution controls — much less expensive than EPA’s original technology — and permitted to operate indefinitely, which could be decades.

The deal should mean cleaner air without as big an increase in electricity rates the utility claimed would have followed the EPA plan.

State and PNM officials singled out the support of Gov. Susana Martinez, who requested a 90-day administrative stay of the EPA rule last spring to see if an alternative haze plan could be worked out.

“All along, my goal has been to strike the right balance between the environmental and economic impacts of energy production in the Four Corners,” the governor said in a statement.

The Sierra Club said the settlement “underscores broadening support” for a move away from coal, but called on the state to go beyond relying on natural gas as a replacement and take advantage of the state’s renewable energy resources.

“The EPA is looking forward toward moving forward on this,” said EPA District 6 Administrator Ron Curry in teleconference call. “This is the culmination of a lot of effort by a lot of people in New Mexico, Dallas and Washington.”

PNM, 46 percent owner of the 1,743-megawatt plant, estimates its share of the capital costs under the settlement would be $400 million to $430 million. It says ratepayers would not see an immediate effect on their bills.

In addition, PNM agreed to no layoffs due to the units’ closures and will provide more than $1 million for job retraining and economic development in the Four Corners area.

The settlement differs substantially from a federal implementation plan for combatting regional haze in an EPA rule issued in August 2011. The EPA gave the nine owners of San Juan five years to install selective catalytic reduction on each of the plant’s four units — at an estimated cost of $824 million to $910 million.

“This agreement reflects a compromise,” Environment Department Secretary David Martin said of the settlement, which followed months of negotiation between his department, the EPA and PNM.

“All people are not comfortable with all aspects of it, that’s the nature of a compromise.”

Martin said while the plan addresses regional haze, “there are significant other environmental benefits to this alternate plan. There are significant reductions in SO2 sulfur dioxide, reductions in carbon and reductions in particulates and … a significant reduction in water usage.”

The state had argued SCR would have a major impact on ratepayers with barely perceptible visibility improvements over SNCR. In June 2011, it submitted its own haze plan calling for SNCR on the four units, at an estimated cost of $77 million. EPA did not approve the cheaper technology.

During the stay, the Environment Department assembled a working group of stakeholders and held a series of public meetings. Although it was unable to reach a consensus, it submitted a alternative in October to the EPA, which later extended the stay.

The state’s original proposal called for closing units 1 and 2. The settlement calls for closing units 2 and 3. Martin said unit 3 is larger than unit 1 and closing it will provide more environmental benefits. That particular change spurred on the settlement talks, according to Curry, who was Martin’s predecessor under Gov. Bill Richardson.

PNM estimates that under the settlement, nitrous oxide and sulfur dioxide emission would be cut by than more than 60 percent. Other emissions such as particulate matter and volatile organic compounds would also be sharply cut, it said.

PNM senior vice president of public policy Ron Darnell said the settlement “actually pushes out the need for rate relief (for the company) because of the changes in the capital expenditures.

“We’re looking at recovery for the alternative plan in sort of the 2018 time frame as opposed to the 2016 time frame that would have been required with the (federal plan),” he said. He said the company has not determined how the settlement costs would “float into rates,” but estimated ratepayers could see a $67 to $70 a year impact on their bills initially. PNM said detailed replacement power plans would be finalized separately from the haze agreement, but believes there are adequate power alternatives to ensure reliability. Ron Talbot, senior vice president and chief operating officer, said the plant’s other owners endorsed the plan this week.

“This agreement is a significant milestone in our efforts to implement an alternative compliance plan that reduce the costs impact to our customers and has broad environmental impacts,” PNM Resources president and CEO Pat Vincent-Collawn said in a statement.

“Reaction in the environmental community — where there was considerable support for the EPA plan — was generally positive.

Mariel Nanasi, executive director of the New Energy Economy, said the settlement would result in the “greatest environmental improvement in New Mexico’s history.”

“This transition from coal is the smartest financial path forward and is aligned with ratepayers,” Nanasi said. ‘We need to be rapidly prioritizing our investments in solar and wind, given New Mexico’s abundant resources.”

While approving of the move away from coal, Nellis Kennedy-Howard, Beyond Coal Campaign representative for the Sierra Club, said natural gas has its own environmental shortfalls and was disappointed the settlement doesn’t mention renewable energy.
— This article appeared on page A1 of the Albuquerque Journal