Critics question economics of carbon capture - Albuquerque Journal

Critics question economics of carbon capture

Potential conversion of the coal-fired San Juan Generating Station near Farmington into the world’s largest carbon capture facility has elevated New Mexico to the forefront of federal efforts to save the coal industry.

During a roundtable discussion in Albuquerque Oct. 5, U.S. Department of Energy Deputy Secretary Mark W. Menezes told local officials and industry executives connected to the project that the federal government’s top brass is watching closely.

“The DOE and the (Trump) administration are committed to do whatever we can to help this project go forward,” Menezes said. “The White House is aware of what you’re doing here today.”

 The San Juan Generating Station west of Farmington on Nov. 25. (Eddie Moore/Albuquerque Journal)

The Trump administration considers carbon-capture technology a critical key to allowing fossil fuels like coal and natural gas to remain a cornerstone of the energy industry, even as the nation moves to reduce greenhouse gas emissions through adoption of renewables like solar and wind generation. But the technology needs more development with real-world success stories, making San Juan’s conversion a potential role model for the U.S. and other countries, Menezes told roundtable participants.

Mark W. Menezes

“Carbon capture, utilization and storage technology is an incredible example of innovation that can drive emissions to zero, making fossil fuels as emissions-free as renewables,” Menezes said. “… For San Juan and New Mexico, it can be an absolute game changer, propelling the state into a world leader in CCUS.”

The politics of energy

Menezes’ visit, which included a separate roundtable on the importance of the oil and gas industry to New Mexico and the nation, underscored the central role energy policy and climate change is playing in the current elections, as Democrats push for aggressive emissions reductions through the accelerated adoption of renewables and the steady decline of fossil fuels, including potential limits on future oil and gas production.

During Menezes’ visit, the DOE released two new reports touting the benefits of the oil industry and the San Juan carbon-capture project. Both reports stressed that fossil fuel production and consumption generates much more high-paying jobs, critical state revenue, and economic development than renewables can, making traditional energy industries vital to a healthy economy as the nation emerges from the global pandemic.

In an op-ed published in the Journal the day before his arrival, Menezes said the intermittency of renewables makes back-up generation from coal and natural gas an essential part of an all-of-the-above strategy to keep the lights on as the country strives to reduce greenhouse gases.

“Misguided policies and environmentalists are attacking traditional energy sources in a self-satisfied attempt to preach 100% renewable energy goals,” Menezes said in the editorial. “Admirable as these goals may seem, it is currently not a realistic nor science-based goal without substantial improvements in energy storage technology.”

Those comments – plus limited invitations for state representatives and others to participate in the roundtable discussions – generated pushback from some local officials.

Abbas Akhil

Energy, Minerals and Natural Resources Department spokesperson Susan Torres told the Journal that the EMNRD was not invited to the events with Menezes, nor was it consulted for input on the new DOE reports.

State Rep. Abbas Akhil – an Albuquerque Democrat and member of the Legislature’s Science, Technology & Telecommunications Committee – said he only learned about Menezes’ visit through the Journal op-ed, even though Akhil played an active role in a Sept. 28 presentation by San Juan officials and industry executives promoting the San Juan conversion project. Akhil called the op-ed “offensive” given the state’s goal of achieving 100% carbon free generation under the Energy Transition Act.

Project controversy

The carbon-capture project remains controversial. Environmental groups question its feasibility and oppose the project’s reliance on selling carbon captured at San Juan to producers in the Permian Basin for “enhanced oil recovery,” whereby operators pump CO2 into wells to help push up hydrocarbons from the ground. Opponents say that neutralizes the benefits of sequestering the carbon underground by enabling more fossil fuel production and consumption.

Opponents also say project promoters are significantly low-balling the costs to convert the plant, making the plan economically unviable, while greatly overestimating the technology’s ability to fully capture CO2 emissions once the plant is operating.

The City of Farmington and Enchant Energy Corp. have partnered on the project. Farmington currently owns a 5% stake in San Juan, but will inherit full ownership once Public Service Company of New Mexico and three other utility co-owners abandon the facility in 2022.

PNM will replace San Juan electricity with solar generation and battery storage to comply with the state’s Energy Transition Act under a plan approved this summer by the state Public Regulation Commission.

Farmington, however, wants to save the roughly 1,500 direct and indirect jobs connected to the power plant and nearby coal mine, plus some $8 million per year in local property taxes. Once the city inherits the plant, it expects to turn the facility over to Enchant Energy, which says it can convert it to carbon capture with a $1.3 billion investment, capturing some 6 million tons of carbon emissions per year by 2023, when the converted plant is targeted to come online.

That would make San Juan the largest carbon-capture facility to date in the world.

The Westmoreland Mine supplies coal to the San Juan Gernerating Station west of Farmington.

But the Institute for Energy Economics and Financial Analysis, a think tank that favors renewable energy, says the project could cost three times more than Enchant estimates. For comparison, the Petra Nova facility in Texas – the only carbon-capture coal plant currently operating in the U.S. – is one-third the size of San Juan and yet it cost $1 billion to build.

In addition, Petra Nova temporarily ceased operations last May because of plummeting oil prices caused by the global pandemic, which undercut the profitability of carbon sales in the Permian for enhanced oil recovery.

Finances under fire

IEEFA research editor Karl Cates said the coal industry and its supporters are pushing the technology despite its flawed economics.

“It’s uneconomic across the board, and yet they’re still pushing it in New Mexico and other places,” Cates told the Journal following Menezes’ roundtable. “It’s a carbon-capture mafia that continues to press this business model against the realities of the marketplace. It won’t work, whatever your position is on carbon capture, because it just doesn’t pencil out.”

Power lines frame the San Juan Generating Station near Farmington.

Enchant Energy says San Juan’s economics are fundamentally different from the Texas plant. For one thing, the project will rely on new federal tax credits for carbon capture that weren’t available for Petra Nova. Those credits will pay $35 per ton for carbon sequestered through enhanced oil recovery, and $50 per ton if the CO2 is directly sequestered underground without being used in oil operations.

In fact, the DOE awarded a $17.5 million grant early this year to New Mexico Tech in Socorro to study the potential to directly sequester San Juan carbon in saline reservoirs in the Four Corners Area. That provides alternative ways to earn federal tax credits, said Enchant CEO Cindy Crane during the roundtable with Menezes.

“It offers a parallel path for risk mitigation, with two opportunities for storage to minimize the ups and downs of the oil and gas industry,” Crane said.

The company signed a deal with Bank of America this summer to advise it on accessing federal tax credits when negotiating with investors in the San Juan project.

Enchant also expects to sell electricity from San Juan on the wholesale market.

“We’re in negotiations now with parties to take the electricity,” Crane said. “We believe the project is well positioned for operational and economic success.”

Menezes said there are still significant challenges to transition carbon capture for coal plants from prototype into profitable, ready-for-market technology.

“One big hurdle is cost, which we need to drive down by 50%,” Menezes said. “Through research and innovation over the years, we’ve reduced it by 25%.”

But San Juan could be the place where carbon capture reaches the tipping point, Menezes added.

“That technology breakthrough could happen here,” Menezes said. “It’s an opportunity for Farmington to be a global game changer … for the technology to be applied at coal plants in the U.S. and other countries. There’s a compelling case here for everything to come together.”

Kevin Robinson-Avila covers technology, energy, venture capital and utilities for the Journal. He can be reached at


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