New Mexico Business Weekly - by Kevin Robinson-Avila NMBW Staff

Sithe Global Power LLC and the Navajo Nation are a major step closer to building a massive, coal-fired generating plant near Shiprock in northwest New Mexico.

The Environmental Protection Agency approved an air quality permit on July 31 for the Desert Rock Power Plant -- a $3 billion project with a 1,500-megawatt capacity that Sithe and the Navajo-owned Din

The Navajo government supports the project for its economic development potential. The plant will buy all its coal from Navajo-owned mines, generating about $50 million in annual royalties and taxes for the tribal government. Construction would create about 1,000 jobs, plus 400 permanent positions when the plant opens, said Frank Maisano, spokesman for Sithe Global's subsidiary, Desert Rock Energy Co.

"The Navajo nation is the project's strongest advocate," Maisano said. "They're anxious to move forward."

But Gov. Bill Richardson and New Mexico environmental groups vehemently oppose the project, which would neutralize state efforts to lower greenhouse gas emissions. If built, the plant would emit about 12 million tons of carbon dioxide per year -- the equivalent of adding 1.5 million average cars to roads.

Because the plant is on Navajo land, however, the state has no authority to stop it, said New Mexico Environment Department Secretary Ron Curry.

"We recognize their sovereignty, but the state will be stuck with the consequences," Curry said. "If Sithe tried to permit this anywhere else, we would definitely reject it."

The dispute over Desert Rock reflects an energetic effort by state government and environmental groups to push industry to cut emissions at New Mexico's existing coal-fired generators -- and prevent new ones from being built. Given the state's status as an above-average emitter of greenhouse gasses and other contaminants, New Mexico is now at the forefront of the growing national debate over fossil fuels, said Sandra Ely, the Environment Department's energy and environmental policy coordinator.

"New Mexico is about double the national average for greenhouse gas emissions," Ely said. "Fossil-fuel power plants are the per capita primary source. Second are emissions from oil and gas operations."

But industry leaders say coal-fired energy is here to stay for the foreseeable future because it's more reliable and much cheaper than alternative power sources. Nationally, 52 percent of all electric production still comes from coal plants, according to the Energy Information Administration.

New Mexico is no exception. About 54 percent of Public Service Co. of New Mexico's locally produced electricity is from coal, said John Myers, PNM's vice president for power production.

"The cost for electricity from coal plants is still relatively low compared to alternatives like natural gas, solar and wind, even with environmental regulations," Myers said. "Nobody has a crystal ball, but many of the 350 existing plants nationwide will continue to operate in the mid- to long-term because the costs are still so low."

New Mexico has two large, aging coal-fired generators that currently operate near Farmington in the Northwest -- the 1,800-megawatt San Juan Generating Station run by PNM and the 2,040-megawatt Four Corners Power Plant run by Arizona Public Service.

The Four Corners facility emits nearly 16 million tons a year of carbon dioxide, according to statistics from the Environmental Protection Agency's Clean Air Markets Database. The San Juan plant releases about 13 million tons.

Those emissions, combined with contaminants from oil and gas wells, have made San Juan County the sixth highest emitter of carbon dioxide in the nation, according to a new study by Purdue University on carbon emissions nationwide.

In addition, non-greenhouse-gas pollutants from the power plants -- including nitrogen oxide, sulfur dioxide, mercury and ash particulates -- have greatly lowered air quality in the Four Corners region. Particularly high levels of mercury have led to fish-consumption advisories for lakes and rivers in the area, Curry said.

"New Mexico has the highest mercury emissions of any state in the West," Curry said. "That makes us particularly wary of any new coal plants."

PNM has made a huge effort to reduce pollutants at the San Juan plant. A $320 million investment is under way there, which, once completed, will cut non-greenhouse-gas contaminants to almost zero (see related article, right).

Arizona Public Service has invested about $600 million in environmental controls since its plant was built in the 1960's, said APS spokesman Steven Gottfried.

But that technology is now largely behind the curve since most upgrades were done in the '80s and '90s. And, like the proposed Desert Rock operation, the Four Corners facility is on Navajo land, blocking state regulatory authority, Curry said.

"We have no jurisdiction there," Curry said. "We do regulate the San Juan facility, and it's clear that plant is now much more environmentally sound than the Four Corners facility."

Maisano said the Desert Rock plant will be built with state-of-the-art emissions controls, making it one the nation's cleanest coal plants to date.

But environmental upgrades at San Juan and controls at Desert Rock will do nothing to block carbon dioxide emissions because carbon sequestration technology is still in development.

Technology to remove carbon dioxide and other pollutants from coal by first turning it to gas and then burning that gas for electricity is available now. In fact, state officials want the Environmental Protection Agency to withhold a permit for Desert Rock unless Sithe agrees to build a coal gasification facility, known as an integrated gasification combined cycle (IGCC) power plant.

"That seems like the most-promising technology today to allow us to use coal responsibly," Ely said.

But Sithe says the technology is still far too expensive and unreliable.

"IGCC technology could add up to $1 billion more to the cost of Desert Rock and the plant would operate much less efficiently, making it uneconomical," Maisano said. "It's promising technology, but it's still not ready for prime time."

If Sithe adopted IGCC, it would greatly dissipate criticism, but many environmental groups would still oppose Desert Rock because they believe coal power should be phased out entirely.

"In San Juan County, we're talking about an area that's investing heavily in continued dependency on fossil fuels and a carbon economy, and we need to move away from all that," said Erik Schlenker, Taos-based director of the Western Environmental Law Center's southwest office.

Gail Ryba, executive director of the New Mexico Coalition for Clean Affordable Energy, said there should be an outright moratorium on the construction of all new coal plants.

"Given all the climate change issues, we shouldn't even be talking about coal anymore," Ryba said. "We should be looking at how to close them down and move toward renewables."

Ultimately, the debate over coal-fired power in New Mexico and the nation likely won't be resolved until state and federal authorities adopt fees and limits on carbon dioxide emissions, Ely said.

"When we start putting a regional and federal price on carbon emissions, dirty coal generation will become a lot more expensive," she said. "At that point, alternative technologies will start looking a lot more attractive to industry."


krobinson-avila@bizjournals.com | 348-8302