HCN: Back to drawing board for Navajo coal power plant

"The 1,500 megawatt coal-fired Desert Rock power plant – proposed for tribal land in the Four Corners region near Farmington, N.M. -- once seemed like a slam dunk. A joint venture of the Navajo Nation and energy company Sithe Global, the plant promised the tribe much-needed jobs, along with millions in revenue and coal royalties. In 2003, when it was launched, coal's star was rising: The Bush White House refused to acknowledge the existence of climate change, and regulatory agencies were generally more permissive.

Seven years later, though, Desert Rock looks all but dead. The economy is flailing, and investors worry how future climate change legislation will affect energy development. Meanwhile, electricity demand in the Southwest is declining, and with public utilities scrambling to keep up with statewide mandates to generate more power from renewable energy sources, nobody is currently seeking new sources of coal power.

So Sithe Global, which the tribe had expected to fund the $4 billion project, is going back to the drawing board, says Sithe Executive Vice President Dirk Straussfeld. Suddenly, everything is up for review – including the plant's design as a coal facility.

From the beginning, Desert Rock's developers cited California's growing demand for electricity. But in 2007, the state's Public Utilities Commission essentially banned utilities from signing contracts for electricity from coal-fired power plants. Instead, it required them to generate or purchase power with emissions comparable to or lower than modern natural gas facilities. And not one of the six Southwestern public utilities listed in Desert Rock's 2007 environmental impact statement is planning to add new coal power to its mix.

Uncertainty is the biggest challenge facing investment in coal right now, according to energy economist Jonathan Lester. No one knows whether Congress will eventually pass a cap-and-trade program or a carbon tax or perhaps something else entirely, any of which could impact coal plants in particular, since they're among the nation's largest source of greenhouse gas emissions. In some cases, investors may balk entirely, says Lester. In others, they're likely to demand higher returns to insulate plants against potential climate costs. "Right now, they are faced with the worst of all possible worlds: They just don't know. And that kills investment.""

Get the Story:
The death of Desert Rock? (High Country News 3/31)

Environmental Appeals Board Decision:
Desert Rock Energy Company, LLC (September 24, 2009)

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