Do New Mexicans deserve low-cost electricity or clear skies? That question lies at the heart of the latest dust-up between federal regulators and the Public Service Company of New Mexico.

The main point of contention is the San Juan Generating Station, an old coal-fired PNM power plant that chugs away near Farmington, providing the bulk of the state's electricity. But the SJGS is also New Mexico's second-largest source of greenhouse gas emissions, according to recently released US Environmental Protection Agency data, as well as a major producer of "haze"—visible air pollution that restricts views in national parks across the West.

For years, SJGS has been in regulators' crosshairs. Under former Gov. Bill Richardson, the New Mexico Environment Department pressured PNM to install up-to-date pollution controls at the plant; in a 2010 interview, outgoing NMED Secretary Ron Curry warned that, even if the state couldn't force SJGS into compliance, EPA eventually would [news, Aug. 25, 2010: "Curry Favor?"].

PNM resisted, claiming the equipment was too expensive. But after Gov. Susana Martinez took office, NMED relaxed the state's air quality standards, effectively letting PNM off the hook. The new standards "aligned 100 percent with PNM's numbers and wishes," Mariel Nanasi, the executive director of environmental group New Energy Economy, tells SFR. "It's clear to us that NMED did no independent analysis of the costs whatsoever and just used PNM's numbers."

Despite the state's relaxed standards, Curry's prediction was spot-on: In August, the EPA tightened its own rules—and rejected New Mexico's as insufficient. (The federal pollution standard would remove about 80 percent of the offending pollution, while current New Mexico standards would result in a 20 percent reduction.) Three months later, the EPA came down hard on SJGS, giving PNM a deadline for installing the best available pollution control technology.

PNM maintains that it cannot afford the equipment, which it estimates would cost more than $750 million. Given the utility's current finances—its low credit rating all but precludes borrowing—PNM would need to ask the embattled New Mexico Public Regulation Commission for politically unpopular rate hikes in order to pay for new equipment. According to a Dec. 2 press release, complying with NMED's regulations will cost PNM a comparatively minimal $77 million.

So in December, with the state's backing, PNM challenged the EPA's new haze rules in federal appeals court.
Critics, however, say PNM's claims are unjustified. They argue that PNM has not only inflated the cost of the equipment—EPA and outside experts estimate it's closer to $345 million—but has also brought this situation upon itself.

Jeremy Nichols, who directs WildEarth Guardians' climate change and energy programs, says PNM and the Martinez administration are raising "bizarre issues" in court to try to avoid installing the best available pollution control technology.

"New Mexico's regulations only require second-rate pollution control technology," Nichols says. "EPA has the authority to require higher standards to protect downwind neighbors. EPA has a duty to step in when states don't meet federal pollution standards."

But NMED spokesman Jim Winchester questions the standards themselves.

"The dispute with EPA is not about what reductions are necessary to protect public health," Winchester writes in an email to SFR. "[I]t is about whether the increased costs of additional emission reductions are justified given the negligible benefits to visibility that would result."

To some groups, though, the SJGS problem is even more fundamental. Even as utilities across the country shutter and retrofit their coal-fired power plants, PNM is sticking with coal. In July, after a lengthy public scoping process, PNM released its long-term energy plan (called an Integrated Resource Plan) to the PRC; environmental groups protested, claiming the plan relies excessively on fossil fuels while failing to meaningfully invest in renewable energy sources.

"This is a totally business-as-usual plan," David Van Winkle, who heads the energy and climate change team of the Sierra Club's Rio Grande Chapter, says. "This is the first IRP ever to be appealed in New Mexico because it is so bad."

According to Chuck Noble, an attorney with the Coalition for Clean Affordable Energy, the plan isn't just bad for New Mexicans; it also puts PNM's own future at stake.

"PNM is increasing the risks to their company by investing still more money in their aging coal plants," Noble writes SFR in an email. "Their long-range plan seems to be to double down on coal—which, for environmental reasons, is increasingly risky. Their books show that they plan to continue to invest in and operate their 30-year-old coal plants for another 40 years, which we believe makes no sense."

PNM isn't exclusively focused on coal; in order to satisfy the state's renewable energy requirements, PNM is building five new solar power plants and buys some solar power from customers' rooftop solar panels. But the SJGS produces 36 times more electricity than these sources, and spokesman Don Brown says PNM has no plans to build new natural gas or solar plants in the foreseeable future.

"The San Juan plant is one of our lowest-cost resources and provides the majority of electricity for our customers," Brown says. "The plant is well positioned to continue operating for the long run."

As the court considers whether EPA's haze rules constitute federal overreach, SJGS continues to spew pollution into one of New Mexico's most scenic but impoverished areas.  And while several major utilities—including Arizona Public Service Company [news, July 27, 2011: "Powering Down"]—transition to cleaner energy sources, Oklahoma and North Dakota, like New Mexico, are instead choosing to fight EPA regulations.