Peabody Energy laid off about 40 miners at the Kayenta coal mine on Navajo and Hopi land in Arizona last month in preparation for the mine's closure later this year, a spokeswoman has confirmed.

"Based on current business needs, Peabody’s Kayenta Mine reduced its workforce in February, affecting about 40 workers," Peabody Director of Corporate Communications Charlene Murdock said. "The company regrets the impact this action has had on impacted workers and their families."

The layoffs represent about 12 percent of the mine's workforce. The company did not provide a date of the layoff action, but confirmed it this week.

The mine near Kayenta supplies coal to the Navajo Generating Station power plant about 80 miles away outside of Page, on the shore of Lake Powell.

Salt River Project runs the power plant for multiple owners, who decided in 2017 to close the plant because it is a money loser.

"The mine will continue operating with about 300 employees who will continue to safely produce coal at volumes targeted to meet customer needs and will then advance into a final reclamation phase as part of the closure plan," Murdock said, adding that more information regarding closure will come "at the appropriate time."

SRP plans to close the coal-fired power plant by late December, but the mine will cease operations earlier because the power plant stockpiles coal on site, and the mine won't need to send trainloads to the plant up to the final day of operations.

Peabody disclosed Feb. 6 in a regulatory filing that the mine is expected to close by October.

The mine and power plant are crucial to the economies of the Navajo and Hopi, not only because of the coal royalties and approximately 750 jobs they provide but also lease payments, and myriad ancillary transactions, such as selling power to the mine.

SRP has transferred workers from the power plant to other jobs at SRP when possible, and has many temporary contract workers at the plant today. However, the new jobs for SRP workers are mainly in metro Phoenix or at other SRP facilities across the state, which will require those people to relocate.

SRP reported in January that of the 433 employees at Navajo Generating Station in 2017 when the closure was announced, 152 have taken new SRP jobs, 36 retired, 15 declined new jobs and 15 were terminated (either decided to take a job outside SRP or fired for poor performance). That left 215 awaiting a job offer or sticking on through the planned December closure.

Takeover deal stalled

A Navajo business entity called NTEC, the Navajo Transitional Energy Company, had been negotiating to take over the plant, but those talks hit an impasse last month regarding who would bear financial responsibility for unforeseen liabilities related to the mine's eventual clean up.

If SRP and the other owners of the plant close this year, they are responsible for site remediation, which would include not only taking down the power plant but cleaning up coal ash there.

SRP officials have said that while they are not looking to profit from the sale, they do want to assure the utility and its shareholders won't be liable for any unforeseen expenses if the plant is transferred to another owner.

Because SRP and the other owners have run the plant since it opened in the 1970s, they are responsible for the majority of the clean up, even if new owners take over the plant and run it for another decade or two.

SRP and the plant's other owners have agreed to put money in an escrow account to pay for the eventual clean up of the plant if it is transferred to NTEC.

And NTEC has agreed to a second clean-up fund as a "backstop." NTEC has offered to issue a performance bond, and is willing to negotiate the amount, to pay any potential cleanup liability beyond what SRP is offering.

But SRP wants even more: full release from any further liability.

Navajo leaders are unwilling to offer that, so negotiations hit a wall.

Legislation was introduced in the Navajo Council to instruct NTEC to continue the negotiations but not offer the liability waiver that SRP is seeking.

MORE: Navajo leaders listen to community regarding coal operations.

Peabody officials are hopeful NTEC succeeds, but are preparing for the worst.

"We are actively engaging with NTEC in support of their activities and continue to encourage stakeholders to seek out appropriate steps to facilitate a transition for NGS and Kayenta," Murdock said. "Our base case remains closure absent formalized agreements."

Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.

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