Ryan Randazzo

The Republic | azcentral.com

The utilities that own the Navajo Generating Station want to close by 2019

They need an agreement with the Navajo Nation to run the plant that long

If they can't reach an agreement, they'll close sooner to be off the land by the end of 2019

The utilities that own the Navajo Generating Station coal-fired power plant near Page are tired of overpaying for power and decided Monday to close the plant when their lease expires at the end of 2019.

To run that long, the utility owners need to work out an arrangement with the Navajo Nation, which owns the land, to decommission the plant after the lease expires. Otherwise, the owners will have to close at the end of this year to have time to tear down the plant's three generators and be gone by 2020.

Environmentalists cheered the decision to shutter one of the biggest polluters in the nation, while other stakeholders such as the U.S. Department of the Interior and coal supplier Peabody Energy hope to find a way for the Navajo Nation or another entity to step in and keep the plant going beyond 2019.

The clock is ticking. The utilities want the lease extension settled with the tribe by July 1.

The three-unit, 2,250-megawatt plant has been more expensive to run than natural-gas-burning plants.

The closure will affect not only about 430 workers at the plant but also another 325 at Peabody's Kayenta Mine 80 miles away, which straddles the Navajo and Hopi reservations and has nowhere else to sell its coal, especially with the fuel falling out of favor nationally.

An official of Salt River Project, an owner and the plant's operator, broke the news to plant employees Monday.

"Obviously it is a difficult announcement to make, but a lot more difficult of an announcement to hear, and we are understanding of that," Deputy General Manager Mike Hummel said. "Our focus now is to take whatever steps we can take to keep the plant running through 2019."

SRP officials said the power plant has been important in developing Arizona, but that the public utility has a duty to its 1 million customers to minimize costs.

Hummel said discussions with the Navajo Nation already are underway to amend the lease to keep the plant running through 2019.

MORE: 5 things to know about the closure of the Navajo Generating Station

Salt River Project owns 42.9 percent of the plant and runs it for the owners, which include the U.S. Bureau of Reclamation (24.3 percent), Arizona Public Service Co. (14 percent), Tucson Electric Power Co. (11.3 percent) and NV Energy (7.5 percent).

The Bureau of Reclamation did not vote for the closure during Monday's owners meeting, and will focus on trying to work out a way to keep the station operating beyond 2019, though how that would be possible is unclear. The Navajo Nation could take up a stake in the plant, but a similar deal between the tribe and another coal plant recently fell through.

NV Energy already plans to exit the plant, and the Los Angeles Department of Water and Power recently sold its 21.2 percent stake to SRP for $13 million.

When SRP made that deal in 2015, officials said it would help keep the plant running through 2044 because they could "retire" the Los Angeles and Nevada portions of the plant, or one generator, in 2019 to comply with environmental regulations. That would allow another 24 years of operations at the two remaining generators.

But cheap natural gas has thrown a wrench into those plans. Over the course of the past year, SRP has gone from fighting to keep the plant open to arguing for its closure.

Also holding a stake in the outcome is the Central Arizona Project, which uses some of the Bureau of Reclamation's share of the power to run pumps on the canal to bring Colorado River water to Phoenix, Tucson and tribes in central Arizona.

CAP released a presentation Monday that concludes it would have saved $38.5 million in 2016 if it had bought power on the open market rather than from the Navajo Generating Station.

MORE: Congressman doesn't want to lose 1,000 jobs at coal plant

The Department of the Interior invited SRP and other stakeholders to Washington, D.C., on March 1 to discuss options for keeping the plant open beyond 2019, and Hummel said SRP "absolutely" would participate in those discussions, though the utility will not be a part of any continued operations.

The Department of the Interior, which is over the Bureau of Reclamation, has a responsibility to the Navajo and Hopi tribes, which not only represent most of the workers at the power plant and mine, but also receive millions in mine royalties each year that support tribal operations.

"Before discussing the possibility of a permanent shutdown, we would like to see if we can find a path forward that meets the needs of multiple NGS stakeholders," David Palumbo, deputy commissioner of operations for the Bureau of Reclamation, said in a prepared statement.

Peabody Energy of St. Louis runs the Kayenta Mine supplying the plant with coal, and those officials also want to find a way to keep the plant running beyond 2019.

"We are pleased with the interim decision and encourage consideration of all steps to keep the plant generating beyond 2019 for low-cost electricity, water supplies and economic strength in the region," Peabody spokeswoman Beth Sutton said Monday. "We look forward to working with current participants and future stakeholders toward a smooth transition that would allow future operations of NGS for many years to come."

MORE: Arizona regulator calls for emergency summit to save station

Environmentalists who have fought for closing the coal plant and mine cheered Monday's decision, but said the owners and tribes need to develop new economic opportunities in the region.

"Right from day one when they signed that lease 50 years ago, the Navajo and Hopi tribes ... they have no excuse because from day one they knew this day was coming," said Percy Deal, a representative of the group Diné CARE and a nearby resident of the mine.

"There should have been a plan," he said. "There should be a contingency plan that would transition into new economic development and to transition jobs. In my eye, there is no excuse. They weren't thinking this thing was going to go on forever."

Jihan Gearon, who represents an affiliated environmental group called the Black Mesa Water Coalition, said she hopes the tribes can develop renewable-energy projects to replace what is lost economically.

"Economic studies show how the transition can happen," she said. "We sell energy to major Southwest cities. We can sell a more sustainable form of energy, using the many lands that are unfortunately already toxic and need to be remediated."

She also said it's important for the tribes to have an ownership in such developments.

"So we are not just leasing land to another big company that receives all the profits," she said.