Navajo Nation OKs new lease for Navajo Generating Station coal plant

Ryan Randazzo | The Republic | azcentral.com

The Navajo Nation Council on Monday approved a new $350 million lease for the coal plant near Page that could allow it to remain open another two years.

Salt River Project, Arizona Public Service Co., Tucson Electric Power and NV Energy agreed to run the Navajo Generating Station through 2019 if the tribe approved a new lease by July 1. Otherwise, the utilities have said they will close the facility because it is more economical to buy power from natural-gas plants.

The tribe's council passed amendments to the lease that SRP and the other owners now must negotiate.

SRP Deputy General Manager Mike Hummel said the utility is pleased with the vote.

“This agreement provides meaningful benefits for all involved and creates a path forward during this challenging transition," he said in a prepared statement.

“Importantly to us, the replacement lease paves the way for SRP employees at the plant to remain on the job for an additional two-plus years and allows us to fulfill our commitment to redeploying all regular NGS employees to other SRP facilities after 2019 should they so choose.”

The coal plant and mine that supplies it employ about 750 people, nearly all members of the Navajo and Hopi tribes. The tribes both also benefit from coal sales from the mine and other economic activity associated with the operations.

The U.S. Bureau of Reclamation also owns a share of the plant and is striving, along with some tribal officials and Peabody Energy, to keep it open even beyond 2019 with new owners.

"We’re encouraged by efforts to keep the Navajo Generating Station on line and continue working with stakeholders toward a transition allowing operations well beyond 2019," Peabody's President of the Americas, Kemal Williamson, said in a prepared statement.

Peabody has hired research company Lazard to find a buyer for the plant.

"Peabody has engaged a globally recognized research firm to evaluate the plant’s economic profile and initiated a process to identify a new ownership structure. We believe the plant will be competitive with natural gas and is essential for energy security, reliable water supplies and economic stability in the region," he said.

SRP has told Peabody and the tribe that if a new owner is to take over the plant, it must be identified by October so that a transition can be completed by 2019.

At a May meeting with stakeholders, Lazard managing director Juan Correa had a heated exchange with Navajo leaders, who were disappointed that Lazard could not yet identify potential buyers. At the conclusion of the exchange, Correa fainted and was helped to a chair.

Environmental groups oppose efforts to keep the plant running and prefer to see a transition to solar and wind power as drivers of the regional economy.

“Navajo leadership now have two and a half years to create a robust transition plan and can waste no time squandering on short sighted efforts to keep the plant running beyond 2019 or foolishly purchasing the Kayenta Mine,” said Robyn Jackson, a member of the group Diné CARE.

The lease was a controversial subject for the tribe and council members. The final vote was 18-4.

Protesters for and against the coal operations posted handmade signs outside the council chambers in Window Rock on Monday, according to photos shared with The Arizona Republic.

"NGO(s), U don't support my family or pay my bills," read one pro-coal sign.

"Drop coal like Cali," read an anti-coal sign, referring to California's anti-coal rules.

Much of the debate among tribal council members was whether the Navajo Nation can take disputes with the lease to Navajo Court or whether potential disputes would be settled in state or federal court.

SRP leaders met early Monday to discuss the negotiations ahead of the tribe's vote. Hummel told the elected officials at SRP that some of the proposed amendments are deal-breakers and that the plant will close this year if the tribe passes them.

In addition to the $110 million in continued lease payments through 2054 that would allow SRP to decommission the plant and monitor the site for several years, the new lease has several financial benefits for the tribe that are at risk if the lease is not passed.

The Navajo Nation has identified several pieces of the operation it wants to keep when the plant closes, including the railroad between the plant and the coal mine, valued at $120 million; the lake pump facility and electrical switch yard, valued at $41 million; and access to major transmission lines leading from the plant, which SRP values at about $80 million.

The transmission lines would allow the tribe to sell power from solar or wind plants.

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