April 3, 2017 Read More →

Federal Subsidies Crucial to Survival of Navajo Generation Station

The Arizona Republic:

Navajo Nation political officials are endorsing a plan to ask the federal government for coal subsidies to keep the Kayenta Mine and Navajo Generating Station operating.

The coal-fired power plant is not economical for Salt River Project and its other four owners, who voted recently to run it through the end of 2019 if possible, but give up their ownership after that. Closing the power plant near Page would mean closure for the Kayenta Mine, which feeds it with hundreds of millions of dollars worth of coal a year.

While the closure would benefit the environment as utilities turn to cheaper, cleaner-burning natural gas, it would devastate the economies of the Navajo and Hopi tribes, whose members depend on the two facilities for jobs, government revenues and smaller services such as free coal to heat homes.

The immediate attention is on getting a new lease agreement approved by the Navajo Nation. If the current lease isn’t extended, the plant must close this year so that SRP can begin decommissioning it to meet the 2019 lease expiration. If a new lease isn’t signed by July 1, SRP will close the plant this summer.

Some officials view any plan to run the power plant after 2019 as a long shot, including Ted Cooke, general manager of the Central Arizona Project, which uses power from the plant to move water from the Colorado River through a large canal serving Phoenix and Tucson.

“Even with a federal subsidy, it is an uphill battle,” Cooke said.

He said subsidizing the coal enough to make it cost competitive with natural gas could cost upward of $100 million a year, and the federal government might help the tribes more by simply giving them cash rather than propping up the coal operations.

He said the CAP will find cheaper power elsewhere, and is prepared for a 2019 closure, if not sooner.

“We expect we will put our power needs out to bid,” Cooke said.

If the plant remains open under some new ownership structure, the CAP will consider buying power there, but not to serve all of its needs.

“We would not ever buy the quantity we are buying from Navajo today,” he said. “It’s not diversified enough for us.”

Navajo Nation officials want President Donald Trump to subsidize Kayenta Mine, power plant

E&E News:

The Navajo and Hopi tribes are often-overlooked members of coal country, but they are the latest to grapple with the upheaval in America’s power sector. A wave of coal plant closures, driven by low natural gas prices, poises a new threat to the tribal economy, unearthing painful questions about the past and sparking fierce debate over the role coal will play in the tribes’ future.

Efforts by President Trump to revive the ailing coal industry by rolling back Obama-era climate regulations have so far failed to rescue aging facilities like Navajo Generating Station. Since Trump’s election in November, utilities have announced retirements of some 9,000 megawatts of coal power, or roughly 3 percent of total U.S. coal capacity, according to an E&E News review of federal figures.

Navajo Generating Station shows why. At 2,250 MW, the second-largest coal facility west of the Mississippi River was scheduled to run until 2044. Now, because of a sustained drop in gas prices, Salt River Project estimates it would lose $100 million to $150 million annually to keep the 43-year-old facility open beyond 2019.

Some residents voiced support for keeping the plant open, saying it is a vital source of jobs on the reservation. Others worried about its climate impact and argued the tribe should embrace wind and solar instead.

Some have promoted the idea of federal subsidies for the plant’s coal purchases. Others have proposed the Navajo buy the facility.

Navajo Generating Station’s complicated ownership structure offers the tribes a potential lifeline. While the four utilities involved in the plant — Salt River Project, the Arizona Public Service Co., NV Energy and Tucson Electric Power — voted for its closure, its fifth owner, the Bureau of Reclamation, has sought to keep it open.

At a hastily arranged meeting at the Interior Department’s Washington headquarters last month, Navajo and Hopi officials appealed directly to administration officials for help. Federal officials were sympathetic, saying they would “turn over every rock” to keep the plant open.

Tribal leaders’ immediate task is negotiating a lease extension for Navajo Generating Station with Salt River Project. The utility has said that without an extension it will need to close the plant this year in order to decommission the facility by the time its lease expires in 2019.

The longer-term picture is even more challenging. The Los Angeles Department of Water and Power sold its stake in the plant in 2015, as part of a plan to comply with a California law prohibiting utilities from buying coal. NV Energy, which maintains an 11.3 percent stake in the facility, was already planning an exit in 2019, when one of the plant’s three units will close as part of a settlement with U.S. EPA to reduce smog around the Grand Canyon.

A sustained drop in natural gas prices provided the death blow. Navajo Generating Station’s largest single customer is the Central Arizona Project. Project officials estimate the water agency would have saved $38 million last year had it purchased energy on the wholesale market. Moreover, they don’t see gas prices rising dramatically anytime soon.

As for Franklin Martin, the longtime Navajo Generating Station employee, he would like to see the plant stay open. Many on the reservation did not benefit from the coal industry. Maybe the tribe could take an ownership stake in the plant and use the money to help people in places like Black Mesa, Martin wondered.

Still, he questioned tribal leaders’ prediction the plant’s shutdown will sow economic chaos. The Navajo have survived conquest by the Army, decades of poverty, even mismanagement of the tribe’s coal wealth.

“These people have lived through that,” Martin said. “The tribe talks a lot about sovereignty. Is the power plant sovereignty? No. That’s somebody else’s business. We have to figure out something on our own.”

($) Coal-reliant tribes ponder a future without their power plant

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