As coal economy collapses, imminent public budget crisis confronts Hopi-Navajo tribes

As the coalfield economy of north-central Arizona moves toward collapse with the impending closure of Navajo Generating Station (NGS) and the Kayenta Mine, the plant’s fuel-source, tribal budgets will be gutted practically overnight.

Navajo and Hopi tribal governments in Window Rock and Kykotsmovi, respectively, stand to lose crucial tax-base and royalty payments from Peabody Energy, which owns Kayenta, an openpit mine on Hopi and Navajo lands. The Navajo government will also lose funding it has long depended on from revenue generated by NGS, which is on Navajo tribal property.

The power plant, commissioned in the 1970s, will close in December in a sign of the times as coalfired generation continues to decline nationally. This trend is driven by competition from cheaper natural gas and renewables, especially wind and solar. Kayenta Mine’s only customer is NGS, so it will cease production this fall, as its stockpiles by then will be sufficient to run the plant through the end of the year.

To compensate for the financial losses, the Navajo government announced this month that it will cut tribal spending by 23 percent in the first full fiscal year following NGS’s closure. The Hopi government has not announced what it will do: it depends on coal operations for 85 percent of its public-services budget, which, like that of the Navajo, fund crucial childcare programs, healthcare, education and a host of other public services.

Beyond the looming public fiscal crisis, larger economic waves will be created by the loss of some 700 good-paying jobs in total at NGS and Kayenta and the knock-on effects to the region’s small businesses. Equipment suppliers, maintenance companies, builders, restaurants and retail stores of all kinds will feel the blow.

Importantly, the federal government helped create NGS through spending programs and policy moves that underwrote construction of the plant and creation of the mine at a time when coal-fired electricity generation was growing. Now, with the pending shutdown of the plant and the mine, the federal government can and should play a major role in the regional transition away from coal and could even use the HopiNavajo situation as a springboard for a national coalfield reinvestment initiative.

The federal government has stepped into such situations before, to responsible bipartisan and powerful regional effect: In its intervention to save the Detroit-based U.S. automobile industry in 2009; in its disaster-relief programs in responses to Hurricane Katrina in New Orleans in 2005 and Hurricane Sandy in the Northeast in 2012; and in its long-running program to ease the effects of military base closings.

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Press release: IEEFA U.S.: Imminent Hopi-Navajo budget crisis as coal industry collapses