Tribal plant’s fate tied to Trump’s coal pledge

The Washington Times Daily - - FRONT PAGE - BY BEN WOLF­GANG

An ag­ing power plant in re­mote Ari­zona could of­fer the Trump ad­min­is­tra­tion a unique op­por­tu­nity: the chance to back up its rhetoric about sav­ing the U.S. coal in­dus­try with con­crete ac­tion.

The fed­eral gov­ern­ment could be the last, best hope to save the Navajo Gen­er­at­ing Sta­tion, a coal-fired fa­cil­ity on Navajo Na­tion land near the Ari­zona-Utah bor­der that is key to pro­vid­ing wa­ter for much of the re­gion, di­rectly sup­ports hun­dreds of jobs and is the sole cus­tomer for a nearby Pe­abody En­ergy coal mine.

The Bureau of Recla­ma­tion, which owns a 24 per­cent stake in the project, is des­per­ately seek­ing a path for­ward as other own­ers of the fa­cil­ity head for the ex­its. Those other own­ers — four West­ern util­ity com­pa­nies — ar­gue

that the gen­er­at­ing sta­tion is no longer eco­nom­i­cally vi­able and, as struc­tured, would run at a $100 mil­lion an­nual loss each year af­ter 2019.

The Navajo Na­tion is ne­go­ti­at­ing with the bureau and other own­ers to keep the plant run­ning through 2019, when its lease ex­pires, and then be­gin de­com­mis­sion­ing. If an agree­ment can’t be reached, the Navajo Gen­er­at­ing Sta­tion could shut down this year.

Even if the plant sur­vives and closes in 2019, the con­se­quences will be dev­as­tat­ing and far-reach­ing. The mine that feeds the plant sits on Hopi Tribe land, and the tribe de­pends on coal roy­al­ties for about 85 per­cent of its an­nual bud­get.

“That’s our life­line. … I don’t sleep very well at night. We’ve got to do some­thing,” Hopi Chair­man Her­man G. Ho­nanie told The Wash­ing­ton Times last week.

In ad­di­tion to the job losses and fi­nan­cial peril for the Hopi, Pe­abody says the fu­ture of its Kayenta Mine is bleak with­out the gen­er­at­ing plant as a cus­tomer.

En­ter the Trump ad­min­is­tra­tion. Coal pro­po­nents say the Bureau of Recla­ma­tion, as a key part of the plant’s own­er­ship group, can and must en­sure that the plant doesn’t close and that a longterm so­lu­tion would serve the in­ter­ests of West­ern en­ergy con­sumers, the Navajo and Hopi tribes, and the Amer­i­can coal in­dus­try.

“The con­se­quences to the coal in­dus­try are enor­mous. In this in­stance, the fed­eral gov­ern­ment is an owner. … If they refuse to keep a coal-fired plant open that they own, how can they en­cour­age any­one else to do the same?” said Michael McKenna, a Repub­li­can Party strate­gist who worked on the Trump tran­si­tion team. “If they al­low this lease to be signed, this plant to close, then the rhetoric about coal from the pres­i­dent has been a lie. … The ad­min­is­tra­tion has an op­por­tu­nity to do some­thing mean­ing­ful here. Words are good. Ac­tions are bet­ter.”

The Navajo Na­tion says a vote could be held as early as next week on ex­tend­ing the gen­er­at­ing sta­tion’s op­er­a­tions through 2019. They also have ex­pressed in­ter­est in the Bureau of Recla­ma­tion tak­ing over full own­er­ship of the en­tire fa­cil­ity by the start of next decade — though gov­ern­ment of­fi­cials say such an ar­range­ment would be un­prece­dented.

“In­te­rior hopes that the NGS stake­hold­ers can find a way to ex­tend the life of the plant and the Kayenta Mine past 2019 with fi­nan­cially vi­able op­er­a­tions,” said Dan DuBray, a spokesman for the Bureau of Recla­ma­tion, a di­vi­sion of the In­te­rior Depart­ment. “The ad­min­is­tra­tion has de­scribed this NGS ac­tiv­ity as part of its com­mit­ment to the coal in­dus­try; it is one ex­am­ple of the many links to our econ­omy and jobs that Amer­i­can min­ing and coal-gen­er­ated en­ergy pro­vide. If any fed­eral own­er­ship of this op­er­a­tion were to be pro­posed, it would likely re­quire new or ex­panded au­thor­i­ties that do not cur­rently ex­ist.”

The gov­ern­ment’s par­tial own­er­ship of the project is in and of it­self a unique sit­u­a­tion. The 2,250-megawatt plant came on­line in 1974, and the fed­eral in­ter­est grew out of the need for a ma­jor power source to pump wa­ter through the re­gion. Ini­tial con­struc­tion costs topped $650 mil­lion, not count­ing mil­lions of dol­lars in up­grades over the years.

In­te­rior has a 24 per­cent stake in the project, with var­i­ous West­ern util­i­ties own­ing the rest. Salt River Project con­trols 42.9 per­cent of the Navajo Gen­er­at­ing Sta­tion, Ari­zona Pub­lic Ser­vice owns 14 per­cent, and NV En­ergy and Tuc­son Elec­tric Power own 11.3 per­cent and 7.5 per­cent, re­spec­tively.

The util­i­ties an­nounced in Fe­bru­ary that they would pull out of the project post-2019, ar­gu­ing that the rise of U.S. nat­u­ral gas has left coal-fired fa­cil­i­ties such as the Navajo Gen­er­at­ing Sta­tion at a mas­sive dis­ad­van­tage in the mar­ket­place.

“The ma­jor is­sue sur­round­ing this plant — and it’s in­dus­try­wide — is eco­nom­ics,” said Scott Harel­son, a spokesman for Salt River Project. “To be quite frank, we were prob­a­bly work­ing a lit­tle bit against re­al­ity try­ing to fig­ure out how can we still make Navajo work. Those are our em­ploy­ees. We’ve op­er­ated that plant for a long time. It’s im­por­tant to that area, and we re­al­ize that.

“Ul­ti­mately, it be­came clear it just was not go­ing to be eco­nom­i­cal,” he said. “It was too ex­pen­sive to op­er­ate.”

Mr. Harel­son said the ideal out­come for the util­i­ties is to run the plant through 2019 and then main­tain ac­cess to the site for de­com­mis­sion­ing and cleanup. The Navajo Na­tion, mean­while, has ex­pressed in­ter­est in pos­si­bly build­ing so­lar pan­els or other re­new­able en­ergy projects in the same area and tak­ing ad­van­tage of the elec­tric­ity in­fra­struc­ture al­ready there.

But such a sce­nario, if it comes to pass, would be a high-pro­file de­feat for the coal in­dus­try. Pe­abody says it has al­ready of­fered a long-term fixed price for the coal that feeds the plant, and it has re­leased eco­nomic stud­ies that it says prove the plant can, in fact, com­pete with any other power gen­er­a­tion source on the mar­ket to­day.

“Pe­abody has come to the ta­ble with a fixed coal price pro­posal rep­re­sent­ing a com­pet­i­tive fuel cost ver­sus alternate gen­er­a­tion sources,” said Pe­abody spokes­woman Beth Sut­ton. “Study find­ings con­firm our be­lief that NGS is eco­nom­i­cally vi­able and pro­vide mo­men­tum for stake­hold­ers to con­tinue work­ing to­ward so­lu­tions that will al­low NGS op­er­a­tions for many years.”

Sup­port­ers of the fa­cil­ity say that de­spite the le­gal and lo­gis­ti­cal chal­lenges, the ad­min­is­tra­tion, if it’s se­ri­ous about aid­ing the coal in­dus­try, should con­sider step­ping in as full owner once util­i­ties of­fi­cially pull out and could cut more reg­u­la­tions that would al­low the Navajo Gen­er­at­ing Sta­tion to op­er­ate more eco­nom­i­cally.

“If the United States [gov­ern­ment] re­ally wants to put their money where their mouth is, they’ll say we’ll stay in as owner and start re­mov­ing these red tape reg­u­la­tions,” said Mark Lewis, a board mem­ber of the Cen­tral Ari­zona Project, which de­pends on the gen­er­at­ing sta­tion for the vast ma­jor­ity of power needed to pump wa­ter through its 336-mile wa­ter de­liv­ery sys­tem.


POWER: The coal-fired Navajo Gen­er­at­ing Sta­tion could shut down this year if the Navajo Na­tion can’t reach an agree­ment with the U.S. Bureau of Recla­ma­tion and oth­ers to keep it run­ning through 2019.

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