Navajo officials seek subsidy for coal mine, generating station
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.
So far, no solid plan has developed to keep the facilities open, though representatives of the tribes and other stakeholders met March 1 with officials from the U.S. Department of the Interior to explore possibilities.
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.
But many people on the reservations want the plant and mine to run at least until 2029. Two employees who work at the power plant, one of whom serves as chairman of a local Navajo political chapter, have written a plan.
Their plan would have the federal government subsidize the price of coal sold from the mine to the power plant so that running the coal plant would be as cost-effective as relying on natural gas. The amount of the subsidy would vary depending on the price of natural gas.
“We looked back at the auto industry, the banking industry, even some solar companies that were subsidized with millions and millions of dollars,” said Jerry Williams, president of the Lechee Chapter House and a 36-year employee of the power plant.
Williams wrote the plan with fellow plant worker Erwin Marks, and they have gotten dozens of the 110 Navajo political chapter houses to sign on. “We haven’t had one turn us down so far,” Williams said. The votes by Navajo chapter houses are not legally binding, but they serve to influence the delegates who serve on the Navajo Nation Council, the legislative branch of tribal government.
The Western Agency Council, which represents 18 chapter
houses, approved the language, as did the Northern Council, which represents 20 chapter houses, Williams said.
Peabody Energy, the Kayenta Mine owner, would effectively reduce the price of coal sold to the power plant, and receive the subsidy, making up the difference in price from the government. The proposal says such a deal would only start with the consent of Peabody.
The company wouldn’t comment directly on the request for subsidies.
“We applaud chapter leadership for their support of the mine and power plant given the importance to jobs, the economy and affordable power for the state,” Peabody spokeswoman Beth Sutton said.
She said the company has offered a lower, fixed-price proposal to sell the plant coal that would make it competitive with other power sources without a subsidy, and has hired an energy research firm to evaluate the power plant’s economics.
“Early 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 to come,” she said.
Navajo Nation President Russell Begaye is supportive of the grass-roots proposal or other plans that emerge to keep the facilities open.
“We support the Western Agency Council’s resolution and we will continue to work diligently to make sure the power plants and mines continue to be in operation until 2029,” Begaye said in a statement to The Arizona Republic. “This will afford the Nation the time needed to transition into solar and other renewable energy operations.”
The tribe has hired energy experts to explore potential scenarios to keep the facilities open, he said. The issue is critical for the tribe not only because of the jobs but also for the economic benefits of the facilities, including lease revenue, coal revenue and a variety of suppliers that serve the businesses.
Begaye has cited President Donald Trump’s campaign promises to help the coal industry as a positive sign that the federal government could step in to help the operations.
“We will continue to encourage the Trump administration, along with his secretaries, to support the usage of coal in the United States for national security and other development measures,” Begaye said.
SRP spokesman Scott Harelson said the utility is supportive of efforts to keep the plant open after 2019, but SRP will not, under any circumstances, remain an owner after that date, meaning a new owner would have to step in even if the federal government provided subsidies.
“The resolution presented to the Western Navajo Agency Council is an extremely complex arrangement to work out, and SRP will be supportive; however, SRP was not the sponsor of that resolution,” Harelson said.
“If there is any chance for it to be successful, it will require time, so the first thing that has to happen to allow that consideration is a lease extension by July. All of our resources are currently focused on accomplishing this.”
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.”