SRP SETTLES
Salt River Project officials agreed to pay $21 million Thursday to settle claims from Peabody Energy regarding the closure of the only coal mine in Arizona.
The Kayenta Mine closed in August after sending its last shipment of coal to the Navajo Generating Station power plant near Page, which burned the last of that coal Monday and shut down after a 45-year run.
Peabody Energy had issued a claim for $53 million to SRP for “premature” closure of the mine, which was previously planned to run until 2044 until the utility owners voted to close it in 2017.
Peabody said SRP owed it millions for a variety of expenses, including severance pay to laid-off miners and equipment that Peabody bought for the mine that wasn’t put to its full use.
SRP officials on Thursday did not publicly discuss which of Peabody’s claims they agreed with and which they didn’t, as they conducted their negotiations during a closed session with the board.
But when it came time to vote, they approved allowing the utility’s executives to enter a deal where SRP and its customers would pay Peabody about $21 million in expenses related to the mine’s closure.
The amount is a fraction of the approximately $188 million in reclamation costs at the mine and about $170 million in expenses to tear down the power plant and remediate that site.
The agreement between SRP and Peabody should “resolve all outstanding issues,” said Bobby Olsen, SRP director of supply trading and fuels.
SRP’s fuel contract with the mine included closure expenses, and SRP officials knew they would have some financial liability with the closure, Olsen said.
The plant is owned by SRP, the U.S. Bureau of Reclamation, Arizona Public Service Co., NV Energy, Tucson Electric Power, and previously, the Los Angeles Department of Water and Power.
As participants in the plant, those parties all owe Peabody some amount of money related to the mine closure, according to Peabody.
The total amount owed the mining company from all participants was $114.5 million, according to the company’s claim.
Peabody asserted SRP was liable for both the 22% share the utility owns and the 24% owned by the U.S. government held by SRP.
The biggest chunk of the overall claim was $26.8 million in equipment relocation costs, according to Peabody.
The mine straddles the Navajo and Hopi reservations, and the tribes were paid proportional to the coal taken from their lands.
The claim involved several other items, including an electrical system to serve a mobile-home community on Hopi land.
Peabody officials declined to comment on the settlement.