Navajo Nation Backs Lease Extension to Keep Coal Plant Online

A coal-fired power plant in northeastern Arizona can continue operating until at least the end of 2019 after the Navajo Nation Council approved a lease extension for the facility. The three Arizona utilities and one Nevada utility that own the plant along with the federal Bureau of Reclamation had said in February 2017 they would close the Navajo Generating Station because less-expensive natural gas-fired power is available in the region. The plant is operated by the Salt River Project in Phoenix, Ariz.

The Navajo Council approved the $350 million extension late June 26 after more than eight hours of debate among council members. The plant’s owners—Salt River Project, Tucson Electric Power, Arizona Public Service Co., and NV Energy—had said they would continue to operate the plant through 2019 if the tribe approved a new lease by July 1. The owners earlier this year had voted to close the 2,250-MW plant.

Mike Hummel, a deputy general manager for Salt River Project, said in a statement after the decision that “This agreement provides meaningful benefits for all involved and creates a path forward during this challenging transition. Importantly to us, the replacement lease paves the way for SRP employees at the plant to remain on the job for an additional two-plus years and allows us to fulfill our commitment to redeploying all regular NGS employees to other SRP facilities after 2019 should they so choose.”

The plant, which opened more than 40 years ago, provides power that is used to pump water from the Colorado River to Phoenix and Tucson as part of the Central Arizona Project. By agreeing to keep the plant operating at least two more years, the Navajo group at least temporarily saved about 750 jobs at the plant near Page and at the nearby Peabody Energy-operated Kayenta coal mine that supplies fuel for the facility. Most of the workers at the plant and the mine are members of the Navajo and Hopi tribes. The plant also contributes millions of dollars in annual tax revenue to local governments. Supporters of the lease extension had said the loss of tax dollars would have an impact on local governments as soon as 2018.

The Navajo Nation, along with the Bureau of Reclamation and Peabody Energy, has said it would like to keep the plant operating through at least 2030, though that means finding a new owner for the facility. SRP officials have said they want a decision on new ownership by October 1 in order to complete a transition by 2019.

Peabody has hired Lazard Asset Management, an investment research company, to find a buyer for the plant. Kemal Williamson, Peabody’s President of the Americas, said in a statement after the decision that the company is “encouraged by efforts to keep the Navajo Generating Station online and continue working with stakeholders toward a transition allowing operations well beyond 2019.”

The Navajo Nation has previously said it wants to keep parts of the NGS operation even if the plant closes, including transmission lines from the plant that SRP has valued at $80 million. The tribal nation said the lines would allow it to sell power from solar or wind farms in the future.

—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)