Navajo Nation Negotiating Sale of West’s Largest Coal Plant

The Navajo Nation on July 12 said it has identified a potential buyer for the 2,250-MW Navajo Generating Station (NGS) in Arizona, the largest coal-fired power plant in the western U.S. The Navajo Nation Council, in a joint news release with the Navajo Nation’s Office of the President and Vice President, said the Hopi Tribe supports an agreement to sell the plant in order to keep it open, along with the nearby Kayenta Mine from which the plant sources coal.

The NGS and the adjacent mine generate about one-third of the Navajo Nation’s operating budget and about 80% of the Hopi Tribe’s, with most of the workers at both the power plant and the mine members of the tribes. The plant’s current ownership plans to close the plant near Page, Arizona, by the end of 2019 if the facility is not sold.

The joint release said negotiations are underway with New York-based Avenue Capital Group, a global investment firm that invests in distressed companies and the distressed debt market, as the potential new owner. The release said Deerfield, Illinois-based Middle River Power (MRP) is the potential new operator. Middle River Power owns about 2,000 MW of power generation assets, including coal, natural gas, geothermal, and solar, in Virginia, West Virginia, California, and Maryland.

Joe Greco, senior vice president of Middle River Power, in June told a meeting of the Central Arizona Water Conservation board that his company could operate the NGS economically and efficiently. He told the board his company was putting together an offer for the plant.

The NGS supplies about 75% of the power for the board’s Central Arizona Project (CAP), which needs electricity to pump water through its aqueduct system. The board has been lining up alternative sources of power for CAP should the NGS close.

The NGS is currently owned by the Salt River Project, Arizona Public Service Co., NV Energy, Tucson Electric Power, and the U.S. Bureau of Reclamation.

Navajo Nation President Russell Begaye in Thursday’s release said, “We look forward to the negotiations that need to take place and the continued collaboration with NGS owners in ensuring the transfer of assets. This selection is a preliminary stage of the process. No contracts have been signed. MRP has been given the opportunity to move forward in becoming the new owner of NGS. We will do everything we can to make sure this is a successful partnership.”

“The Hopi Tribe remains hopeful that these negotiations will be successful for the economic benefit of the Hopi and Navajo People,” Hopi Tribal Chairman Timothy L. Nuvangyaoma said in a statement.

Hopi Tribal Vice Chairman Clark W. Tenakhongva said, “The economic security of the Hopi Tribe is not merely about money, it’s about stewardship—protecting the future and welfare of all who live in our communities.” The plant’s operation provides royalties to both the Navajo Nation and the Hopi Tribe, along with jobs at the plant and Kayenta Mine.

Middle River’s interest in NGS was first reported by Bloomberg in April, based on emails it obtained that showed a representative with the Lazard investment company reached out to a CAP representative regarding the plant. Lazard has been retained by Peabody, owner of the Kayenta Mine, to find potential buyers for the plant and coal mine.

The federal government also has discussed keeping the plant open, citing a 50-year-old law that it says requires CAP to continue to source power from the NGS.

The CAP was started in 1968. The law authorizing the 336-mile project was signed by then-President Lyndon B. Johnson as a way to supply water for central and southern Arizona from the Colorado River. The project is the state’s single largest renewable water supply. The federal government has a say in the project because Congress appropriated its funding. The government also owns a 24.3% interest in the NGS, managed by the Bureau of Reclamation on behalf of the Interior Department.

Environmental groups have long opposed the Arizona plant’s operation, saying the NGS and the mine are among the biggest polluters in the region. The High Country News last year reported that the plant and mine “emit nearly 20 million metric tons of carbon dioxide, methane and other greenhouse gases annually. The plant also spews sulfur dioxide, nitrous oxides and thousands of pounds of mercury, selenium and arsenic. These elements, which are toxic to humans and wildlife, have shown up in relatively high concentrations in fish in the Grand Canyon and the San Juan River upstream from Lake Powell, as well as in precipitation at Mesa Verde National Park. Meanwhile, the plant produces about 1.3 million tons of solid waste, most of which is dumped nearby.”

Several groups opposing the plant wrote a letter to the Interior Department asking for confirmation that continued operation of the plant beyond the 2019 closing date would be subject to provisions of the National Environmental Protection Act (NEPA). It said keeping the plant open would require completion of an environmental impact statement that was halted by the Bureau of Reclamation after the plant’s owners announced last year they would close the facility.

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