Navajo Nation President Ben Shelly signed a land lease extension on April 30 for the 2,250-MW Navajo Generating Station, but not before adding several amendments to the agreement. The early lease renewal with the Navajo Nation must be in place before plant owners could consider making future investment in expensive new air quality control equipment.

The lease extension, the subject of much disagreement within the Navajo Nation, extends the lease from 2019 to 2044 in return for a boost in yearly lease payments to the nation from $3 million to $43 million. Other concessions in the lease agreement include educational scholarship money and the opportunity for the nation to potentially obtain partial ownership of the plant in the future.

Amendments added by the nation to the agreement are reported to be a $1 million signing bonus, changes to the plant related to flash management, assurance from plant owners that they will assist in protecting the Navajo’s claims on water from the upper Colorado Basin, adding the federal government as a lessee, and Navajo preference in employment (as permitted by federal law).

The amended lease renewal agreement is now with Salt River Project (SRP) and its co-owners for review.

Navajo Generating Station is operated by SRP and owned by SRP (21.7%), the U.S. Bureau of Reclamation (24.3%), Los Angeles Department of Water & Power (LADWP, 21.2%), Arizona Public Service (14%), NV Energy (11.3%), and Tucson Electric Power (7.5%). LADWP revealed its intent to move away from coal-fired power in its 2012 Integrated Resource Plan and is said to be in negotiations with SRP to purchase its share of the plant. NV Energy has also announced plans to exit coal-fired generation over the next 10 years.

Plant owners are also facing a billion dollar investment in the plant to meet proposed U.S. Environmental Protection Agency regional haze rules, requiring a reduction in NOx emissions of 84%.

SRP spokesman Scott Harelson concedes that the process to keep the plant operating is complicated, but the utility is committed to keeping it in operation. “We think it’s an important resource, not only to SRP customers but to the entire state of Arizona,” the AP quoted him as saying. “It’s water, it’s jobs, it’s economic impact. There’s a lot riding on this facility.”

In addition to supplying electricity to the Southwest, Navajo Generating Station also provides the power to deliver water to Arizona’s metropolitan areas via the Central Arizona Project.

Researchers from Arizona State University’s W.P. Carey School of Business released a study on April 11 that determined the power plant and its Kayenta Mine will contribute nearly $13 billion to the Navajo Nation’s economy between 2020 and 2044.

Opposing the lease renewal were environmentalists arguing that the plant owners should abandon coal-fired power and that the lease extension is not in the best interests of the Navajo Nation.

Sources: POWER, NGS Power, EPA, LADWP, KTAR/AP

Dr. Robert Peltier, PE, Editor-in-Chief.

Note: This story was originally published on May 1