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Navajo Generating Station Lease Approved, 15 Amendments Attached

The Navajo Nation Council has approved a lease renewal with the Navajo Generating Station, but multiple amendments could be a factor.
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The Navajo Nation Council has approved a controversial renewal to the tribe’s lease with the Navajo Generating Station – but with 15 amendments that could break the deal.

Navajo Nation President Ben Shelly gave the thumbs-up to the lease extension in February, after it was negotiated between a team of experts assembled by him and representatives from the Salt River Project, part owners of the coal-fired power plant. The extension proposal raises annual tribal revenues from about $3 million a year secured in the original 1969 lease to $44 million a year during the tenure of the new lease, between 2019 and 2044. But when it was presented to the legislature in early March, delegates bristled at having been left out of the negotiations.

At first, the Council ruled the legislation out of order, citing a little known and never-before used portion of the Navajo Nation code that mandated legislative representation on energy deals. Then, during its regularly scheduled spring session in mid-April, council delegates spent hours dissecting the lease extension’s details – and chastising the executive branch for excluding Council during the drafting stages. Even though Shelly sent a letter to the Council asking them to pass the extension – and visited chambers at one point while they deliberated – the Council demurred, and tabled a decision until Monday, April 29. (Related story: Navajo Nation Council Tables Navajo Generating Station Lease)

At the conclusion of the spring session, the Council had proposed six caveats to attach to the lease, should they approve it. By the time they passed it on Monday, that number had grown to 15. Among other points, the amendments attempt to solidify the Nation’s rights to 50,000 acre-feet a year of Colorado River water the tribe has been leasing to the Navajo Generating Station since the plant’s opening. They also want to see more careful control of fly ash, a byproduct of coal-fired electricity production that contains toxins but is currently unregulated by the federal government. They want NGS employment practices to reflect Navajo hiring preference more rigorously than the lease extension had initially spelled out. They’ve even asked to add a bit of political activism into the lease’s language, with the statement, “The Navajo Nation hereby declares that the United States’ contractual interest, held by the Salt River Project for the Bureau of Reclamation, to the power generated by 24.3 percent of the Navajo Generating Station’s capacity is in direct conflict with the federal government’s trust responsibilities and duties to the Navajo Nation and the Navajo people.”

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It is unclear whether the lease extension will fail as a result of the proposed changes; Shelly’s spokesman Erny Zah had earlier suggested that it could. On April 30, he said the negotiating parties would be scrutinizing the proposed language changes.

Scott Harelson, spokesman for the Salt River Project, issued a statement noting that the owners of the Navajo Generating Station “are thankful that the Navajo Council has voted to approve legislation that would extend the lease for this important Arizona resource. However, the action taken by the council last night also included the addition of several new amendments. The NGS owners will meet to review the implications and discuss the new amendments to determine how to proceed.”

Harelson pointed out that NGS provides electricity for millions of customers in the southwest and jobs for about 520 people, more than 85 percent of them Navajo. The Kayenta Mine, the plant's coal supplier, employs more than 400 people, most of whom are also Native American.

And he cited a recent Arizona State University study indicating that NGS and the Kayenta Mine stand to contribute nearly $13 billion to the Navajo Nation economy through sustained jobs and wages, if it stays operational until 2044.

NGS faces daunting challenges besides the thorny lease approval process. The EPA recently announced proposed pollution controls related to regional haze that could cost the plant $1.1 billion if they are enacted. And part owners of the plant in both Nevada and California – the Los Angeles Department of Water and Power, and NV Energy – have made moves to abandon coal-fired electricity production at NGS in favor of cleaner energy. That would leave SRP, the U.S. Bureau of Reclamation, Arizona Public Service and Tucson Electric Power to travel the costly road ahead.