Navajo Generating Station Lease Extended Through 2019
The largest coal-fired power plant in Indian country will continue operating for another 18 months following the Navajo Nation’s approval of a lease that promises to keep the Navajo Generating Station open until December 2019.
During a ceremony on July 1, Navajo Nation President Russell Begaye signed a $350 million lease that calls for utility owners to extend operations at the 2,250-megawatt plant near Page, Arizona, through 2019. The lease, a 35-year agreement between the tribe and utility owners, secures $110 million in continued lease payments to the Navajo Nation through 2054, requires the Nation to receive minimum fuel purchase revenues of $39 million for 2018 and 2019, and allows owners access to the land for decommissioning activities and long-term environmental monitoring.
The lease also allows the tribe to keep existing water infrastructure, transmission lines and railroad lines between the plant and Kayenta Mine, the plant’s sole provider of coal. Begaye hopes the infrastructure can be used to deliver solar- or wind-generated energy.
“Today, as we sign this extension lease, the Navajo Nation will become an energy tribe for the first time in its history,” Begaye said during the signing ceremony. “We will now have the capability of producing renewable energy and selling it to the world market. This signing is also about closing the power plant and making sure the Navajo Nation is not taken advantage of in the decommissioning process.”
The lease agreement marks the end of a debate that began in February when Salt River Project, the plant’s operator and its largest utility owner at 42.9 percent, announced it would not operate the facility after 2019. This decision—which came as a shock to many Navajos—was a complete reversal from the owners’ previous position.
Since construction began in 1969, the plant and the mine have created hundreds of jobs and produced millions of dollars in revenue for the Navajo and Hopi nations—and provided electricity to customers in Arizona, California and Nevada.
The original lease called for operation of the plant for 50 years, or until 2019. In 2009, the Salt River Project asked the Navajo Nation to renew its lease and extend the life of Navajo Generating Station until 2044. The Navajo Council passed an agreement in 2013—after six months of debate—but the Salt River Project never signed it.
Four years later, Salt River suddenly announced its intent to close the plant when the original lease expires at the end of 2019 because “it became clear that current and forecasted low natural gas prices had made goal generation uneconomical,” Salt River Project spokesman Scott Harelson said. Salt River Project, along with minority owners Arizona Public Service Co., Tucson Electric Power and NV Energy, agreed to keep the plant operating through the end of 2019 only if the tribe approved a “replacement lease” by July 1.
For months, a Navajo task force and the Salt River Project negotiated the terms of a replacement lease. Over a period of several weeks, the Navajo Nation Council wrestled with legislation approving that lease. Still, it was a difficult sell, said Council Speaker LoRenzo Bates, who sponsored the legislation. Bates expressed concerns about a lease that waived the Nation’s sovereign immunity in legal matters.
Much of the eight-hour debate on June 26 in Council Chambers centered around the same questions: Could the Nation take disputes with the lease to Navajo court, or would parties be forced to settle in state or federal court? Delegate Leonard Tsosie, a veteran on the Council, adamantly opposed the waivers and urged the Council to vote down the legislation.
“They’ve been on our land for over 50 years—they should know us by now,” he said during the Council discussion. “Do they regard our laws of being from cavemen years or think theirs are superior?”
Other delegates pointed to the hundreds of jobs at stake and the millions of dollars of lost revenue should they fail to approve a lease. Navajo Generating Station and Kayenta Mine together employ about 850 people and contribute $40 million to the Navajo Nation every year, or one-third of the Navajo government’s operating budget.
“I am for jobs,” said Delegate Edmund Yazzie. “I am for revenue that goes back to the Nation.”
Council members voted 18–4 in favor of the lease. The legislation passed with nine amendments, including language that stipulates how potential legal disputes will be handled.
The Council only had power to approve legislation in favor of a replacement lease, while Begaye had final authority to sign or reject the lease itself. As he signed the document, Begaye promised to move the Nation toward a cleaner economy.
“We can now go into solar and renewable energy development to sell energy directly to markets, towns and enterprises,” he said. “The Nation has 500 megawatts to develop, and we are already getting commitments from power companies who want to partner in buying renewable energy from the Navajo Nation.”
Although the tribe met the July 1 deadline to approve a replacement lease, continued operations at the power plant require signatures from two more stakeholders. The Bureau of Reclamation and the Los Angeles Department of Water & Power, the latter a previous partial owner of the plant, are expected to sign before December.
Salt River Project officials applauded Begaye’s decision to sign the lease. Besides keeping the plant open for 18 more months, the move buys the Nation time to find a new operator or transition to renewable energy, Harelson said.
“SRP is very pleased that the Council has approved the replacement lease as we believe this is the best possible transition for our employees and the Navajo Nation,” Harelson said. The replacement lease requires plant owners to continue giving hiring preference to Navajo employees and to support economic development on Navajo land.
The U.S. Bureau of Reclamation, which also owns a share of the plant, is looking for ways to keep the plant open beyond 2019—including identifying a new utility owner. Salt River Project told the Navajo Nation that if a new owner is to take over the plant, it must be identified by October 1 of this year.
In a statement on June 27, U.S. Secretary of the Interior Ryan Zinke praised the lease agreement. He also pledged federal support for Navajo and Hopi sovereignty and promised to work with tribes to “chart the future of this important facility.”
The new lease “gives NGS and Kayenta Mine workers a fighting chance and gives Navajo and Hopi economies a moment to regroup for the work ahead,” Zinke said. “Now, NGS operations can continue while stakeholders examine opportunities for a new operating partner to extend the life of the plant beyond its original 50-year lease.”