Navajo coal plant is the next to close; the end of an industry

Historical photo via National Archives

The Associated Press

Navajo President Jonathan Nez: 'We are moving forward with renewable energy as our top priority'

Felicia Fonseca

Associated Press

FLAGSTAFF, Ariz. (AP) — The closure of a coal-fired power plant on the Navajo Nation sooner than expected will be a major blow to a region where coal has been a mainstay of the economy for decades.

The Arizona Public Service Co. now plans to shutter the Four Corners Power Plant near Farmington, New Mexico, in 2031 when its coal contract expires rather than wait until 2038. 

The news came as New Mexico regulators consider plans for the 2022 closure of San Juan Generating Station, another coal-fired power plant just miles away off the Navajo reservation.

The moves have prompted regional officials to say they are even more focused on promoting tourism and recreation as economic alternatives and ensuring the area has reliable internet and other infrastructure to entice manufacturing, data centers and other businesses. 

"There's a lot of transitioning happening," said Arvin Trujillo, chief executive of Four Corners Economic Development group. "We're looking at how do we take the challenges we have and begin to look at more positive aspects and how do we get the full region to begin to work together."

The Four Corners plant went online in the 1960s. Arizona Public Service Co. is the majority owner, with smaller shares held by Public Service Co. of New Mexico, the Salt River Project, Tucson Electric Power and the Navajo Nation.

Three of the units shut down in 2014, and the coming full closure likely means the coal mine that feeds the plant will shutter, too. The mine is owned by the Navajo Transitional Energy Co. — a business arm of the tribe. The company said Thursday its plans and financials have centered around the end of the coal contract in 2031, and it will work to diversify the tribe's energy sources.

The mine and power plant employ more than 700 mostly Navajo workers. The plant has an annual payroll of nearly $100 million, APS said. Another $100 million a year is paid in taxes, fees and coal royalties to tribal, local, state and federal entities, with an economic impact that APS estimates is more than double that amount.

APS spokeswoman Lily Quezada said the utility will work with employees and nearby communities on the transition. 

"We will be open and transparent and will provide as long a lead time as possible to reduce the impact of job losses and lower tax revenue," she wrote in an email.

The other owners have no plans to run the power plant themselves and said they'll replace the coal-fired power with other sources. 

Arizona requires utilities to get 15 percent of their energy from renewable sources by 2025. APS has a more aggressive plan, saying it will rely on the nation's largest nuclear power plant as it adds renewable power, battery storage and other sources of energy. It has vowed to have 45 percent renewable energy by 2030 and be carbon-free by 2050. 

In New Mexico, investor-owned utilities must be carbon-free by 2045 under an energy transition law adopted last year. Implementation of the law is tangled up in a regulatory fight, but Public Service Co. of New Mexico already has pledged to divest itself of coal and natural gas by 2040.

The closure of the Four Corners Power Plant likely will mark the end of decades of coal mining on the vast Navajo Nation, which extends into Arizona, New Mexico and Utah. Two other power plants that relied on coal from the reservation closed in 2005 and last year.

Navajo Nation President Jonathan Nez said the tribe isn't closing the door on fossil fuel but is heeding public desire for energy developed from wind and solar. The tribe has a couple of solar plants in Kayenta, Arizona, and is working with the Salt River Project on others.

"The Nation has an abundant amount of coal, and we don't know what types of new technology will be developed in the future that might allow for cleaner production of power," he said in a statement. "But we are moving forward with renewable energy as our top priority."

Trujillo, who worked as a coal mining engineer for more than a decade and later worked for APS, said some people are reluctant to move on from an industry that built the middle class Navajo Nation. He said his group also is working with area colleges to retrain the workforce.

"The biggest piece is that uncertainty," Trujillo said. "People don't know, and when they don't know, they start to get scared and they don't know how they're going to take care of their families."

Meanwhile in Wyoming, a company owned by the Navajo Nation is facing new challenges.

The Navajo Transitional Energy Company owes the federal government more than $10 million in unpaid taxes accrued from mining coal in three Powder River Basin mines in September and October, the Casper Star-Tribune reported Thursday.

The U.S. Interior Department filed a motion in bankruptcy court this month for mining operations at the three mines, officials said.

The company took over the Antelope and Cordero Rojo mines in Wyoming and the Spring Creek mine in Montana in October from bankrupt coal firm Cloud Peak Energy, officials said. Part of the agreement was that Navajo Transitional Energy Company would pay royalties accumulated since May in payments, but the company fell behind, officials said.

Coal companies must make production royalty payments to the government for all minerals extracted from public land and payments are due the last day of each month following the month the coal is mined, according to federal law.

The company paid about $170,000 to the Office of Natural Resources Revenue in December, according to court documents, but the government is holding the small payment in escrow and not applying it to the amount due.

Navajo Transitional Energy Company did not immediately respond to a request for comment.

Even though Navajo Transitional Energy Company is willing to pay the royalties over time, Cloud Peak Energy is "liable to Interior for timely payment of the royalties, following coal production, as the lessee of the Assumed Federal Leases," agency officials said.

The Navajo Nation-based firm has not yet obtained the leases for the mines because all past-due royalty payments need to be settled before the government can transfer leases to a new owner, officials said.

Cloud Peak Energy still holds the permits and Navajo Transitional Energy Company will continue to operate as a temporary contract miner until it pays the accrued fees, officials said.

"Approximately half of all the royalties from federal minerals developed within the state of Wyoming come back to Wyoming," said Shannon Anderson, an attorney with Powder River Basin Resource Council, a landowners group. "We just can't afford to lose revenue that we are entitled to."

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