'No path forward' for Navajo Generating Station or coal mine

Wind and solar now beat fossil fuel generation purely on economic grounds Updated

Donald J. Trump had a consistent theme during his 2016 election campaign: He dug coal. Coal would create jobs. Coal would launch a new economic bonanza, especially in rural states. And coal would power the United States.

The catch: Coal markets have all but collapsed. There are fewer buyers for coal and for even less for coal-powered energy. To be sure coal is not going away, anytime soon. But there are less expensive sources that are cleaner. And those alternatives are getting stronger. Last year was the lowest consumption of coal in nearly 40 years, according to The Energy Information Administration.

“It’s been another disappointing few months for the U.S. coal industry,” writes Clark Williams-Derry for Sightline.org. “And it’s been especially grim for Western U.S. coal companies hoping that Asian exports will revive their flagging prospects.”

And Indian Country, like other rural parts of the country, is right in the middle of changing times.

Tribes control nearly a third of coal reserves west of the Mississippi. Coal has provided a huge boost to tribal budgets and created high paying jobs for the Hopi Tribe, Navajo Nation, and Crow Nation. Some 25 tribes have significant coal reserves either with production or the potential for additional development.

Source: U.S. Environmental Protection Agency


But coal is a dirty fossil fuel. The production of electricity accounts for more 28.4 percent of the greenhouse gases that trap heat and make the planet warmer, according to the Environmental Protection Agency. More than two-thirds of that electricity comes from burning fossil fuels, and that’s mostly coal.

“The decline of the U.S. coal industry is the result of market forces, not a policy ‘war on coal.’ Any successful policy to revive the industry will be working against economic headwinds, and thus difficult to maintain over the long term,” writes Samantha Gross at the Brookings Institution. Although coal mining and coal-fired electricity generation are small contributors to the overall U.S. economy and employment, the decline of coal has had tragic consequences in certain communities. Working to ameliorate these impacts in affected communities is likely to be a much more effective strategy than attempting to revive the coal industry with policy.”

In other words: Coal is not coming back, and a better strategy is to look for alternatives. Easier said than done.

Last week the plant's operator, Salt River Project announced that it had reached an impasse in its negotiations with the Navajo Nation to transfer ownership of the Navajo Generating Station, a coal-fired electricity plant. The Navajo Nation created an enterprise to continue the plant, the Navajo Transitional Energy Company. As Salt River Project spokesman Scott Harrelson told The Arizona Republic. "We don't see a path forward.”

There is one fundamental reason for that: liability. The Salt River Project would like to have a hard number on its costs to clean up the site. The Navajo Nation, through its enterprise, is willing to invest a significant amount of money to do so. Both the Salt River Project partners and the Navajo Nation are keen to limit cleanup costs which could reach hundreds of millions of dollars. 

The Institute for Energy Economics and Financial Analysis research editor Karl Cates said the tribal enterprise purchase could be “catastrophic” if the tribe gets stuck with the massive cleanup liabilities at both the mine and plant. “It’s a big mess that the owners of the power plant would love to walk away [from],” Cates said. “It’s a big mess that Peabody Energy would love to walk away from.”

“Liability is the tail wagging the dog,” said Williams-Derry who studies the economics of coal for Sightline.org. Across the country, some operations have found it makes more sense to “lose money slowly” in order to avoid those liability costs. Others are transferring ownership just to avoid the liability.

“There’s no path forward on prolonging coal, period,” said Percy Deal, Navajo, who is now retired and a former Navajo County and tribal official. “There’s no believable business plan you can write when the market signals that something like coal is simply no longer economically viable. Today, our nation should be talking with SRP, but about renewable energy, not coal.”

The Navajo Nation continues to press for some kind of deal. The closure of the plant also means the end of the Peabody Kayenta Coal mine because that operation supplies the generation station, some 240 rails cars of coal every day. Not to mention the seven hundred-plus jobs. And the Navajo Nation and the Hopi Tribe receive significant royalties from the mine that fund tribal government, an estimated $40 million for the Navajo Nation and $18 million for the Hopis.

The Black Mesa Water Coalition and the Sierra Club have filed a notice of pending litigation to force Peabody to present its cleanup plan. “Peabody is trying to sidestep its reclamation responsibilities by pretending the Navajo Generating Station isn’t on track to close in 2019, but it is, and that’s been the case for two years,” said Jihan Gearon, executive director of Black Mesa Water Coalition.

So both the tribal governments and the companies keep throwing up ideas -- any ideas -- hoping there is a path forward for either the plant or the mine. 

One plan to save the mine would require a new railroad line so that the coal could be sold to Asia. But that project would take years and require a huge investment when the world is moving away from coal and prices are not stable enough to support that new investment.

Last week a press release from the Navajo Nation Council said: “From the outset” the council and the Navajo Transitional Energy Company “made clear that the potential transaction would be negotiated by the two companies, using their expertise. However, the Navajo Nation and Navajo Nation Council would need to approve all transaction documents or agreements that require such approval according to relevant laws.”

That is the problem. Any deal would require either the Salt River Project and its partners or the Navajo Nation to agree to an unknown cost. 

And even if that liability could be lifted the prospect for coal in the marketplace is not improving.

“Interestingly, wind and solar are now beating out fossil fuel generation purely on economic grounds. A decade ago, wind and solar both heavily relied on subsidies. No longer. Wind and solar are now the two cheapest sources of power in the US, according to 2017 estimates from consulting firm Lazard,” writes Williams-Derry for Sightline. “So cheap, in fact, that it is often cheaper to build and operate brand new wind and solar projects than to keep existing coal and nuclear plants in service.”

He said this is happening even while the Trump administration promotes coal and undercuts renewables.

“Despite it all, renewables keep chugging along, steadily stealing market share from coal,” he wrote. “The economics aren’t going to get any better for coal in the years to come. Most analysts project that both wind turbines and solar panels will just keep getting cheaper. Meanwhile, the best mines are played out and mining keeps getting more expensive.”

The Navajo Generating Station “owners and Peabody have mined and burned coal on Navajo land for 50 years. That’s generations of contamination they are accountable for cleaning up, and the Navajo Nation should never let them off the hook for that.,” said Nicole Horseherder, a resident of Black Mesa and a water advocate with Tó Nizhóní Ání. “The plan to retire NGS in December provides full accountability and guarantees proper cleanup and reclamation. And it gives the owners the certainty they need. Coal markets are dead and this moment provides an opportunity for the Navajo Nation to stop wasting time and move on to build a clean energy economy.”

The Navajo Nation will hold town halls on March 9 and 10 in Hardrock and Kayenta, Arizona. “Please bring constructive thoughts on this important topic affecting the future of the Navajo Nation and be prepared to share them with Navajo leadership,” said Navajo Council Speaker Seth Damon (Bááháálí, Chichiltah, Manuelito, Tsé Lichíí’, Rock Springs, Tsayatoh). “It is critical to hear from the grassroots and the families affected by this decision.” 

RESCHEDULED: KAYENTA TOWN HALL

WINDOW ROCK, Ariz. – The Kayenta town hall regarding the potential acquisition of the Navajo Generating Station by Navajo Transitional Energy Company scheduled for Saturday, March 9, 2019 is rescheduled for Sunday, March 10, 2019. The town hall will be from 10:00 am to 4:00 pm at the Kayenta Commission building.

The Hardrock Chapter town hall remains on Friday, March 8, 2019 from 10:00 am to 4:00 pm at the chapter house.

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Mark Trahant is editor of Indian Country Today. He is a member of the Shoshone-Bannock Tribes. Follow him on Twitter - @TrahantReports

Comments (1)
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RWM
RWM

Wind and solar are NOT less costly than existing coal. The unsubsidized cost of solar is still greater than $50/MWh, and the ongoing cost to operate and maintain a coal-fired plant is under $30/MWh. So, while it is “closer,” solar is still 70+% more costly. Furthermore, electricity from wind and solar generation is and always will be unreliable. Wind is only able to produce electricity roughly 40% of the time (i.e., when the wind is blowing) and solar only 25% of the time (i.e., when the sun is shining). Therefore, to make a fair comparison to coal or other traditional technologies, the cost of backup generation must be considered. A better comparison would include a combination of traditional resources and renewable resources—a much more expensive alternative. If you think batteries are the answer, at their current cost and when combined with solar and wind, think >$200/MWh. (And please don't reference any loss leaders for solar/battery combinations. Any fair look at the amortized costs for these systems would reveal that $20/MWh to $30/MWh for these is highly subsidized and not currently sustainable.) For wind, an additional and significant cost that is often hidden is for the transmission infrastructure that is required to deliver energy from where the wind is plentiful and the customers are few, to the load centers.

The bottom line: electricity from renewable resources is not cheaper than from existing traditional resources. It may be in the future, but it is not today.