Study shows positive economics for Navajo Nation of Navajo coal plant

The Navajo Generating Station (NGS) in northern Arizona will help contribute nearly $13bn to the Navajo economy and help support thousands of jobs from 2020 through 2044 – if agreements can be reached to keep the plant operating beyond 2019.

That is according to a study prepared for the Navajo Nation and the Salt River Project, which is the plant’s operator and a co-owner, by the L William Seidman Research Institute at the W.P. Carey School of Business at Arizona State University. The study was released by SRP on April 11.

According to the ASU report, the plant’s coal supplier, the Kayenta strip mine of Peabody Energy (NYSE: BTU), will contribute billions of dollars to the Navajo Nation economy through sustained jobs and wages if the plant was to remain operational through 2044.

NGS currently employs about 518 people, nearly 86% of whom are Native American. The Kayenta mine has more than 400 employees, of whom about 90% are also Native American.

“I have been saying we need to protect existing jobs on the Navajo Nation,” said Navajo Nation President Ben Shelly. “This study shows that the plant and the mine not only support existing jobs at the plant and mine, but support other jobs in the area.”

The ASU report examined the direct, indirect and induced economic impact of NGS and the Kayenta mine on the Navajo Nation using the IMPLAN model employed by the state of Arizona to examine various economic projections.

This study on the plant’s economic impact on the Navajo Nation is separate from a 2012 study from ASU that concluded that NGS and the Kayenta mine will provide more than $20bn in economic contributions throughout the state for the 2011-2044 period. The new study examined the economic effects exclusively for the Navajo Nation.

The plant’s lease and various rights of way with the Navajo Nation are set to expire around 2019 and the Navajo Nation Council is currently considering legislation to extend them. The plant’s owners are also renegotiating the coal supply contract with Peabody Energy. Perhaps most significantly, the U.S. Environmental Protection has proposed additional and costly environmental rules to address regional visibility.

NGS is a coal-fired power plant that provides electricity to customers in Arizona, Nevada and California, and energy to pump water through the Central Arizona Project. The participants in NGS include: the plant’s operator, SRP; the U.S. Bureau of Reclamation; Arizona Public Service; Los Angeles Department of Water and Power; Tucson Electric Power and NV Energy.

This is a 2,250-MW plant with a number of hurdles to clear

Located on the Navajo Indian Reservation near Page, Ariz., the station’s first unit began producing electricity in 1974. The plant currently has a capacity of 2,250 MW from three 750-MW units. NGS annually uses 8 million tons of low-sulfur bituminous coal from Peabody Western Coal‘s Kayenta mine, 78 miles to the southeast, which is hauled to the station by the Black Mesa and Lake Powell Railroad.

NGS has so far invested over $420m in SO2 scrubbers, and a further $45m to reduce NOX emissions. Over the past 18 months, the power plant has faced a number of difficult issues that threaten its future viability, the report noted. These have included:

  • The need to extend the site lease and rights-of-way for the NGS plant, railroad, transmission, and waterlines beyond 2019.
  • The need to also extend the Coal Supply Agreement with Peabody Energy beyond 2019.
  • A January 2013 proposed rule from the EPA that would require installation of additional emission control technology at NGS in the form of selective catalytic reduction for NOx control, as early as 2023, potentially costing in excess of $1.1bn.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.