'We don't see a path forward': Navajo coal plant negotiations hit big roadblock

Ryan Randazzo
The Republic |

Negotiations for a Navajo Nation energy company to take over the troubled coal plant near Page have hit a major impasse over who could be responsible for the eventual cost of clean up.

The owners of the Navajo Generating Station, which is on tribal land and fed by a mine on Navajo and Hopi land, are planning to close the power plant this year.

The Navajo Transitional Energy Company, or NTEC, which is owned by the tribe, has been negotiating to take over the plant, which is the largest coal-fired generator in the West.

But a Feb. 25 letter from NTEC to the power plant owners, which include Salt River Project and Arizona Public Service Co., indicates the deal has stalled because the parties cannot agree over the long-term liability for the plant.

The parties met Wednesday and an SRP spokesman said Thursday the deal stalled.

"The discussion we had with them yesterday did end at an impasse," SRP spokesman Scott Harelson said Thursday. "We don't see a path forward."

But Navajo Nation Councilman Nathaniel Brown said the tribe's elected officials hope to continue moving the discussion forward

"The Nation would still like to continue the conversation," Brown said Thursday.

Clean up of site is at issue

If SRP and the other owners of the plant close this year, they are responsible for site remediation, which would include not only taking down the power plant but cleaning up coal ash there.

The letter does not cite a sale price for the coal plant, but SRP officials have said that while they are not looking to profit from the sale they do want to assure that the utility and its shareholders will not be liable for any unforeseen expenses if the plant is transferred to another owner.

The plant owners lease the land from the Navajo Nation.

Because SRP and the other owners have run the plant since it opened in the 1970s, they are responsible for the majority of the clean up, even if new owners take over the plant and run it for another decade or two.

The plant's current owners have agreed to put money in an escrow account to pay for the eventual clean up of the plant if it is transferred to NTEC.

And NTEC has agreed to a second clean-up fund as a "backstop." NTEC has offered to issue a performance bond, and is willing to negotiate the amount, to pay any potential cleanup liability beyond what SRP is offering.

But SRP wants even more: full release from any further liability, according to the letter.

"The SRP negotiating team, however, keeps pointing to unnamed hypothetical future decommissioning liabilities as the basis for requiring a guaranty," the letter said.

Harelson confirmed the negotiations ended over clean-up liabilities.

NTEC said in its letter that the money SRP and the other plant participants are offering would, by SRP's own estimate, cover the full cost of cleanup. And anything in addition to that would be paid with NTEC's bond.

NTEC said in the letter that such a bond is how NTEC structured its purchase of the Navajo Mine and part of the Four Corners Power Plant in New Mexico after the tribe formed NTEC in 2013 for that purpose.

SRP mum on whether negotiations will continue

NTEC asserts that there is no precedent for what SRP is asking.

"There is no need or justification for the kind of absolute and unconditional guaranty from the nation that SRP has been requesting," said the letter from NTEC's Chief Executive Clark Mosely to the power plant participants.

Brown said a meeting is scheduled Saturday in the Phoenix area to continue negotiations. He said SRP has not confirmed whether anyone from the utility will participate.

Brown said the plant is too important to the regional economy to let it close as SRP plans.

"This is a huge impact not only to the Navajo Nation and Hopi Tribe, but to the state of Arizona and the Four Corners region," Brown said. "I think there is still a little bit of time."

Not all council members support plan

However, not all of the 24 Navajo Nation Council delegates support NTEC's plan to take over the plant and coal mine.

"There are some of us that feel like that was a little premature," Councilman Daniel Tso said Thursday.

Tso said he is concerned there is not a sufficient market for the energy to warrant the investment.

"We understand that California ... now the voters have voted to no longer purchase power that is coal-fired electricity," he said.

He also is concerned because NTEC's proposal is to not operate the plant at full capacity, which means the $40 million or so the operations bring annually to the tribe will not be made up if the plan goes through.

"OK, you are going to lose $40 million in revenue, but if you are only operating at two-thirds power, then the full potential for that $40 million is not what is going to come back," Tso said.

He said it appears the deal is scuttled.

"NTEC is trying to deflect and say they are still at the negotiating table, but if there is nobody at the other end of the table, then how can negotiations continue?" Tso said.

Reach reporter Ryan Randazzo at or 602-444-4331. Follow him on Twitter @UtilityReporter.

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