A path paved in coal

Navajo Nation looks to old energy to break from past

Forty years ago, the Navajo Nation and Southern Ute tribes languished side by side, mired in high unemployment and poverty.

Today, worth billions, the Southern Ute Indian Tribe is one of the richest in the United States, while the Navajo still suffer as one of the most impoverished communities in the country.

The difference? Energy.

While the Southern Utes have natural gas, the Navajo Nation has coal, which has for decades been extracted to feed various large-scale power plants, including in the Four Corners. But that revenue has come under threat by tightening air-quality regulations. At the same time, natural gas, a cleaner fuel source for generating electricity, has grown cheaper and more abundant because of hydraulic fracturing.

The shift has left Navajo leaders in a quandary: either continue investing in coal in the hopes it will remain a significant fuel source, or cut their losses and choose another investment.

The tribe is staking its future on coal.

The Navajo Nation is in negotiations to buy the Navajo Mine from BHP Billiton in 2016 when BHP's lease expires.

Opponents say all the deal will do is saddle the tribe with a huge environmental cleanup. Tribal leaders say coal is a viable fuel source, and buying the Navajo Mine will save jobs and provide a foundation for the tribe to build a formidable energy portfolio similar to the Southern Utes.

Tribal leaders' plans will have far-reaching effects, not only for members – some of whom still live without electricity or plumbing – but also for residents throughout the region, who have seen haze cloud their views and threaten their health.

“We see how Southern Ute is using natural resources to advantage the tribe. We think they're doing well as far as adapting with the times,” said Navajo member Dailan Long, whose family lives near the Navajo Mine that is close to Fruitland on Navajo land.

“I definitely see a much older mind-set managing our economy, which has gotten us to the point where we are now. I think they (the Navajo leaders) could take a much more rational and logical approach to energy alternatives,” said Long, who formerly worked for Diné Citizens Against Ruining Our Environment, a Navajo environmental-activist organization.

The fossil fuel of the future

Dust billows at the Navajo Mine as a dragline excavator scoops dirt into its bucket and transfers it into a pile nearby, exposing coal for a bulldozer to grab.

Workers pour an ammonium-nitrate fuel-oil mixture into holes dug into the side of the mine to later blow up sections to reveal more coal in its depths.

The coal mine accounted for $53.6 million in direct revenue in 2012, about $110 million when taking into account lease and royalty revenue.

The 33,000-acre surface mine supplies the Four Corners Power Plant, about nine miles north, with about 8 million tons of coal a year.

BHP and Arizona Public Service approached Navajo Nation this summer about buying the Navajo Mine after the two entities failed to reach an agreement over coal prices, said Erny Zah, spokesman for the Navajo Nation president.

Under the preliminary negotiations, the tribe would give any federal and state tax revenue to BHP until 2016, when BHP's lease ends to pay for the mine, Zah said.

It's unclear who would take on the legal liabilities associated with eventual mandatory cleanup of the mine. The Navajo Nation emphatically says the tribe will not be responsible, and BHP says the issue is still part of the negotiations.

Going against the national energy tide

While global demand for coal remains high, coal production in the United States dropped about 7 percent in 2012, according to the U.S. Department of Energy. Coal still provided 42 percent of the nation's electricity in 2011, but just four years ago, it was providing nearly half.

“If we're talking about coal development and revenue as a major source of funding for the tribe, why didn't they negotiate this (sale) decades ago?” Long said.

He believes BHP wants to walk away from the cleanup responsibilities and leave the tribe with the bill.

“I think that it's definitely an exit strategy on behalf of BHP,” he said.

In contrast, the Southern Utes have focused on energy sources that will likely grow.

In 2008, the Southern Utes formed a separate company to manage its new-energy investments that include wind farms and biofuel projects.

The U.S. Energy Information Administration expects coal power to decline to 35 percent of total American electricity generation by 2040. Natural gas is expected to generate 30 percent of the nation's electricity within three decades.

Navajo Nation tribal officials acknowledge the new energy realities and have invested in alternatives, especially natural gas. Oil and gas contributed $48 million in revenue to the tribe in 2012.

The tribe also has invested in an 850-megawatt wind farm.

But coal will nonetheless remain the centerpiece of Navajo Nation's energy portfolio moving forward.

“We want to make sure coal is part of the picture for at least another couple of decades, if not longer,” Zah said.

But tightening environmental regulations that shutter coal-fired power plants could further strangle coal production.

Mike Eisenfeld and other environmental activists don't anticipate the Four Corners Power Plant will remain open for more than 10 years, as federal scrutiny of its environmental impact increases.

“I don't think they're sustainable now, and the sooner we figure out a transition plan to wean ourselves from big coal plants the better,” said Eisenfeld, New Mexico energy coordinator for the San Juan Citizen's Alliance.

APS is decommissioning its three oldest generating units at the Four Corners Power Plant rather than install new equipment to meet EPA regulations. This will result in a 30 percent reduction in production at Navajo Mine and layoffs at both the mine and power plant.

For a tribe with a roughly 50 percent unemployment rate and more than 50 percent of its members living below the poverty level, the closure will be a painful blow.

“One of the reasons we're exploring the possibility of taking over Navajo Mine is we're looking at saving jobs at the mine and also at the power plant because one cannot exist without the other,” Zah said.

If the power plant closes, Navajo Mine may have to shut its doors. This was the fate of the Black Mesa Mine in 2006 after the Mohave Generating Station, near Laughlin, Nev., which it supplied, shut down.

Navajo Nation's other plans to secure a future for its coal haven't been met with much success.

Less-energized alternative

In 2003, The Navajo Nation proposed a new coal-fired power plant called the Desert Rock Energy Project, which would be supplied by an expanded Navajo Mine.

Under the project, international energy developer Sithe Global Power would have built a new 1,500-megawatt power plant on Navajo land about 25 miles outside Farmington. The plant would have been among the largest in the country, and it would have provided electricity for 1.5 million customers.

The tribe heralded the power plant as an economic victory, saying it would provide 400 jobs at the Desert Rock power plant, 200 additional jobs at Navajo Mine and $50 million in annual revenue – almost half of Navajo Nation's current total coal revenue.

The EPA approved Desert Rock in 2008 and touted it as “state-of-the-art,” but the agency reconsidered the project's air permit after New Mexico joined environmental groups in appealing the EPA's initial approval. In 2009, the EPA reversed its decision and revoked the air permit.

For the Navajos, losing the project was a crushing blow.

“(Navajo Nation) viewed Desert Rock as a huge economic opportunity,” said Tom Shipps, an Indian law lawyer who works for Colorado's Southern Ute tribe. “The technology employed at Desert Rock could have been great improvements. Concerns about the environment drove a lot of the criticism, especially around here.”

The project remains in the back of tribal leader's minds, Zah said. One idea is to convert it to a natural-gas plant.

Still, the question of what to do with the Navajo Mine would remain if a new power plant were to run on natural gas.

In the meantime, coal is the focus of the tribe's energy strategy.

BHP gives a qualified endorsement of that strategy.

“Coal will continue to be an important part of meeting the energy needs of the U.S.,” Norman Benally, spokesperson for BHP, said. “Granted there are mandates coming from the EPA that are limiting the use of coal and in some areas shutting down power plants that generate electricity. But we believe coal will be part of the energy portfolio, though limited, until such time that renewable energies have or will become viable.”

jdahl@durangoherald.com

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