The Navajo Nation on Thursday signed an agreement to purchase Navajo Mine, west of Farmington, linking the tribe’s future to a decades-old coal mine whose sole customer faces increased scrutiny from federal regulators.
The tribe will take ownership of the mine Dec. 1. The mine’s current owner, Australian mining giant BHP Billiton, will continue to operate Navajo Mine through 2016.
The tribe faced the possibility that if BHP Billiton pulled out, the mine and neighboring Four Corners Power Plant would close, throwing hundreds of Navajos out of work and costing the tribe millions in tax revenue.
“For the short term, we’re talking about saving existing jobs on the Navajo Nation,” said Erny Zah, spokesman for Navajo Nation President Ben Shelly.
“If you take the mine and the power plant together, we’re talking about more than 800 jobs.”
Unemployment on the Navajo reservation ranges from 40 to 60 percent, Zah said. A majority of employees at the plant and mine are Native American.
The $85 million purchase was completed by Navajo Transitional Energy Co., a business entity created by the tribe. The mine generates about $40 million in annual revenue.
Navajo Mine has at least 100 years of coal remaining, Zah said.
The mine’s only customer is Four Corners Power Plant, a 2,040-megawatt coal plant operated by Arizona Public Service Co. APS, a Phoenix-based utility company, has agreed to shut down three of the plant’s five units under pressure from the U.S. Environmental Protection Agency to reduce emissions.
The plant is a major producer of nitrogen oxides, a pollutant that contributes to smog.
APS plans to complete a $294 million purchase of a Southern California utility’s stake in Four Corners by the end of the year, said Damon Gross, an APS spokesman. That would allow APS to shut down the three oldest stacks at Four Corners and install pollution-control technology on the remaining two units.
Arizona Public Service and Navajo Transitional Energy also must complete a contract to supply coal to the plant past 2016. The two sides have made significant progress on that contract, Gross said.
APS’ plan to close three units at Four Corners is expected to reduce demand for the mine’s coal by about a third, Zah said.
Federal regulators also are interested in the operation’s future. Four Corners Power Plant and Navajo Mine face an environmental impact statement process that for the first time will study the combined environmental effects of the plant and mine.
“For the first time ever, Navajo Mine and Four Corners Power Plant will be analyzed together in one document,” said Mike Eisenfeld, New Mexico energy coordinator for San Juan Citizens Alliance, a Durango-based environmental group.
The U.S. Office of Surface Mining Reclamation and Enforcement is conducting the review, which is expected to be released in 2014.
Eisenfeld cautioned that many layers of approval are necessary before APS can carry out its plan.
“There’s big decisions at hand,” he said. “This is one cog of many.”
Eisenfeld said he was disappointed by a lack of public participation in the Navajo Nation’s move to purchase the mine. The public has not seen reports from Navajo Transitional Energy’s “due diligence” team that examined the mine, he said.
The Navajo Nation is working on a couple of major ventures to expand the mine’s market beyond the coal plant. The tribe is in “active discussions” with BNSF Railway Co. to construct a new rail line from near the mine to Thoreau, N.M., Zah said. There it would connect with an existing BNSF line.
Shelly and other Navajo Nation officials also are discussing the possibility of building a new coal plant that would incorporate coal sequestration to meet any future EPA emissions goals.
“We’re not in denial as to what the future of coal might look like,” Zah said.