KIRTLAND, New Mexico
Faced with the possibility of losing $40 million in annual revenue and several hundred jobs for its members, the Navajo Nation last year placed a high-stakes bet on coal, agreeing to take ownership of Navajo Mine.
Only a few months later, that bet is looking increasingly precarious as the Obama administration increases pressure to limit carbon-dioxide emissions and utilities find a ready alternative in cheap natural gas.
The tribal government had little choice when it decided to take possession of the mine, said Lorenzo C. Bates, a member of the Navajo Nation Council. If it didn’t agree to take over the coal mine, there was a chance mine operator BHP Billiton would walk away, leading to the mine’s closure. That, in turn, would lead to shuttering Four Corners Power Plant, which relies on the mine for its coal.
The two operations employ more than 800 workers, a majority of whom are Navajo Nation members.
“When you take all those considerations, what alternative did the Nation have at the time we decided to purchase?” Bates said. “Nothing.”
In October, the tribe purchased Navajo Mine for $85 million. The mine officially transferred to the tribe Dec. 1.
The Nation faces the prospect of long-term bills coming due as the plant nears possible retirement in 2041. The tribe agreed to take on all liabilities related to the mine, meaning the Nation could find itself on the hook for workers’ pensions and millions in potential cleanup costs.
The mine and power plant also face scrutiny from an environmental impact statement conducted by the federal Office of Surface Mining, Reclamation and Enforcement. The agency is studying the cumulative environmental effects of operating the mine and power plant through 2041. The public comment period for the study ends June 27.
The Nation’s big bet on coal has come under heavy criticism from environmental groups.
Mike Eisenfeld, New Mexico energy coordinator for Durango-based environmental group San Juan Citizens Alliance, said the Nation initially gave some assurance that the tribe intends to transition toward renewable energy, particularly wind and solar. That emphasis has been missing more recently, he said.
“Now I think they’re going all-in again on fossil fuels,” Eisenfeld said.
Eisenfeld said he suspects the mine grew unprofitable, and BHP Billiton found only the Navajo Nation willing to take it on.
Lori Goodman, with the Navajo environmental group Diné CARE, said the tribe has provided little information since taking over the mine.
“There’s been no news, and there are a lot of unanswered questions,” she said.
The mine now is owned by Navajo Transitional Energy Co., a wholly owned subsidiary of the sprawling tribal government. The company is organized as a tribal enterprise, much like its casino and agriculture companies. The mine continues to be operated by BHP Billiton, a mining giant based in Melbourne, Australia. NTEC is expected to take over mine operations in 2016.
The fate of Navajo Mine is tied inextricably to that of Four Corners Power Plant. The aging coal-fired plant, which went online in 1963, is the mine’s sole customer. The Nation is exploring other ways to get the coal to other customers, including a possible rail line to Thoreau, New Mexico, but it’s unclear if the ideas will come to fruition.
At the same time, Four Corners needs less coal to operate. As part of an agreement with the EPA to fight regional haze, plant operator Arizona Public Service Co. closed three of the plant’s five units. That reduced production capacity to 1,540 megawatts, down from 2,100 megawatts.
The closure also means cleaner air in the region. Carbon-dioxide emissions were expected to decline by 30 percent, nitrogen oxides by 36 percent, mercury by 61 percent and particulates by 43 percent, according to APS.
A crew of about 70 APS employees is gradually taking apart the three shuttered units. Some equipment is being sold for future use at other sites, but much of it will be scrapped. Piles of scrap metal are gathered in spots around the plant.
David Bloomfield, plant manager, designed tanks and other equipment for the plant as a young engineer. Some of the equipment he designed is being removed.
“It’s a little sad, in a way,” he said.
APS plans to install additional pollution controls on the remaining units 4 and 5 in 2017-18. The controls, called selective catalytic reduction, or SCR, units, are being designed by URS Corp., Bloomfield said.
The greatest threat to the mine and power plant could come from tighter limits on carbon emissions. Because it’s on Navajo land, Four Corners is not subject to the proposed carbon limits for existing coal plants announced by the EPA on June 2. But the EPA is expected to impose similar limits on Four Corners and three other coal-fired plants on tribal lands in the Southwest.
Despite the mounting challenges to coal, Bates insists the Nation bought the mine with its eyes open. And, finally, after five decades relying on a foreign company for jobs, the Nation fully controls the mine’s future.
“We are no longer on the bench, on the sidelines,” Bates said. “We’re a player.”