September 21, 2018 / Modified sep 21, 2018 12:18 p.m.

Prospective Owner, Operator of Navajo Coal Plant End Pursuit

The companies said they could not get anyone to commit to buying power from the plant.

Colorado Navajo Gen hero The Navajo Generating Station can be seen beyond Lake Powell near Page, Arizona, April 2018.
Vanessa Barchfield/AZPM

FLAGSTAFF — Two companies that were negotiating to take over a coal-fired power plant on the Arizona-Utah line ended the effort Thursday, saying the challenges were too great.

The Navajo Generating Station, near Page, is one of the largest coal plants in the western United States. It was set to close at the end of 2019, the victim of lower natural gas prices and an environment that has not been friendly to coal.

The plant's coal supplier, Peabody Energy, launched a long-shot bid to find a buyer to save the 2,250-megawatt plant and the coal mine that has no other customers. New York-based Avenue Capital and Chicago-based Middle River Power showed interest and touted a plan to run the plant at less than half its capacity to prolong its life.

They announced Thursday they were terminating the effort. The companies said they could not get anyone to commit to buying power from the plant, delaying the start of an environmental review. A ballot measure to boost renewable energy standards in Arizona created more uncertainty.

"We have concluded, regrettably, that the steps required to facilitate our ownership and operation of NGS are no longer possible within the required timeframe," the companies wrote in a letter to the Navajo Nation.

The decision is a huge blow to the economies of the Navajo and Hopi tribes, which rely heavily on coal revenue for about 20 and 85 percent of their budgets, respectively.

Hundreds of tribal members are employed at the coal plant and mine. The power plant workers have offers to transfer to other facilities run by one of the owners and current operator, the Salt River Project, if the closure happens as planned. The mine workers do not.

Navajo President Russell Begaye said earlier this year that a lease agreement for new ownership would go before lawmakers in October, acknowledging it was an ambitious timeframe. In a statement late Thursday, he and Navajo Nation Council Speaker LoRenzo Bates remained optimistic that the tribe could put its coal resources to use through new technology and other unspecified options.

Percy Deal, who lives on the reservation near the coal mine, said the Navajo leadership should accept the decision that was an answer to his prayers.

"Now the doors are open to a full recovery to start using what is naturally here, which is the sunlight and the wind," he said. "That's what the great spirit gave us, those two precious gifts so we could utilize it and enjoy life."

Salt River Project spokesman Scott Harelson said the utility isn't actively working with any other entities to take over the plant.

The Navajo Generating Station was built to move water through a series of canals to serve Arizona's major metropolitan areas. The operator of the canal system also had switched to power produced by natural gas and said it had no legal duty to buy from NGS.

The U.S. Bureau of Reclamation has a share in the plant and said late Thursday that it's open to explore any other options to keep the power plant open, recognizing its impact to the tribal economies and water users in Arizona. The other owners are Tucson Electric Power, NV Energy and Arizona Public Service Co.

Interior Secretary Ryan Zinke has said keeping the power plant open is among the agency's top priorities, though it has not received any federal incentives despite efforts from Republicans in Congress.

Peabody called on the U.S. government Thursday to "take all necessary steps to ensure ongoing operation" of the plant and mine beyond 2019.

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