Potential buyers for largest coal plant in the Western US back out

Two investment companies that had been negotiating a purchase of the Navajo Generating Station (NGS) outside of Page, Arizona, have decided to end talks without purchasing the coal plant. The 2.25 gigawatt (GW) plant is the biggest coal plant in the Western US, and it has been slated for a 2019 shutdown. That decision came in early 2017, when utility owners of the plant voted to shut it down, saying they could find cheaper, cleaner energy elsewhere.

The 47-year-old plant employs hundreds of people from the Navajo and Hopi tribes in the area. It is also served by Arizona’s only coal mine, the Kayenta mine, which is owned by the world’s largest private coal firm, Peabody Energy. After the news of NGS’ proposed shutdown, Peabody began a search for a potential buyer for the coal plant so as not to lose its only customer.

The Salt River Project, the majority-owner of NGS, published a press release on Thursday saying Peabody Energy retained a consulting firm to identify potential buyers of the massive coal plant. That firm came up with 16 potential buyers who had expressed some interest. Salt River Project says that it hosted numerous tours for prospective buyers and set up meetings with various regulators as well as the Navajo Nation. Ultimately, a Chicago firm called Middle River Power and a New York City firm called Avenue Capital Group (which invests in “companies in financial distress”) had entered into negotiations to potentially take over the coal plant and keep it running.

Reasons for and against

The two firms decided to back out of any deal this week. According to the Associated Press, Middle River Power and Avenue Capital Group “said they could not get anyone to commit to buying power from the plant, delaying the start of an environmental review.” In addition “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 told the Navajo Nation, according to the AP.

The Navajo Nation relies significantly on royalties from coal, in addition to the fact that the power plant and the mine together employ more than 900 people. Power plant employees are being given the option to transfer within Salt River Project’s company. “Regular employees of NGS are now being redeployed to other facilities,” the Arizona power company wrote in its press release. “SRP anticipates that by December 2019, only a small number of permanent employees will remain at NGS,” the company added.

Employees of the Kayenta mine will not have opportunities to transfer, the AP reports. Peabody claims that “99 percent of Kayenta’s workforce is Native American. Wages and benefits for a typical miner are more than 10 times higher than the Navajo Nation per capita income.”

Federal implications

On a national scale, the failure to find buyers for the coal plant is a blow for the Trump administration. The Department of Energy’s Bureau of Reclamation owns a portion of the plant and uses electricity from NGS to power the Central Arizona Project, which diverts water from the Colorado River to serve the central and southern portions of the state. In a statement to Ars, Bureau of Reclamation Chief of Public Affairs Theresa Eisenman wrote: “The Department remains committed to exploring options that stakeholders may present for an economically viable option for the Navajo Generating Station.”

The 2.25GW power plant represents two-fifths of Arizona’s existing coal-fired generation, according to the Energy Information Administration. Natural gas overtook coal as the primary fuel source for generating electricity in Arizona in 2016, and the state also gets a significant amount of electricity from its Palo Verde nuclear plant, which is the largest nuclear power plant in the country, at 3.9GW.

According to the Salt River Project’s 2017 annual emissions report (PDF), NGS’ three coal-fired generators emitted 15.89 million short tons of carbon dioxide last year, as well as 14,561 short tons of nitrogen oxide and just over 5,000 short tons of sulfur dioxide.

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