Guest column: NGS Replacement Lease ready for Navajo Nation Council vote

The Navajo Generating Station uses coal to produce electricity. Because of recently declining prices of natural gas, the station is facing an uncertain future. Adobe stock

The Navajo Generating Station uses coal to produce electricity. Because of recently declining prices of natural gas, the station is facing an uncertain future. Adobe stock

After several months of thorough, good-faith negotiations, a replacement lease that would keep the Navajo Generating Station operating through the end of 2019 is now in the hands of the Navajo Nation Council for consideration and, hopefully, final approval.

The terms of the replacement lease were developed by a task force from the Navajo Nation and Salt River Project (SRP) on behalf of the NGS owners. The Navajo Nation Council will vote on the replacement lease sometime in June. NGS owners require a final decision by July 1.

Since the NGS owners voted to end their participation in the plant on Feb. 13, their principal objective has been to seek a way to keep NGS operating until the end of its current lease in December 2019 rather than close this year. This new timetable will allow enough time to decommission and dismantle the plant by that time.

We are now at a crucial point, where success depends on the Council’s yes vote. Should the Council vote no, NGS owners would need to close the plant this year to allow time to schedule the work to decommission the plant, seek the contractors to do it, and complete the process by December 2019.

If approved, the replacement lease will keep the plant operating for two and a half more years, preserve continued employment for NGS workers, and continue to ensure millions of dollars in revenues to both the Navajo Nation and the Hopi Tribe. For those NGS workers who are not ready for retirement and choose to stay with the plant until the end of 2019, SRP has ensured their continued employment with the company.

The NGS owners also have confirmed that they will continue to support efforts by the Navajo Nation or others to explore the potential to acquire and operate the plant beyond 2019.

Here are some key points of the agreement:

• The proposed 35-year replacement lease sets guidelines for retirement activities after 2019. It provides for long-term site monitoring as required by the U.S. Environmental Protection Agency. It also extends the lease to allow ongoing operation of the transmission system on the Navajo Nation.

• The agreement will require the NGS owners to make lease payments totaling approximately $110 million. The Navajo Nation will also receive minimum fuel purchase revenues of $39 million in 2018 and 2019 combined.

• The U.S. Bureau of Reclamation, which owns 24.3 percent of NGS, will provide transmission rights from the NGS transmission station to sites off the Navajo Nation. These rights total 500 megawatts and together with an operation & maintenance benefit are valued at more than $80 million. The non-federal owners of the plant — SRP, Arizona Public Service, NV Energy and Tucson Electric Power — have agreed to pay operating and maintenance costs of the transmission systems for 10 years.

• The agreement will allow the Navajo Nation to retain several NGS assets at no cost such as commercial buildings, the 78-mile railroad from the Kayenta Mine to the power plant, and the lake pump system.

As has been our practice, the NGS owners have agreed to continue to give preference to Navajos in hiring for post-closure employment and to require decommissioning and monitoring contractors to use a similar policy in their own hiring.

Water rights and water development have been important issues to the Navajo Nation for years. The NGS owners have committed to support the Nation’s use of Upper Basin Water and continued economic development on Navajo land.

This agreement is of historic importance. It provides the glide path needed to smooth the huge economic transition that will occur when NGS finally closes. It also eliminates a great amount of uncertainty for NGS workers, allowing them to work safely going forward and to finish strong.

The proposed replacement lease will ensure continued employment for Navajos during the years-long decommissioning process and it gives the Navajo people and the Navajo Nation choices that would not exist if the plant were forced to close by the end of this year.

For 43 years, NGS has sought to be a good neighbor to the Navajo Nation. We feel good that the efforts that went into making the replacement lease a reality, and the promise that it holds, are right and the right thing to do — for us, the Navajo people and all of northern Arizona.

Joe Frazier is manager of the Navajo Generating Station.


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