Last month, the fight to keep the Navajo Generating Station (NGS) open reached Capitol Hill, where tribal leaders addressed a congressional hearing, urging committee members to act to save the power plant and the jobs it brings to the area. On Tuesday, the Hopi Tribe, the United Mine Workers of America, and Peabody Energy took their case to court. In the suit, the three parties ask the U.S. District Court for the District of Arizona to enter a judgement affirming the obligation of the Central Arizona Project (CAP) to purchase power from the NGS, thereby preserving native jobs.
“The lawsuit filed by the plaintiffs simply seeks to uphold the law, require the Central Arizona Water Conservation District (CAWCD) to honor its statutory commitments and keep its word,” said former Arizona Congressman John Shadegg, now an attorney at Polsinelli, a Phoenix firm representing Peabody Energy and the other plaintiffs, the Hopi Tribe, and the United Mine Workers of America.
The NGS was originally built to provide both native jobs on the reservation and power for the CAP, a major water infrastructure project in the state of Arizona. Without the bulk purchases made by CAP, the NGS and the attached Kayenta mine have struggled to survive. Closure would severely harm the economy of both the Hopi and Navajo tribes, since the Kayenta mine is a major area employer.
“Tribal leaders agreed to develop a mine and a power plant on sovereign lands using tribally-owned coal to move water across the state with the assurance that we would receive a sustaining revenue stream for 70 years,” said Hopi Chairman Timothy Nuvangyaoma in a statement.
“The loss of 85 percent of our annual general fund based on the whims of the utility owners and the CAP would be devastating to the Hopi people,” he continued. “CAP staff cannot be allowed to continue this illegal approach. This plant should operate another quarter century as Congress intended”
At the heart of the case is the question of whether the Central Arizona Water Conservation District will be held to the terms of a 1968 agreement under which the federal government covered the cost of the infrastructure project with the understanding that the state would eventually repay the loan through the profits generated by NGS.
“Arizona went hand in hand to the federal government in 1968, saying that it didn’t have the money to pay to move water across the state,” Shadegg told InsideSources, who explained that the federal government agreed to cover the cost of the project so long as Arizona agreed to use power from the NGS to run the pumps and to repay the debt out of the “Navajo Surplus,” namely the power produced by the plant in excess of the government’s needs.
Since the 2017 announcement that the NGS would close 25 years earlier than expected, a variety of groups have been working to find ways to make the mine and power plant cost competitive. At the end of the day, all of these efforts rely on the continued use of NGS power for the CAP. In the last several months, investment banking adviser Lazard has worked to find potential buyers for the plant and has received bids from several of them. However, since the state entity is the largest single consumer of NGS’s power, buyers “might walk away” if the plant loses the government’s contract, says Shadegg.
“Our belief is that the CAP is obligated to take NGS power based on the statutes and agreements enacted when the plant was developed,” said Kemal Williamson, president of Peabody–Americas. “We are concerned that the board’s actions may interfere with a successful ownership transition and have asked the court to decide the issue.”
According to Shadegg, it will likely take a minimum of 2-3 months for the court to make a decision about the case. The CAWCD will have an opportunity to answer the charges and, potentially, to appeal the decision.
If the mine is forced to close, the impact on the local economy would be severe and negative. In addition to the revenues the mine provides for the Hopi Tribe, the mine and power plant currently employ 845 people and support thousands of additional jobs in the surrounding area. When the Hopi agreed to the use of their land and resources for the plant, they were promised that the project would have a 70-year lifespan. If they lose their lawsuit, the NGS is unlikely to remain open that long.