By Mark Hand
September 4, 2018 - Keeping the 44-year-old Navajo Generating Station operating for as long as possible has turned into a bipartisan affair.
The facility — the biggest coal-burning power plant in the West and one that spews tons of the most hazardous air pollutants — was on its way to shutting down in 2019. Environmental and public health advocates were breathing a sigh of relief.
But then in 2017 the Trump administration stepped in and made saving the coal plant, located on tribal land in Arizona, a top priority of the president’s coal-first energy policy. The Trump administration wanted to ensure the 2,250-megawatt Navajo Generating Station — the seventh biggest source of carbon dioxide emissions in the country — had a post-2019 future.
The power plant’s supporters in the Trump administration, coal industry, and the Navajo Nation received more good news earlier this year when Marc Lasry, a top Democratic Party donor, expressed interest in buying the plant.
Lasry is the billionaire chairman and chief executive officer of Avenue Capital Group, a private equity firm that owns Middle River Power, a company that has more than 2,200 megawatts of power generation assets in operation or development.
After several months of researching the economics of purchasing a majority ownership stake in the old and inefficient Navajo Generating Station, Avenue Capital Group and Middle River Power decided the acquisition made financial sense.
Many members of the Navajo Nation have grown frustrated with their land and air serving as a toxic dumping ground so that Phoenix and other population centers to the south can have reliable electricity in their homes. They’ve written to Lasry, urging him not to purchase the plant.
Neither Lasry nor members of his investment team have yet to respond to the pollution concerns of the Navajo Nation residents, many of whom lack indoor plumbing and electricity.
Lasry, who co-founded Avenue Capital Group in 1995, was one of Hillary Clinton’s biggest financial supporters during her run for president in 2016. He also contributed thousands to her Senate campaigns. In 2006, Lasry also hired Chelsea Clinton to work at Avenue Capital Group while Hillary Clinton was a U.S. senator from New York. And he is a co-owner of the Milwaukee Bucks basketball franchise.
Earlier this year, former President Bill Clinton sat court side with Lasry at an NBA playoff game between the Bucks and the Boston Celtics.
In 2011, Lasry and Goldman Sachs CEO Lloyd Blankfein invested in Eaglevale Partners, the hedge fund set up by Marc Mezvinsky, Chelsea Clinton’s husband. Lasry invested $1 million, HuffPost reported in July.
Lasry has also reportedly donated huge sums of money to the Clinton Foundation, the nonprofit global policy group created by Bill Clinton.
But Lasry has also had close business dealings with President Donald Trump. He took Trump’s casino business, Trump Entertainment Resorts, into and out of bankruptcy in 2009, Institutional Investor reported last year.
Lasry’s team at his private equity firm began to show interest in the Navajo Generating Station after the Trump administration launched efforts to ensure the power plant stayed open beyond its scheduled 2019 retirement date.
Based on its analysis, Lasry’s team determined that pursuing the acquisition of the Navajo Generating Station would make economic sense. “We believe we can quickly illustrate the value proposition of NGS [Navajo Generating Station] under our planned scenario and effectively meet all of CAP’s power needs,” Middle River Power President Mark Kubow wrote in a May 2 letter to the Central Arizona Project (CAP) — the state’s massive water diversion canal.
Then this summer, the Sierra Club launched an online campaign to get Lasry to change his mind about purchasing the power plant.
“If the sale goes through, it’d be a massive cave-in to the Trump Administration and a huge step backwards for cheaper, more reliable clean energy projects,” the Sierra Club message reads. “Why doesn’t Marc Lasry invest his billions in clean, sustainable energy that benefits Navajo communities and our climate instead?”
Outside of the Navajo Nation, Middle River Power is developing a large solar plant in California called High Desert Solar. The 108-megawatt project will be located on about 670 acres of desert land located in San Bernardino County, California. The company also operates a 270-megawatt geothermal power facility in central California.
Among its fossil fuel assets, Middle River Power currently operates three natural gas-fired plants. The company is developing a dual-fuel (natural gas and diesel) plant in Maryland that will be built on the site of a former 400-megawatt coal plant that was officially closed down in June.
If the Navajo Generating Station deal gets done, the plant would become the only coal-fired generating facility in Middle River Power’s portfolio. The plant is located on the Navajo Reservation, just east of Glen Canyon Dam, near Arizona’s northern border.
Before Middle River Power showed interest in acquiring the power plant, the facility’s owners voted in early 2017 to close the Navajo Generating Station when their 50-year lease with the Navajo Nation expires in 2019. The owners were tired of losing money on their investment. The massive three-unit has been more expensive to run than natural gas-burning plants.
The power plant provides electricity to operate the Central Arizona Project, a 336-mile water distribution system built to deliver more than 1.5 million acre-feet of Colorado River water annually from western Arizona to agricultural users, Native American tribes, and municipal water users in load centers in Arizona. The plant also provides electricity to customers in the rapidly growing Phoenix area and other urban areas of the state.
Aside from the federal government, the Navajo Generating station is owned by four electric utilities: Salt River Project at 42.9 percent, Arizona Public Service Co. at 14 percent, Nevada Energy at 11.3 percent, and Tucson Electric Power at 7.5 percent.
The U.S. Department of the Interior’s Bureau of Reclamation, primarily a water management agency, oversees the government’s 24.3 percent ownership stake in the plant. It is the bureau’s only stake in a fossil fuel-powered electric power generating facility.
Tucson Electric Power has projected that it would cost an average of $56 to $57 per megawatt-hour to operate and maintain the Navajo Generating Station from 2020 to 2030. According to David Schlissel, director of resource planning analytics for research and consulting firm the Institute for Energy Economics and Financial Analysis (IEEFA), it is extremely unlikely the Navajo Generating Station could sell power at anywhere near that price on the wholesale market or through bilateral agreements with an electric utility or another power customer.
But Middle River Power’s analysis shows the Navajo Generating Station could sell electricity at $26.84 per megawatt-hour, less than half of what Tucson Electric Power forecasts. Such a price is achievable only if production costs at the power plant are cut drastically, Schlissel wrote in a report on the Navajo Generating Station published last month.
“To get where it needs to be profit-wise, Middle River or any other owner would have to lay off workers and cut wages and benefits for remaining employees at the plant,” Schlissel said. “Miners at Kayenta Coal Mine, which supplies the plant, likely would be similarly affected.”
Middle River Power has a track record of buying distressed energy businesses and wringing value from them. Earlier this month, the company presented a plan that would keep the Navajo Generating Station open by running it at a reduced capacity during off-peak demand. Reducing capacity could help the plant avoid closure, but it would also mean lost jobs in the area.
Russell Begaye, president of the Navajo Nation on whose land the plant sits, said a lease agreement with Avenue Capital Group and Middle River Power could be discussed by tribal lawmakers at a meeting in October.
“We look forward to the negotiations that need to take place and the continued collaboration with NGS owners in ensuring the transfer of assets,” Begaye said in a statement in July. “This selection is a preliminary stage of the process. No contracts have been signed. MRP [Middle River Power] has been given the opportunity to move forward in becoming the new owner of NGS. We will do everything we can to make sure this is a successful partnership.”
Unlike the residents concerned about the region’s air and water, other members of the Navajo Nation have rallied around the plant and a nearby coal mine — the Peabody Energy-owned Kayenta mine — that supplies coal to the power plant. Navajo Nation leaders are working with Peabody Energy and other industry interests on a campaign to keep the power plant open.
Since last year, the Interior Department has been in contact with Peabody Energy — a coal company with ties to President Donald Trump — about the future of the plant.
Officials from the United Mine Workers of America have traveled to Arizona to support the unionized workforce at the Kayenta Mine and praised Interior Secretary Ryan Zinke for his efforts to keep the Navajo Generating Station open.
The power plant and coal mine provide jobs — about 400 at each — to the Native American tribes in the region. Another estimated 2,300 jobs in the region are linked to the power plant and coal mine.
The power plant also has the capacity to produce enough power to serve all the residents of the National Nation plus extra power to serve other customers in Arizona. But serving the residents of the Navajo Nation was not why the power plant was built. The plant was built to serve the needs of the growing non-Native American population of of the Southwest.
An estimated 32 percent of all homes in the Navajo Nation lack electricity, while 31 percent lack plumbing, 38 percent lack water services, 86 percent lack natural gas and 60 percent lack telephone services.
The Navajo Tribal Utility Authority (NTUA) supplies electricity, water, natural gas, and wastewater treatment to residents of the Navajo Nation. The utility serves about 41,260 electric customers, 39,325 water, 14,105 waste water customers, and 7,930 natural gas customers.
The NTUA does not get its electricity from the Navajo Generating Station. Instead, it purchases its electricity from various power supply companies in the Southwest. NTUA, for example, has a wholesale power contract with Tucson Electric Power, but the contract is separate from Tucson Electric’s ownership stake in the Navajo power plant.
To be sure, the jobs at the Navajo Generating Station and Peabody Energy coal mine have helped thousands of Navajos and other Native Americans in Arizona make a living. But poverty remains pervasive in the region.
The Navajo Nation is the largest reservation in the United States, situated on more than 27,000 square miles of land — about the size of West Virginia — within the states of Arizona, New Mexico, and Utah. If the Navajo Nation were a state, though, it would be one of the poorest in the country.
With about 175,000 members spread out across the reservation, the Navajo Nation has an unemployment rate somewhere between 40 and 50 percent. An additional 100,000 Navajos lives off the reservation. The Hopi Nation — located within the Navajo Nation — is even poorer.
The owners of the Navajo Generating Station and the Kayenta coal mine, along with other groups that support the plant, want people to think they provide jobs to a vast majority of the Navajo Nation, Nicole Horseherder, an organizer with Tó Nizhóni Ání, an environmental group in the Black Mesa Plateau in northeastern Arizona, told ThinkProgress.
“That is completely false. They’re misleading the public by making it seem like the entire Navajo Nation is dependent on this workforce. We are not,” Horseherder said.
When the plant’s owners announced plans to close the plant, the Navajo Nation was offered an opportunity to prepare for a transition away from coal, she said. Leaders could have emphasized the development of renewable energy as a way to make sure no resident was without power. Renewable energy projects also would provide secure jobs.
Solar and wind resource potential on Navajo lands hold promise for longer-lasting benefits as opposed to the plans to prop up coal plants temporarily.
Of equal, if not greater, importance, shutting down the coal plant and mine would allow the Navajo Nation to address the health impacts families have suffered as a result of the region’s dependence on coal for the past four decades.
Like other communities across the country that rely on polluting industries for jobs, though, the Navajo Nation has found it hard to break away from the coal industry.
“Communities acquiesce to harmful industries because they are desperate for money and jobs, then become reliant on those industries and eventually find it difficult, if not impossible, to break away and chart a new economic course,” Evelyn Nieves wrote in a 2017 article for the Sierra Club.
Members of the Navajo Nation breathe some of the dirtiest air in the country. The Clean Air Task Force, a nongovernmental organization, estimates that pollution from the Navajo Generating Station, contributes to 16 premature deaths, 25 heart attacks, 300 asthma attacks, and 15 asthma-related emergency-room visits each year, with annual health costs of more than $127 million.
Middle River Power could squeeze profits out of the Navajo Generating Station by running it only at peak times and by making drastic cuts to plant costs such as worker salaries and maintenance.
If Marc Lasry succeeds, Navajo Nation residents will continue to breathe the same dirty air.
No authoritative long-term health study of the impacts of the power plant’s emissions has been undertaken. Navajo groups have unsuccessfully tried to get the Indian Health Service to study the health of the people who live near the power plant.
Horseherder and other members of the Navajo Nation who oppose the continued operation of the Navajo Generating Station wrote to Lasry earlier this year to request a meeting with him to discuss their clean energy goals for the region. The Navajo Nation members still have not heard back from Lasry or any officials with his companies, she said.
Officials from Middle River Power have met with officials of the tribal government that support keeping the plant open. “But I disagree that they are the official voice of the Navajo Nation,” she said.
Avenue Capital Group and Middle River Power had not responded to a request for comment from ThinkProgress at the time this article was published.
Joseph Greco, a senior vice president for Middle River Power, told Arizona utility regulators at a mid-August hearing that his company would operate the plant at 44 percent of its capacity, and at different rates during peak and off-peak demand, making it more economical while ensuring a steady power base.
The Salt River Project, the operator of the coal plant, said it’s been in talks with Middle River Power about acquiring the plant. But the Salt River Project could not discuss specific parts of the negotiations due to a nondisclosure agreement, the Associated Press reported last month.
The Salt River Project is a not-for-profit utility that serves about 1 million electric customers in the Phoenix area.
According to IEEFA’s Schlissel, the future is not bright for the Navajo Nation, even if Lasry’s firm saves the plant from closure.
Newly released data shows the coal industry is doing worse than it was when Trump took office in January 2017. Coal production is still on the decline. Coal-fired power plants are still closing. And Trump’s own Department of Energy doesn’t see these trends reversing anytime soon.
“Market conditions suggest an economic disaster any way you cut it, and one that would cause pain for workers, miners, and other members of the Nation,” Schlissel wrote. “There are sensible ways to invest in a region in need of federal attention on many levels. This is not one of them.”
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