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SRP objects to Navajo Council's version of NGS lease extension

Modified: Thursday, May 2nd, 2013

NGS is a sight­—and site—to behold. Negotiations to extend the site lease, however, are unsightly.

Less than 48 hours after Navajo lawmakers approved a lease extension for the Navajo Generating Station, the plant’s principal owner rejected the deal because unacceptable amendments had been added.

Salt River Project officials communicated their displeasure in a letter to Johnny Naize, Navajo Nation Council speaker. SRP spokesman Scott Harelson confirmed the company had communicated with Naize but would not divulge what was said. Naize did not return a phone message.

Harrelson did say, however, that SRP had previously identified a number of issues surrounding the lease extension that would not be acceptable.

As an example, he cited the Council’s request that SRP not object to any future claims the Navajo Nation might make on water from the Upper Colorado River Basin. “We’ve already stated that we don’t object to them making claims to water rights,” he said. “But we can’t commit to agreeing to something in the future without knowing what it might be about.”

Negotiations on the site lease extension have been ongoing for more than two years, he said.

After the respective negotiating teams reached an agreement, which received the blessing of Navajo Nation president Ben Shelly, at least one official in March objected to the composition of the Navajo team. That delayed approval for a few weeks.

Council members spent hours at an April 17 meeting discussing the deal but tabled it when they were unable to agree on the amendments. They reconvened April 29 and, after several more hours, approved it.

NGS had sent two buses to the council deliberations, as did the Peabody Mine, according to George Hardeen, a communications consultant for NGS.

Now that SRP has apparently made it clear to the Council that it objects to the agreement as amended, its response less than 24 hours earlier was relatively positive, saying the company was “thankful” to the Council. Harrelson explained that the initial reaction was because company officials hadn’t had time to fully review the language of the pact and were trying to be “somewhat discreet.”

The next morning, May 1, the Chronicle obtained what was purported to be an internal communication at NGS.

“Although SRP’s negotiating team hasn’t seen the final written amendments — which relate to issues like Colorado River water claims and how the plant is regulated — it appears that what the Council passed would not be acceptable to the NGS owners,” it reportedly read. “Earlier today, SRP sent a letter to Council Speaker Johnny Naize stating that fact. By including these new amendments to the previously negotiated lease amendment, the letter said, the Council was putting at risk a combined signing bonus and accrued payment of $8.4 million.”

In addition to perhaps 16 to 21 amendments that SRP has specific objections to, company officials are reviewing the proposed changes to determine whether they actually change the lease, rather than simply extend it.

Though the lease doesn’t expire until 2019, the environmental approval process for NGS is likely to take five to six years to complete, according to Harrelson. But that process won’t start until other issues are settled, most notably the site lease.

SRP and other owners of NGS are faced with the possibility of spending $600 million to $1.1 billion to install additional environmental upgrades to the coal-fired plant, Harrelson said, adding that they wouldn’t make that sort of investment without being certain the plant would be operating over the long haul.

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