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Know the West

The life and death of Desert Rock

The Navajo Nation's proposed coal plant always rested on shaky ground. Now, it may collapse entirely.


Updated 8/16/10

More than four decades ago, the Hopi and Navajo tribal councils sold 65,000 acres of coal rights to what was then called Peabody Western Coal. The Black Mesa deal, engineered by a former U.S. attorney who represented the Hopi while working for Peabody on the sly, brought hundreds of jobs to northeastern Arizona. It also forced the relocation of some 10,000 people from land slated for the strip mine. Families and clans were split and relations between the two tribes strained. Starting in 1970, the mine began pumping more than 4,000 acre-feet of groundwater annually to send coal slurry 273 miles via pipeline to the Mohave Generating Station, dropping the Navajo aquifer and drying up local wells. 

Though the Black Mesa Mine closed in 2005, its associated Kayenta Mine still sends coal to the Navajo Generating Station on the reservation near Page, Ariz. In addition to this and the open pit Navajo coal mine, the reservation hosts two of the region's three coal plants. The tribe owns none of these facilities, and though it receives royalties and tax revenue, it has no say in how they do business. 

"Past development in Indian Country was the old formula where companies came in and built projects, but only leased the land and did not include the tribe as equity partners," says David Lester, a member of the Muscogee Creek Tribe and the executive director of the Denver-based Council of Energy Resource Tribes (CERT). "That old paradigm left us with all the social and environmental costs and none of the economic benefits." 

Given this history, it's no wonder the Navajo Nation, like many tribes, has tried to take control of resource development on its own land. The tribe's Desert Rock coal plant was conceived to do just that. In 2003, the Diné Power Authority, created by the tribal council to develop the tribe's energy resources, announced that the 1,500-megawatt facility would be built by the German company Steag Power (acquired the following year by Sithe Global Power) on Navajo land about 25 miles outside of Farmington, N.M. The tribe itself would own up to a half stake, exploit its large coal reserves, and, when the plant was finished as projected in 2005, send electricity off to markets with its own 500 kilovolt transmission line, which has been in the works since the 1990s. 

Navajo Nation President Joe Shirley Jr. hailed the project as an economic victory for the poverty-stricken reservation, where the unemployment rate ranges from 44 to 66 percent. Desert Rock would mean not only jobs -- 200 in BHP Billiton's expanded Navajo Mine as well as 1,000 construction jobs and 400 operation jobs for the plant itself -- but also $50 million in annual revenue. 

At the time it was proposed, the plant seemed to have a solid foundation: The economy was swinging back from a mild recession, real estate was hot and construction was booming, especially in the Southwest and California. To keep pace with a projected doubling in electricity demand, the International Energy Agency called for $1.6 trillion in energy investment through 2030 in Canada and the United States.  Regulatory agencies were generally more permissive, and Congress was nowhere near to passing legislation to rein in carbon emissions, while the Bush White House was refusing to acknowledge climate change. Yet despite the tribe's optimism, a closer look at how it and its partners went about obtaining permits and securing funds shows that Desert Rock always rested upon shaky ground. This March, after seven years of planning and with millions of dollars poured into attorneys, consultants and travel junkets, Sithe Global not only delayed the project once again -- beyond 2015 this time -- but said it is considering changing it extensively. In June, the company gave up the only funding it had secured for construction of the project, when it allowed a $3.2 billion industrial revenue bond and tax break from San Juan County, N.M., to expire. And now, with its champion Shirley stepping down because of term limits this fall, Desert Rock's days are likely numbered.

From the get-go, the Navajo tribal government's approach did little to reassure community members that Desert Rock would be different from past projects involving outside companies. To get the land for the plant, for example, the government paid elderly shepherds to sign over their grazing allotments without telling them what the land would be used for. (The tribe needed their permission because reservation land is held in trust for the Navajo by the United States government.) "They would bring a bag of groceries and tell them they would get a thousand dollars," says Lori Goodman of Diné Citizens Against Ruining Our Environment, or Diné CARE, a Navajo nonprofit formed in the 1980s to fight construction of a toxic waste incinerator and dump. "People told us they were harassed to the point where they got fed up and said, 'We'll sign whatever just to get you out of our face.' "

The move alienated many in the Burnham Chapter -- one of 110 local government subdivisions on the reservation -- where the plant would be located, and soon after Desert Rock went public, Burnham's members defeated a resolution to support the plant. Undeterred, the tribal government adjusted chapter boundaries, pushing Desert Rock onto the neighboring Nenahnezad Chapter, which then passed a resolution supporting it. "That was how it started," says Goodman. "And it's been like that ever since."

So Diné CARE began spreading the word that many Navajo people oppose Desert Rock. Along with the resistance group Dooda ("absolutely not") Desert Rock, elders and families also began to demonstrate against the plant, organizing blockades against Sithe and occupying a makeshift protest camp at the plant's site. 

Meanwhile, the Four Corners-area nonprofit San Juan Citizens Alliance took notice of the project, and the organization's New Mexico energy coordinator, Mike Eisenfeld, began poring over regulatory documents, e-mail messages and meeting notes obtained through Freedom of Information Act requests. In 2006, when the project's lobbyists began seeking tax relief from the New Mexico Legislature, claiming that it was necessary to make Desert Rock economically viable, Eisenfeld was there. "When (lobbyist Dick) Minzer was asked if they had their permits, he said, 'Yes,' " says Eisenfeld with a shake of his head. "And we're in the back" -- he raises his hand -- "saying, 'No!'" 

For three years running, the Legislature denied the lobbyists' requests, in large part because of the proposed plant's environmental impact on the state, says state Sen. Peter Wirth, D-Santa Fe. Even so, opposition to the plant came almost entirely from the three grassroots groups. New Mexico's congressional delegation either supported the project, as with now-retired Sen. Pete Domenici, R, or deferred to tribal sovereignty, as with Sen. Jeff Bingaman, D. And Sen. Tom Udall, D, formerly a U.S. representative, has consistently said Desert Rock would mean much-needed economic development for the Navajo. It wasn't until five years into the project's planning that the state of New Mexico itself stepped directly into the fray.

In July 2008, the Environmental Protection Agency determined that Desert Rock would not worsen pollution in the Four Corners region and issued it a key air-quality permit. Three months later, New Mexico joined environmental groups in appealing the decision. The state contended that the EPA failed to consider how Desert Rock would affect visibility within nearby national parks and failed to consult with the U.S. Fish and Wildlife Service on how the plant's emissions might increase water-borne levels of mercury and selenium and affect two endangered fish in the San Juan River. The state also asked the agency to consider evidence it had previously ignored -- that regional ozone pollution levels exceeded federal health-based air quality standards even without Desert Rock, which would add not only ozone and greenhouse gas emissions, but also mercury, sulfates, nitrates, carbon monoxide and both fine and large particulate matter. The region already hosts three coal plants, including the 1,800-megawatt San Juan Generating Station and the 2,200-megawatt Four Corners plant, as well as tens of thousands of oil and gas wells. 

As a result of the appeal, the EPA announced it was reconsidering portions of the air permit in early 2009. Nine months later, it reversed its Bush-era decision entirely -- in part because the permit lacked emission limitations for carbon dioxide. Developers had also had failed to complete a required consultation with the U.S. Fish and Wildlife Service on the two endangered fish. Shortly after that, the Bureau of Indian Affairs withdrew its biological opinion in support of the plant, acknowledging that Fish and Wildlife had "significant concerns" about the impact of the plant's potential mercury and selenium discharges on the San Juan River's fish. Without that document, the project's environmental impact statement remains incomplete. And without that, most other permits -- for mine expansion to feed the plant as well as the plant itself -- are impossible to obtain.

Even as Desert Rock's developers have struggled with permits and tax breaks, electricity markets have changed significantly. Initially, developers looked to California. But after that state's Public Utility Commission essentially banned new contracts for electricity from coal-fired power plants in early 2007 -- requiring utilities to generate or purchase power with emissions comparable to or lower than modern natural gas facilities, which emit about half the carbon emissions of coal -- developers turned to the interior Southwest. In Desert Rock's June 2007 draft environmental impact statement, Sithe listed seven of the region's utilities, all of which were projected to need new power, as potential customers.

Now, however, not one of those utilities plans to seek electricity from new coal plants. Although he's optimistic about the future of "clean coal" and the eventual development of new carbon-capturing technology, Resource Planning Manager John Coggins of the Salt River Project sums up the utilities' current viewpoint: Until it's certain how carbon emissions will be regulated and there's a commercially viable way to capture and store carbon, the Salt River Project, which serves the Phoenix area, has no intention of buying new coal power. In addition to the EPA's recent ruling that carbon dioxide and other greenhouse gases should be considered pollutants, the agency has proposed new air-quality standards for smog, which, if implemented, will affect everything from the transportation sector to factories and power plants.  

Securing funds for the ever-more-expensive Desert Rock, even from the Navajo Nation itself, has also proved difficult for Sithe. In 2003, when the project was projected to cost $1.5 billion, the Nation was expected to pay between 25 and 49 percent of construction costs.  Now, with estimated costs exceeding $4 billion, President Shirley's spokesman, George Hardeen, says that Sithe will have to foot the entire bill. In fact, the tribal council has yet to actually approve investment in the project. Within the agreement that the Diné Power Authority drew up between Sithe and the tribe, DPA's project administrator Ben Hoisington says the Navajo Nation still has the option to buy into Desert Rock and be a partner in the project.  The DPA is working with the tribal council's oversight committee and investment committee on the deal. "We are just trying to fine-tune it," he adds. "But we have to get the permitting done before we can make any commitments."

The tribe and Sithe have also failed to obtain federal money. In 2005, the Bush administration denied Shirley's request for a $1 billion loan; three years later, the Obama-Biden Transition Team denied a $2.9 billion request to help fund carbon capture and sequestration at the site. A June 2009 application to the U.S. Department of Energy's Clean Coal Power Initiative was also denied.  

Some tribal officials -- including CERT's Lester and DPA's Hoisington -- say the federal government is unfairly denying Indian projects. But there are significant discrepancies between the reality of the project and the words in the clean-power initiative application. Sithe insists, for example, that the project is supported by the host community as well as the Navajo tribal government -- and that the project is in "very advanced stages of development," despite lacking all of its permits.

This isn't the first time the Navajo Nation has stumbled while trying to develop its own energy resources. Since it was founded in 1985, the  Diné Power Authority has yet to develop a single energy project. Even the project that spurred the authority's creation in the mid-1980s -- the Paragon Ranch coal-fired plant planned for reservation land north of Crownpoint -- never came to fruition. "In '92, things went toward natural gas," says Hoisington, "and the plant was not feasible." At that point, the authority directed its efforts toward the Navajo Transmission Project, which would run from the reservation in northwestern New Mexico some 400 miles to Nevada. But more than two decades into the project's planning process, it also remains theoretical. 

In March, 2009, the Department of the Interior remanded the power line's environmental impact statement after environmental groups sued, arguing that the analysis -- completed in 1996 -- did not consider the greenhouse gas emissions or the environmental and health impacts from the coal plant it would likely serve: Desert Rock. On top of that, the project's only permit, for a segment of the line's location Arizona, will expire this October.

In the past, some Navajo Council delegates have complained about the authority's lack of results. In response, in 2003, the tribe's Office of Management and Budget prepared a report, questioning the authority's funding and its timelines for projects. Between 1990 and 2003, it found, the tribe had given DPA $9,373,381 "for the transmission project with no return to the nation." Diné CARE's Goodman estimates that the tribal council has allocated $20 million to the authority since 1990. OMB executive director Dominic Beyal agrees that Goodman is close. 

According to Hoisington, DPA has a staff of eight, and its budget goes mostly toward travel. "With delays in the (power plant) project, we have to have meetings not only regionally, but on a national level," he says. "We do a lot of presentations ... and we have to use consultants to help us move forward with the project, legally, environmentally and engineering-wise." 

He also says that the power authority has put some of the $20 million toward the transmission line's Environmental Impact Statement and "other studies" to determine which route would have the least impact. But those studies would have been paid for by the developers funding the projects, including Trans-Elect, an early investor in the transmission line, and Sithe. Unfortunately, it's impossible to say definitively how DPA has spent its money: Tribal governments are not obligated to comply with open-records laws.

Through most of the challenges, President Shirley's office has firmly maintained that Desert Rock is still a go, and Sithe and its public relations team have agreed. But early this year, the company pulled back from plans for two of its three coal-fired power proposals in the United States. In February, it abandoned a 300-megawatt waste-coal plant in Pennsylvania. In March, it transformed plans for its Toquop Energy Project near Mesquite, Nev., into a 700-megawatt natural gas plant with a 100-megawatt solar component. 

Shortly after, Sithe Executive Vice President Dirk Straussfeld admitted that the company is also actively reviewing Desert Rock to take into account economic and regulatory changes. The company is in discussion with utilities to learn what types of power resources they are seeking for the future: Desert Rock can only go forward if it has customers. Essentially, everything is on the table, he says, including perhaps the plant's design. "There is no need in 2015 for this, so it might be delayed," Straussfeld says, adding that Sithe has no plans to resubmit its air-permit application to the EPA. 

Steven Begay, general manager of the Dine Power Authority, has insisted the tribe will find a new company if Sithe balks. "Desert Rock is still on track," says presidential spokesman George Hardeen. "It's going to provide jobs that are needed on Navajo -- people are getting poorer, and Navajos want jobs."

But it's clear the tribal government is becoming increasingly desperate. For years, in response to environmentalists' lawsuit over the Navajo transmission line's environmental analysis, the tribe and project proponents claimed that the line and Desert Rock were two separate endeavors. Now, however, they say that building Desert Rock and the transmission line together is the only way the tribe can develop and market its renewable energy resources.

"The Desert Rock power plant is a keystone to building the capacity for tribal energy to be developed in a win-win scenario," says CERT's Lester. It's the lack of transmission that thwarts full development of renewable resources on the Navajo, Hopi and Hualapai reservations, he says. The nation is dotted with orphaned wind-farm proposals -- only a large-scale coal or natural gas plants can justify something as expensive as a 500-kilovolt line. "If we want the vast solar resources of the Colorado Plateau to be developed, we've got to have a transmission line," he says. "And Desert Rock would provide that transmission line."

Even if Lester is right, Desert Rock as coal plant looks to be on its deathbed. Its biggest proponent is on his way out of power. In July, Shirley lost a court bid to throw out term limits so he could run again this fall. And though the project probably won’t be a major issue in the election, neither candidate vying to replace Shirley overtly supports Desert Rock in its current form. The Navajo primary winner, state Sen. Lynda Lovejoy, says Sithe needs to deal with local concerns about how the 1,500 megawatt plant would deplete water supplies and affect air quality. The company also needs to commit to employing Navajos and training them to take on administrative and managerial jobs, she adds, and to the long-term well-being of the tribe. Although she suggests that a smaller megawatt plant might be a better fit for the tribe, Lovejoy says she’d most like to see the company agree to give more financial control over and more financial return from the project to the Navajo. But with no commitment from the tribal council to actually invest in the plant’s construction, that seems unrealistic.

For his part, Lovejoy's opponent, current Navajo Vice President Ben Shelly, actively opposes Desert Rock and has called the project “foolish.” “There is no hope of getting that particular power plant going under President Obama,” he says. Throw in roadblocks from the EPA and other federal agencies, as well as the state’s staunch opposition, he adds, and “there is no hope that we know of that it will be built.” In other words, says Shelly, it’s time to move on. “By saying no to Desert Rock,” he says, “maybe we can focus on other sources of power.”