Peabody: 'Black is the new green'.

Kathy Helms, (Dine Bureau/Gallup Independent)

WINDOW ROCK – Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce testified Wednesday before a federal committee that carbon technologies now under development are changing the color of coal, placing the nation on a path to achieve the ultimate green goal of near-zero emissions.

“Black is the new green,” Boyce told the Select Committee on Energy Independence and Global Warming, chaired by Rep. Edward J. Markey, D-Mass.

Boyce, along with Steven F. Leer of Arch Coal Co., and Preston Chiaro of Rio Tinto went to Capitol Hill to answer questions on their positions on climate change, clean energy policy, and challenges facing their industry.

“Just as our national energy policy is at a crossroads, so, too, is the coal industry,” said Markey. “I believe Congress requires answers from the coal industry on their ability to be a part of our clean energy future.”

Boyce said Peabody shipped nearly a quarter billion tons of coal to customers in 23 countries on six continents last year – “nearly 75 pounds of coal for every man, woman and child in the world.” Peabody delivered the second best results in the company's history in 2009. Revenue totaled $6.01 billion on sales of 243.6 million tons.

U.S. Energy Secretary Steven Chu has issued a call to accelerate global development of carbon capture and storage, or CCS, technologies with the goal of broad deployment in as little as eight to 10 years, and the Obama administration has charged a new Clean Coal Task Force of federal agencies with breaking down barriers to developing as many as 10 commercial demonstrations of CCS as quickly as 2016, Boyce said.

“The world has ample room for carbon storage. In the United States, for instance, we could sequester CO2 for the next century and wouldn’t even use up 10 percent of the potential geology that’s suitable for storage, based on an analysis by Pacific Northwest National Laboratory,” he said.

Boyce did not mention the Navajo Nation or Peabody's failure to get a 10-year reopener agreement approved for the Black Mesa and Kayenta mines. Nor did he mention Black Mesa residents' lack of drinking water and electricity in his argument to the committee, focusing instead on China, India and Haiti.

Boyce told the committee that everyone in the room is a member of the so-called “golden billion,” enjoying a standard of living the rest of the world can only dream about. More than half the world’s population, or 3.6 billion people, lack adequate access to electricity, he said. Of that total, 1.6 billion – more than five times the population in the United States – have no electricity at all.

“They seek power for the most basic needs: clean drinking water, light and warmth. Coal is the only energy source with the scale and low cost to alleviate energy poverty.

“I urge the committee to look beyond the government halls where caps and carbon are under debate, and enter the huts of the hundreds of millions of people who live in poverty – the people who daily walk miles to gather firewood and waste to burn for the most basic of energy forms.”

Citing Haiti specifically, Boyce said, “Bringing those families out of severe and direct poverty-driven environmental harm must be priority number one, and electrification through large-scale coal generation is that solution.”

Meanwhile, on the Navajo Nation where unemployment hovers around 50 percent, Black Mesa residents mounted up Thursday for a five-day ride to Window Rock, where they hope to send a message to the Navajo Nation Council that the future of Black Mesa should be fully considered in current coal royalty “reopener” negotiations with Peabody.

“If the leaders who are negotiating on behalf of our water and homelands cannot come to our communities to explain to us what they are deciding, then we will come to them,” said Marshall Johnson of Tonizhoni Ani. Council kicks off its spring session April 19, when protesters will ride into Window Rock to greet them.

Residents have expressed increased concerns over the exclusion of community input regarding current coal royalty negotiations and have held community meetings to discuss the health of Black Mesa, a sacred mountain to Navajos known as Tadidiin Dzil or “corn pollen mountain.”

Peabody employees also met recently with the Resources Committee and voiced concerns that the company is not adhering to Navajo Preference, does not respecting cultural beliefs, and is not complying with environmental laws.

According to the lease agreement, the 1987 amendments provide for a reopener to negotiate increased royalty rates and royalty-tax caps for each successive 10-year period after 1987. The coal royalty rate for the Kayenta Mine is 12.5 percent, set in 1977, and 6.25 percent for the Navajo-Hopi Joint Use Area.

In 1993, the Navajo Nation initiated a lawsuit against the federal government for $600 million in damages from decades of below-market royalty rates. In April 2009, after years of conflicting decisions and appeals, the U.S. Supreme Court ruled against the Navajo Nation.

“For 14 years, the official position of the Navajo Nation was that it deserved at least a 20.5 percent royalty rate. Now, Navajo Nation leaders are trying to ram through another 10-year agreement with Peabody at the 12.5 percent rates,” said Nicole Horseherder of Tonizhoni Ani. “If the Navajo Nation is really concerned about economic prosperity, why are they negotiating at rock bottom rates?”

On April 1, Council held a work session on the reopener. Presenters included Peabody, United Mine Workers, the Division of Natural Resources and Black Mesa United.

“It's unfortunate that the reopener work session only had one group representing the views of some Black Mesa residents but excluded hundreds of voices of community members who are concerned about Peabody's coal mining operations and how it has impacted them,” said Marie Gladue of Voices of the People. “We need to be at the table because we are the ones who have to live with these consequences.”

Peabody's Boyce said coal advances energy security and provides low-cost electricity that powers the economy and helps people live longer and better.

“The real question isn’t: 'Will we use coal?' The U.S. has more coal than any other nation on Earth. We have hundreds of billions of tons of coal in the United States and trillions of tons of coal in the world. And we will use it all.

“The real question is: 'What is the proper path to move to what the presidents of China and the United States last year called '21st Century Coal'? That path is technology first ... deployment requirements second ... as we work together to accelerate the movement to green coal,” he said.

'Clean coal' a pipe dream for Four Corners?

Kathy Helms, (Dine Bureau/Gallup Independent)

WINDOW ROCK – Arizona Public Service Co. wants to be as transparent as possible in discussions with the Navajo Nation about the future of the 2,060-megawatt Four Corners Power Plant because at the end of the day, everyone expects APS to go off and do everything in its power to keep the facility alive.

“We've got almost 50 percent owners walking out the door. Someone's got to buy it. That's the reality,” Mark Schiavoni, senior vice president of Fossil Generation, told the Budget and Finance Committee this week.

The other reality is APS is best situated to buy out Southern California Edison's 48 percent share, but it can't move forward until it has locked in leases for the site, transmission and fuel, all of which are up in 2016. In addition, several other factors have the potential to impact Four Corners' future, including best available retrofit technology, or BART, for industrial facilities emitting air pollutants that reduce visibility.

On April 15, 2004, the U.S. Environmental Protection Agency proposed amendments to its July 1999 regional haze rule. The BART requirements apply to facilities built between 1962 and 1977 that have the potential to emit more than 250 tons a year of visibility-impairing pollution. Four Corners' first three units were placed in service in 1963-64; units four and five in 1969-70.

EPA is expected to propose BART requirements for the plant later this year. APS estimates costs for Selective Catalytic Reduction to improve visibility at nearly $900 million. Also expected are new mercury rules which would require $250 million in upgrades.

Budget and Finance member Hoskie Kee had a number of questions for Schiavoni, such as whether BART is “clean coal” technology. “I hear a lot of that term from the news media and all over. Is that what it is?” He also questioned whether the quality of coal from BHP Billiton's Navajo Mine is down.

“It always interesting when I hear clean and coal in the same sentence,” said Schiavoni. “Clean coal technology, all it really means is, basically, the gasification process that takes place allows you the ability to extract the CO2, the carbon. That's what you read about in potential carbon capture, sequestration – pumping CO2 into the ground much like you do in oil fields.

“There are things you can do to enhance your emissions, but nothing that really burns clean coal,” he said.

It's not just the carbon that's being captured in the gasification process. There are other chemicals coming off the process that also have to be captured and shipped away, he said, and though the technology has been in the works for a few years, the problem today is that it is not available on a commercial scale.

“Tampa Electric has a project – IGCC – Integrated Gasification Combined Cycle, where they have gas running through a gas turbine to generate electricity. But it's not utility grade, commercially available. It's probably 15 to 20 years away from that. It's not something that's going to happen today or tomorrow.”

Pulverized coal and supercritical plants have different types of environmental profiles. Though more efficient, they still do not burn clean, he said.

The last thing he saw on the proposed 1,500 megawatt Desert Rock power plant was that they wanted the coal gasification process put on there, he said, adding that they would lose about 40 percent of their energy just in making it work. “They're very inefficient, process-wise.”

Still, the real problem lies in what to do with the carbon once it is captured, he said. “We have a lot of people that believe in the NIMBY – not in my back yard – syndrome. Whether it's from nuclear, transmission lines, or whatever it may be, no one wants it in their back yard.

“Now we're going to talk about sequestering CO2 in someone's back yard. Who's going to own it when it burps and goes up into the atmosphere? What happens? Where's the liability? There's still a lot of work to be done,” he said.

Also in response to Kee's question, Schiavoni said the coal quality and BTU content from BHP's Navajo coal is not where they would want it, and they are losing generation.

“We've had a lot of operational issues as a result of coal quality, especially on our small units – one, two and three. We've had discussions with BHP,” he added.

Kee asked whether it was economically feasible to retrofit the newer units at Four Corners with natural gas.

“Gas saves you like 45 to 50 percent of your carbon, so it's not clean like everybody believes,” Schiavoni said. “But we did look at retrofitting and it would be cost-prohibitive.”

Delegate Francis Redhouse, who once worked at Four Corners, sat in on the Budget and Finance meeting and asked to be allowed to make some comments regarding hazardous materials at the site, including the fly ash pond.

“When the wind blows at 90 miles an hour, it goes all the way down to Upper Fruitland Chapter and I'm sure that LoRenzo Bates (Budget and Finance chairman) breathes in some of that, unless you provide him with a respirator.

“The fly ash and those ponds are carcinogens, if you look at it in terms of breathing it in. Those are cancer-causing contaminants and those are very important to me from the standpoint of looking at it on behalf of the Navajo Nation,” Redhouse said.

EPA is considering whether to regulate fly ash as solid or hazardous waste. That would cost APS an additional $60 million a year. Currently, the plant's fly ash impoundments are in full compliance with state and federal laws and dam safety rules, according to APS. Approximately 13 to 22 percent of the fly ash is sold for other uses, such as in the manufacture of concrete products.

Schiavoni said the ash ponds and dust are the most prevalent safety issues. Four Corners has retained URS to look at the ponds and determine how best to remediate them. “We're not going to wait for decommissioning to go down that path, because we do understand the issue with dust, including at the site,” he said.

APS is hoping for a 25-year fuel agreement, through 2041, and an extension through 2065 on the site leases.

“We think the units can last that long,” Schiavoni said. “With technology, we can make anything last.”

'Attitude adjustment' recommended for APS, Peabody.

Kathy Helms, (Dine Bureau/Gallup Independent)

WINDOW ROCK – Representatives of Arizona Public Service Co. came before the Budget and Finance Committee Tuesday to discuss the fate of the Four Corners Power Plant and went away with a word of warning: The attitude of APS toward its Navajo workers has to change.

Committee Chairman LoRenzo Bates said he and Resources Committee Chairman George Arthur have been meeting with some of the employees of APS.

“In one of the meetings there was about an average of 25 to 28 years of service sitting in that room,” Bates said. However, only 74 percent of APS' workers are Native American.

“APS was built 47 years ago. I would say the Navajo Nation leaders at that time envisioned that some of those employees would be in management. And after 47 years, I don't see it. Forty-seven years ago, there were probably not that many educated Navajos in engineering and so on, but that has changed,” he said.

With APS' change in management, workers are being transferred or laid off or are taking early retirement, Bates said, “but the Navajos that are there are not filling those positions. Those vacant positions are being filled from outside, yet you have 28 years of experienced Navajos that could fill those positions. That's one of the issues that is being brought forth.”

The complaint was similar to one raised April 1 during a work session on a coal royalty “reopener” agreement with Peabody Western Coal Co.

Phil Russell, international representative for United Mine Workers of America, told the Navajo Nation Council that though they have a contractual agreement with Peabody, the company is bringing in outside contractors.

“We've got enough Navajo people on our panel to do those jobs. I've got hundreds of Navajos that are welders, carpenters, truck drivers; but for whatever reason, Peabody goes outside to bring in those contractors.”

He said some of the Navajo workers who actually live on Black Mesa are coming forth to talk to them.

“They're telling us that they have mom-and-pop operations up there that are laying them off and using their own family members to operate equipment. We don't represent them, but we wanted to bring that forth to you. Because they don't have protection, they don't say anything. But we, as United Mine Workers, we're willing to talk on their behalf,” Russell said.

When the lease with Peabody first came forth, it contained provisions stating that Navajos would be trained, he added. “But when our Navajo brothers and sisters were laid off from the Black Mesa complexes, in order for them to get a job when their seniority number comes up at Kayenta Mine, Peabody is saying they have to be tested.

“What we have here is we have individuals that did jobs for years at Black Mesa Mine, and for whatever reason, when they go to Kayenta Mine, they're not qualified. That doesn't make sense. So what we're saying is, 'If you're going to do this, you'd better train them, because that is in the original lease agreement.”

Bates told Mark Schiavoni, senior vice president of Fossil Generation at APS, that though Schiavoni mentioned “in the spirit of trying to work together,” that spirit appeared only to be coming from him. “That same attitude doesn't seem to be coming from upper management. That attitude has to change.”

He mentioned last week's meeting regarding the Peabody leases as an example. It would only take Northern Agency delegates to say, “We have a problem,” and probably everybody would take a step back from any lease agreements that APS might want to move forward, Bates said. “You don't want that. I'm saying, now, straighten it up. Fix it.”

Schiavoni, who has been at Four Corners Power Plant for only a year, said, “I'm not going to apologize and I'm not going to look backward. I'm not part of that legacy. I don't disagree with your comment, or Chairman Arthur also. We have not done a good job of developing people, and it goes beyond Native Americans.”

Schiavoni said he does not disagree that they need a change in attitude. “It's been a long process. I think we're starting to change that.”

For too long, workers were suppressed, figuratively speaking, and weren't allowed to speak their mind, he added. “It was not a part of our culture – not just there, but across all my facilities. So we're trying to encourage that type of communication.”

These days, he brings a group of employees together in a room and asks them what they think is going well, what they don't think is going well. “They all have opinions. They all think they have the right answer; they know what needs to be done – and they do.

“But we haven't trusted them to give them all of the information and give them the opportunity to be part of the system. So we're challenging them in ways they haven't been challenged before. It doesn't always come across positive, and for that I take the blame. I provide a sense of urgency to the problem,” he said.

APS has promoted three Native Americans in the last six months to senior management positions, he added.

Brad Brown of Peabody told Council last week that the company's workers are represented by the United Mine Workers. “They do have a formal process to process grievances and claims, and we do that on a regular basis. We feel that is very effective.”

Brown said that in 2000, the total Native American work force was 378 out of 413, or 92 percent The total number of Native managers, supervisors and officials at that time was 19 out of 45, or 42 percent.

“In 2010, the total Native American work force out of a total of 427 employees that we have are 401. We're at 94 percent. The total Native managers, supervisors and officials is 44 out of 62, for 71 percent,” Brown said.

Black Mesa 'reopener' must be renegotiated.

Kathy Helms, (Dine Bureau/Gallup Independent)

WINDOW ROCK – The Navajo Nation Council spent nearly an entire day last week discussing the 10-year coal royalty rate “reopener” with Peabody Western Coal Co. for Black Mesa leases before it was determined that the deal is dead because the resolution was tabled by Council in December and an attempt to bring it back failed.

“Right now, we don't have a deal between the Navajo Nation and Peabody, with the exception that they will continue digging coal and if there is any revenue to be generated, it would basically be at the 12.5 percent royalty rate, period,” said Resources Committee Chairman George Arthur, sponsor of the resolution.

The bill came before Council the first week of November 2009 but was tabled with a directive that a work session be held within 30 days. The work session was held Dec. 21 and the resolution was tabled again Dec. 22 during a special session.

Another directive was made at that time to hold a work session within 90 days to review all leases since 1960 pertaining to Peabody and to possibly hold public hearings before presenting oral and written reports during spring session. Council has yet to see the leases and the public hearings haven't been held.

Approval of the “reopener” amendment would give the Nation 12.5 percent coal royalties until 2017 – the minimum set by Congress in 1977 – a signing bonus of $1.55 million for both leases, an annual bonus of $3.5 million a year for 10 years, and scholarship funding of $250,000, up from $186,000.

Peabody has operated the Kayenta and Black Mesa mines as two separate surface coal mining operations since the early 1970s. The Kayenta mining operation has supplied coal to Navajo Generating Station near Page since 1973, while Black Mesa supplied coal to Mohave Generating Station near Laughlin, Nev., from 1970 until December 2005.

Mohave and the Black Mesa mine closed in 2005 after utility company owners, led by Southern California Edison, could not reach agreement with the Navajo and Hopi tribes on coal and water supplies for the generating station.

Navajo gets full royalty of 12.5 percent under Lease 8580, which provides coal to Navajo Generating Station; both tribes get 6.25 percent each under Lease 9910, in the former Joint Use Area, which primarily provided coal to Mohave.

“The reopener, at the moment, is gone unless we agree to go back and renegotiate and reestablish an understanding that there is an agreement between the Navajo Nation and Peabody,” Arthur said, but added that the deal might not be the same.

Attorney General Louis Denetsosie said the consequences of not approving the 2007 royalty adjustment is the Navajo Nation would lose the $36.5 million that has been negotiated, compared to the $32.5 million negotiated in 1997.

“We have received $3.5 million already and we would have to return the $3.5 million to Peabody,” he said.

Britt Clapham, former deputy attorney general for the Navajo Nation who has been involved in reopener negotiations, told Council that rejecting the royalty rate adjustment has no impact on Peabody's operation. The company can continue to mine coal under its leases with the Navajo Nation until the coal runs out, whether Navajo approves the rate adjustment or not.

“The reopeners are relatively narrow. They are to adjust the royalty rate only if either party is dissatisfied. We have exercised that option in 1997-98 and again in 2007-2008. The question you have before you is to approve the revised royalty rate.

“The 10-year reopener does not reopen every aspect of the lease agreement. It merely reopens the royalty rate. That's what we can negotiate about. If the federal minimum increased, we would automatically go to that,” Clapham said, however, that has not come into play since the rate was set in 1977.

“The Navajo Nation can't give away under a Black Mesa lease what an administrative law judge vacated in a permit,” said Marsha Monestersky, program director for the Forgotten People. “They can't do anything with the Black Mesa lease. There is no Black Mesa Mine.”

An administrative law judge vacated a life-of-mine permit for the Black Mesa Complex in January, ruling that the Office of Surface Mining Reclamation and Enforcement violated the National Environmental Policy Act, and remanded the permit to OSM for further action.

“All there is, is the Kayenta Mine, because what the judge vacated was actually the Black Mesa Complex. They were going to fold the Kayenta and the Black Mesa mines together in the Black Mesa Complex,” Monestersky said, adding that the Navajo Nation was trying to do in the lease reopener what couldn't be done in the vacated permit.

“You can't issue a permit or a lease for a mine that doesn't exist. If there's only one mine, why would they have two leases? They're running out of good coal. There's no permit for Black Mesa Mine and OSM didn't respond and file an appeal in a timely manner, so if they want to reopen the Black Mesa Mine, they have to issue a whole new Environmental Impact Statement,” she said.

Forgotten People has vowed to file suit, based on the same grounds, against the U.S. Environmental Protection Agency if it issues a wastewater discharge permit for the Black Mesa/Kayenta mines. EPA held a meeting recently in Kayenta to discuss its plan to issue the wastewater permit.