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The Associated Press February 16, 2011, 8:52AM ET

Navajo lawmakers OK lease extension for NM plant

Navajo lawmakers on Tuesday approved a lease extension for a northwestern New Mexico power plant that means more money for the tribe, sending it to the tribal president for consideration.

The Tribal Council voted 18-2 to extend the lease for the Four Corners Power Plant until 2041. The tribe will receive $7 million a year under the lease that will track with inflation. That's up from an average of $1.5 million the tribe had been receiving annually under the previous lease.

The lease is the first step in Arizona Public Service's plan to close three of the plant's generating units and seek majority ownership of the remaining two from Southern California Edison. APS had said it would have shuttered the plant if the lease extension wasn't approved.

"We felt like we had made our case that the lease was good for the plant, it was good for the community, it was good for the employees that work there," said APS spokesman Damon Gross. "The council obviously supported that, and we're really appreciative."

The Navajo president has 10 days to sign or veto the legislation once it reaches his desk.

Under the measure, the plant would be required to have the best available technology to reduce sulfur oxide and carbon dioxide emissions -- an amendment that was added over lawmakers' concerns about pollution.

The Four Corners plant is the largest single source of nitrogen oxide emissions in the United States.

The U.S. Environmental Protection Agency has proposed cutting nitrogen oxides at the plant by 87 percent under a regional haze rule but has not developed carbon dioxide regulations. Under the proposal, smog-causing nitrogen oxides at the plant would drop from 45,000 tons per year to 5,800 tons per year.

The Navajo Nation EPA regulates sulfur dioxide emissions from the plant at a level consistent with federal standards. Executive director Stephen Etsitty said the agency will roll any decision the EPA makes on other emissions into the plant's operating permit.

He commended the council for addressing pollution as part of the lease.

"It just lays a good, solid foundation and stresses that environmental compliance is important in the renewed lease," he said.

The next step for APS, if Navajo President Ben Shelly signs off on the lease, is securing a fuel agreement from BHP Billiton, which supplies the coal to run the plant. A BHP spokesman said it currently is negotiating the price and details of a new agreement with APS.

The 45-year-old Four Corners plant, along with the nearby Navajo Mine, employs about 1,000 people -- the majority of them are Native American.

APS also needs approval from the Arizona Corporation Commission to buy out Southern California Edison's 48 percent share in the two newer units for $294 million. APS currently owns 15 percent of the two units.

The California utility is terminating its interest in the plant to comply with its state's laws that prevent utility providers from investing in most coal-fired power plants.

APS proposed the buyout as a result of that decision and the proposed pollution controls.

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