Salt River Project to payPeabody Energy $21 million to settle cleanup claim for Kayenta coal mine

November 22, 2019

Peabody Energy will be paid $21 million by Salt River Project (SRP) officials to settle claims stemming from the early closure of the Kayenta coal mine in Arizona.

The Peabody mine sent its last shipment of coal to the Navajo Generating Station power plant near Page, AZ which burned the last of that coal on Nov. 18 and shut down after a 45-year run. The Kayenta coal mine had been scheduled to run until 2044, but utility owners voted in 2017 to close the utility.

Peabody Energy issued a claim for $53 million to SRP for "premature" closure of the mine, and said SRP owed it millions for a variety of expenses, including severance pay to laid-off miners and equipment that Peabody bought for the mine that was not put to its full use.

Arizona Central reported that SRP officials did not publicly discuss which of Peabody's claims they agreed with and which they didn't, as they conducted their negotiations during a closed session with the board.

The amount is a fraction of the approximately $188 million in reclamation costs at the mine and about $170 million in expenses to tear down the power plant and remediate that site.

The agreement between SRP and Peabody should "resolve all outstanding issues," said Bobby Olsen, SRP director of supply trading and fuels.

SRP’s fuel contract with the mine included closure expenses, and SRP officials knew they would have some financial liability with the closure, Olsen said.

The plant is owned by SRP, the U.S. Bureau of Reclamation, Arizona Public Service Co., NV Energy, Tucson Electric Power, and previously, the Los Angeles Department of Water and Power.

As participants in the plant, those parties all owe Peabody some amount of money related to the mine closure, according to Peabody.

The total amount owed the mining company from all participants was $114.5 million, according to the company's claim.

Peabody asserted SRP was liable for both the 22 percent share the utility owns and the 24 percent owned by the U.S. government held by SRP.
The biggest chunk of the overall claim was $26.8 million in equipment relocation costs, according to Peabody.

The mine straddles the Navajo and Hopi reservations, and the tribes were paid proportional to the coal taken from their lands.
The claim involved several other items, including an electrical system to serve a mobile-home community on Hopi land.

 

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