# NAVAJO GENERATING STATION

AND KAYENTA MINE:

An Economic Impact Study

Dr. Matt Croucher, Dr. Anthony Evans and Dr. Tim Ja mes

L William Seidman Research Institute,

W. P. Carey School of Business,

Arizona State University

February 2, 2012i



## L. William Seidman Research Institute

**The L. William Seidman Research Institute serves as a link between the local, national, and internatio**  **nal**

**business communities and the W. P. Carey School of Business at Arizona State University (ASU).** 

**First established in 1985 to serve as a center for applied business research alongside a consultancy** 

**resource for the Arizona business community, Seidma n collects, analyzes and disseminates information** 

**about local economies, benchmarks industry practice s, and identifies emerging business research issues** 

**that affect productivity and competitiveness.**

**Using tools that support sophisticated statistical modeling and planning, supplemented by an extensive** 

**understanding of the local, state and national econ omies, Seidman today offers a host of economic** 

**research and consulting services, including economi c impact analyses, economic forecasting, general** 

**survey research, attitudinal and qualitative studie s, and strategic analyses of economic development** 

**opportunities.**

**Working on behalf of government agencies, regulator y bodies, public or privately-owned firms, academic** 

**institutions, and non-profit organizations, Seidman specializes in studies at the city, county or stat**  **e-wide**

**level. Recent and current clients include:**

• **Arizona Commerce Authority (ACA)**

• **Arizona Corporation Commission (ACC)**

• **Arizona Department of Mines and Mineral**

**Resources**

• **Arizona Hospital and Healthcare Association**

• **Arizona Investment Council (AIC)**

• **Arizona Public Service Corporation (APS)**

• **Arizona School Boards Association**

• **Arizona Town Hall**

• **The Boeing Company** • **Executive Budget Office of the State of**

**Arizona**

• **Freeport McMoran**

• **Goodwill Industries**

• **Intel Corporation**

• **Raytheon**

• **Salt River Project (SRP)**

• **Science Foundation Arizona (SFAZ)**

• **Turf Paradise Valley METRO Light Rail**

• **Waste Management Inc**ii



## Executive Summary

• This report, prepared for the Salt River Project (S RP) and the Navajo Nation, examines the direct,

indirect and induced economic impact of Navajo Gene rating Station (NGS) and Kayenta Mine,

individually and in aggregate, for the period 2011- 2044, at county and state level.

• NGS currently employs 538 regular workers, of which 83% are Navajo in origin.

• Kayenta Mine currently employs 320 union-represente d and 110 non-represented company

workers. Approximately 93% of the union workers ar e Native American, primarily drawn from

the Navajo Nation, although no specific number is a vailable. An estimated 20-40% of company

employees are also Native American but no specific estimate of Navajo Nation employees is

available.

• During the period 2011-2044, the operation of both facilities accounts for approximately

112,720 full-time or equivalent jobs years througho ut Arizona, including 32,912 direct job years.

• Retail trade (11.9%), health care (11.5%) and const ruction (10.4%) also enjoy significant indirect

job creation.

Overview of NGS and Kayenta Mine’s Cumulative State -Wide Total Economic Impact

Cumulative Impact

2011-2044

Total Private Non-Farm Employment 112,720 full-time or e quivalent job years

Gross State Product $20.46 billion (2011$)

Real Disposable Personal Income $11.16 billion (2011$)

**Source: Authors’ Calculations**

• Real GSP for the Generating Station and Mine combin ed during 2011-2044 is higher relative to

the baseline by almost $20.5 billion (2011$) throug hout the state.

• Real disposable income during 2011-2044 is higher r elative to the baseline by over $11 billion

(2011$) for the Generating Station and Mine combine d throughout the state.

• The principal beneficiary of the economic impacts i s the host county for each facility.iii Cumulative Adjusted State Revenues for NGS and Kaye nta Mine, 2011-2044

Category Cumulative Impact

2011-2044 (Millions 2011$) 1

Income Tax 203.72

General Sales Tax 276.25

Selective Sales Tax 80.13

Corporate Income Tax 119.47

Total 679.58

**Source: Authors’ Calculations**

• Both facilities cumulatively account for over $679 million (2011$) in adjusted state tax revenues

throughout the period, of which 40.7% is general sa les tax, 30% is income tax, 17.6% corporate

income tax, and 11.8% selective sales tax.

• Coconino County benefits from 39.7% of the 2011-204 4 adjusted state tax revenues, equating to

$269.5 million (2011$).

• Navajo County benefits from 34.6% of the 2011-2044 adjusted state tax revenues, equating to

$228.7 million (2011$).

• The continued operation of NGS and Kayenta Mine the refore exerts **significant** positive

economic impact for the host counties and Arizona a s a whole.

• Throughout the period, NGS and Kayenta Mine will al so make a number of direct payments to

the Navajo Nation.

• No additional quantification of the economic impact of NGS and Kayenta Mine exclusively for

the Navajo Nation is possible using the current REM I model.

• Additional research is recommended, consisting of a survey of Navajo expenditure patterns and

the development of a bespoke Navajo-specific IMPLAN impact analysis for 2011, to arrive at a

robust estimate of the economic impacts of NGS and Kayenta Mine exclusively for the Navajo

Nation.

1 General State Sales Tax includes authors’ estimate s of revenue from Prop 100 temporary tax.iv



## Table of Contents

Executive Summary ii

1. Introduction 1

2. Report Method and Scenario Examined 3

3. Simulation Results 4

3.1 Navajo Generating Station 4

3.2 Kayenta Mine 12

3.3 Cumulative Economic Impact of Navajo Generating Station and Kayenta Mine 19

4. Direct Payments to the Navajo Nation 22

5. Conclusions 23

References 26

Glossary 27v



## List of Tables

Table 1: Overview of NGS’ Economic Impact, 2011-204 4 5

Table 2: NGS’ Direct and Indirect/Induced Job Years for Private Non-Farm Employment, 2011-2044 7

Table 3: NGS’ Private Non-Farm Employment across Se ctors, 2011-2044 9

Table 4: NGS’ Cumulative Adjusted State Tax Revenue s by County, 2011-2044 10

Table 5: NGS’ Aggregate Adjusted State Tax Revenues for Arizona, 2011-2044 11

Table 6: NGS’ Cumulative Adjusted State Revenues by Tax Type, 2011-2044 11

Table 7: Overview of Kayenta Mine’s Economic Impact , 2011-2044 13

Table 8: Kayenta Mine’s Direct and Indirect/Induced Job Years for Private Non-Farm Employment 15

Table 9: Kayenta Mine’s Private Non-Farm Employment across Sectors, 2011-2044 16

Table 10: Kayenta Mine’s Cumulative Adjusted State Tax Revenues by County, 2011-2044 17

Table 11: Kayenta Mine’s Aggregate Adjusted State T ax Revenues for Arizona, 2011-2044 18

Table 12: Kayenta Mine’s Cumulative Adjusted State Revenues by Tax, 2011-2044 18

Table 13: NGS and Kayenta Mine’s Total Economic Imp act, 2011-2044 19

Table 14: NGS and Kayenta Mine’s Total Private Non- Farm Employment across Sectors, 2011-2044 20

Table 15: NGS and Kayenta Mine’s Total Adjusted Sta te Tax Revenues by Tax Type, 2011-2044 21

Table 16: Summary of the Statewide Total Economic I mpact of NGS and Kayenta Mine, 2011-2044 23

Table 17: Percentage Impact of Key Macro-Economic V ariables by Facility and Host County 24

Table 18: NGS and Kayenta Mine’s Cumulative Adjuste d State Tax Revenues by County, 2011-2044 24Page | 1



## 1. Introduction

Navajo Generating Station (NGS) is a coal-fired pow er plant serving electric customers in Arizona,

Nevada and California, and energy to pump water thr ough the Central Arizona Project. Located on the

Navajo Indian Reservation near Page, AZ., the statio n’s first unit began producing electricity in 1974, and

currently has a capacity of 2,250MW from three 750M W units. NGS annually uses 8 million tons of low

sulfur bituminous coal from Peabody Western Coal Co mpany's Kayenta Mine, 78 miles to the southeast,

which is hauled to the station by the Black Mesa an d Lake Powell Railroad.

To minimize its environmental impact, NGS has inves ted over $420 million in sulfur dioxide (SO 2 )

scrubbers, and a further $45 million to reduce nitr ous oxide (NO X ) emissions. NGS also implements a

stringent waste minimization program. However, the power plant is currently facing a number of

difficult issues that may threaten its future viabi lity. These include:

• A potential ruling from the Environmental Protectio n Agency to install additional emission control

technology at the plant costing in excess of $1.1 b illion.

• The expiration of a site lease and rights-of-way fo r the NGS plant, railroad, transmission and water

lines in 2019.

• The expiration of the Coal Supply Agreement with Pe abody Energy in 2019.

NGS’ management and SRP are currently working to av oid a facility shutdown, which could become a

reality if the EPA imposes the $1.1 billion emissio n controls before the lease and rights-of-way can b e

renewed with the Navajo Nation. To assist with the negotiations, SRP and the Navajo Nation has

therefore asked The Seidman Research Institute, W. P. Carey School of Business at ASU, to:

• Quantify the **direct**

economic impacts and **indirect** effects of NGS and the Kayenta Mine individually,

at both a county and state level.

• Compile additional information concerning the state and local tax revenues associated with the

direct, indirect and induced economic effects of bo th operations.

• Calculate a cumulative figure for the total contrib ution of NGS and Kayenta Mine to the Arizona

economy.Page | 2

Direct impacts are generally relatively easy to und erstand and calculate. For example, whenever a

business decides to locate in Arizona, there is a r esulting increase in capital expenditures as new

buildings are constructed and/or old buildings are remodeled. Also, industry specific expenditures ma y

be required to ensure the facility is fit-for-purpo se. Coupled with this initial capital investment, there

are on-going jobs created once the business begins operation. 2 The direct economic impacts of NGS and

Kayenta Mine in Arizona therefore include employmen t, income payments, the purchase of goods and

services from local businesses, and tax payments to state and local governments.

Indirect or induced impacts are less obvious but no less significant. For example, the income that an

NGS employee receives and then spends in the local economy will in turn create revenues and/or

income for a variety of different businesses. Addi tional indirect impacts arise when firms that suppl y

goods and services to NGS or Kayenta Mine place ups tream demands on other producers, or increase

their number of employees as the generating station or mine’s purchasing increases. Whenever local

governments spend tax revenues, this too has an ind irect impact.

These latter rounds of expenditures are not self-pe rpetuating. Instead, through time, the rounds of

expenditures become smaller as more of the income/e xpenditure “leaks” out of the local economy. 3

The cumulative impacts of these rounds of expenditu re or “ripple effects” are known as the multiplier

effect within economics. Importantly, there is no one “magic” multiplier number for every conceivable

scenario. Due to the inter-linked nature of the Ar izona economy both within itself and its links to t he

rest of the US (and world), the eventual ripple eff ects depend on a variety of factors including the s ize of

the direct impact, its location in terms of county and economic sector, and its duration. A thorough

analysis of the total impact of a business or indus try upon the Arizonan economy therefore requires a

sum of the direct and indirect/induced impacts.

Section 2 describes the economic impact method adop ted for this analysis. Economic impact results

specific to NGS and Kayenta Mine are presented in S ection 3, along with a cumulative assessment of

their total economic impact at a county and state l evel. Section 4 discusses direct payments to the

Navajo Nation. Conclusions and recommendations for future research are offered in Section 5.

2 There are also on-going (operations) capital expen ditures throughout the lifetime of the business.

3 For example, in the form of savings, payments on g oods and services produced outside of the state etc

.Page | 3



## 2. Report Method

This report uses an Arizona-specific version of the REMI regional forecasting model to produce numeric

estimates of the impact of a business upon the Ariz ona economy. REMI models are sometimes referred

to as “econometric models” due to their underlying equations and statistical response estimations.

However, REMI also integrates three additional mode ling approaches, incorporating the strengths of all

four methodologies while overcoming their limitatio ns, to comprehensively answer “what if ...?”

questions about the economy. These are Input-Outpu t, General Equilibrium and Economic Geography.

The REMI model contains detailed industries, captur ing the industry structure of a particular region a nd

transactions between industries. However, unlike m ost other regional economic impact models, REMI is

also dynamic, producing integrated, multi-year fore casts and feedback among its economic and

demographic variables. This ability to track varia tions within the economic impact of a business enab les

that firm or industry to change their behavior in r esponse to changing economic conditions.

The spatial dimension of the economy is addressed b y productivity and competitiveness benefits,

through the concentration or agglomeration of econo mic activity in cities and metropolitan areas, and

the clustering of industries.

REMI is also an open model in that it explicitly ac counts for trade and migration flows in and out of the

state, and between counties. The use of a county l evel model enables a more detailed disaggregation o f

results to occur, thereby estimating the economic i mpacts that “leak” into other counties in Arizona.

Seidman’s operation of the REMI model has been deve loped to facilitate the simulation of policy

changes, via a large set of modifiable policy varia bles. To simulate the impact of a policy change or

event, a change in one or more variables is entered into the model and a new forecast generated. The

REMI model then automatically produces a detailed s et of simulation results showing the differences in

the values of each economic variable between the co ntrol and the alternative forecast.

A complete explanation of the model and discussion of the empirical estimation of the

parameters/equations is found at www.remi.com.Page | 4



## 3. Simulation Results

This section examines the direct economic impacts d uring 2011-2044 associated with the operations of

Navajo Generating Station and Kayenta Mine, and any potential indirect impacts that may occur due to

their increased economic activity. The following f igures are provided for each operation:

• Standard macroeconomic variables such as total empl oyment, gross state product (GSP) and

real disposable income.

• A forecast for employment impacts and adjusted stat e revenue at a disaggregated level.

The figures presented for each operation are always relative to a baseline forecast in which the facil ity

does not exist or operate. 4 The report period for this economic impact analys is is 2011-2044. This

assumes a continuation of operations beyond the exp iration of the current agreements. Results are

presented at county level and for Arizona as a whol e. All dollar amounts are measured in 2011 dollars

(2011$). 5

The section concludes with a cumulative assessment of the total economic impact of the generating

station and mine in their host counties and for Ari zona as a whole.

3.1 Najavo Generating Station (NGS)

NGS is a coal-fired generating station, operated by SRP, serving electricity customers in Arizona, Nev ada

and California. The station also supplies energy t o pump water through the Central Arizona Project.

NGS currently has 538 regular employees, of which 1 47 are salaried staff, and 391 paid by the hour.

These latter hourly employees include apprentices, office specialists, operations and maintenance staf f,

specialist skilled craftsmen and warehouse speciali sts. Navajos account for the greatest proportion o f

this workforce – 446 employees or 83%. Table 1 est imates NGS’ impact on selected standard macroeconomic variables.

4 For instance, if GSP is estimated to be x dollars higher than the baseline case, this does not mean i t is x dollars higher than what GSP is **today** . It simply means that it is x dollars higher than what GSP is forecast to be in that given year if the new business had not located in A rizona.

5 The report refers to real, rather than nominal, va lues to allow for comparisons across years.Page | 5Table 1: Overview of NGS’ Economic Impact, 2011-2044TotalPrivate NonFarm Employment(Full-Time Job Years)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona 1,617 1,750 1,810 1,830 1,823 1,799 1,774 1,750 1,726 1,651 1,643 1,665 1,699 1,749 57,793Coconino County 1,296 1,368 1,391 1,388 1,370 1,3451,317 1,292 1,268 1,187 1,154 1,142 1,141 1,149 41,090Host County % of Total 80.1% 78.2% 76.8% 75.9% 75.2% 74.8% 74.3% 73.9% 73.5% 71.9% 70.3% 68.6% 67.2% 65.7% 71.1%Gross State Product(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona 234 254 266 276 283 289 295 299 304 329 360397 437 484 12,161Coconino County 204 217 225 232 237 242 246 250 253273 296 322 349 381 9,947Host County % of Total 87.0% 85.5% 84.6% 84.0% 83.8% 83.7% 83.6% 83.5% 83.4% 83.0% 82.1% 81.1% 79.9% 78.7% 81.8%Real DisposablePersonal Income(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona 81 92 100 106 111 116 119 123 126 140 157 179 206 241 5,352Coconino County 63 69 75 79 82 84 86 88 90 98 107 119 133 151 3,633Host County % of Total 77.3% 75.7% 74.5% 73.8% 73.3% 72.9% 72.5% 71.9% 71.6% 70.2% 68.3% 66.5% 64.6% 62.6% 67.9%State Revenue(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactFrom activity acrossArizona6.71 7.46 7.81 7.98 8.29 8.56 8.81 9.05 9.26 10.2511.4 12.69 14.2 16.02 382.96From activity based inCoconino County5.35 5.79 5.93 5.96 6.13 6.25 6.38 6.48 6.57 7.04 7.58 8.22 8.96 9.85 255.78Host County % of Total 79.7% 77.6% 75.9% 74.7% 73.9% 73.0% 72.4% 71.6% 71.0% 68.7% 66.5% 64.8% 63.1% 61.5% 66.8%**Source: Authors’ Calculations**Page | 6

Table 1 estimates that Arizona-wide employment is a pproximately 1,617 higher relative to the baseline

in 2011. Real GSP is higher relative to the baseli ne by approximately $234 million (2011$). Real

disposable income is higher relative to the baselin e by approximately $81 million (2011$) and state

revenues higher by approximately $7 million (2011$) . The main beneficiary of these positive economic

impacts is Coconino County (ranging from 77% to 87% for the variables examined).

In 2019, Arizona-wide employment is forecast to be approximately 1,726 higher relative to the baseline

, of which 1,268 job years are located in Coconino Co unty. Real GSP is higher relative to the state’s

baseline by approximately $304 million (2011$). Re al disposable income is higher relative to the stat e’s

baseline by approximately $126 million (2011$) and state revenues higher by approximately $9.26

million (2011$). Again, the vast majority of these positive economic impacts are forecast to occur wi thin

Coconino County (ranging from 71% to 83% for the va riables examined). However, a slight increase in

economic activity is also forecast to occur outside the host county. 6

If an agreement is reached and production continues until 2044, in aggregate terms and for the report

period 2011-2044, NGS accounts for 57,793 total pri vate non-farm job years, 71.1% of which is based in

Coconino County. Total real GSP in the state is cu mulatively higher by $12.16 billion (2011$). Total real

disposable income is cumulatively higher by $5.35 b illion (2011$), and total state revenues cumulative ly

higher by $383 million (2011$).

Economic impact assessment reports usually disaggre gate employment or job years into direct and

indirect/induced jobs, and this is illustrated in T able 2. 7 This suggests that Navajo Generating Station

accounts for more than twice as many indirect/induc ed jobs for every person employed at NGS for the

reporting period 2011-2044.

6 This is expected as some of the economic activity “ripples” into other counties.

7 It is a standard output in another economic impact program called IMPLAN.Page | 7Table 2: NGS’ Direct and Indirect/Induced Job Yearsfor Private Non-Farm Employment, 2011-204420112012201320142015201620172018201920242029203420392044CumulativeImpact2011-2044(Job Years)Direct Full-Time JobYears538 538 538 538 538 538 538 538 538 538 538 538 538538 18,292Indirect/Induced FullTime Job Years1,079 1,212 1,272 1,292 1,285 1,261 1,236 1,212 1,188 1,113 1,105 1,127 1,161 1,211 39,501Indirect/Induced as aPercentage of Direct201% 225% 236% 240% 239% 234% 230% 225% 221% 207% 205% 209% 216% 225% 216%S**ource: Authors’ Calculations**Page | 8

Table 3 estimates non-farm private sector employmen t. This suggests that the biggest indirect

beneficiaries of NGS from an employment perspective are the construction, retail trade, health care an d

administration/waste services sectors. The biggest direct beneficiary is obviously the utilities sect or.

Tables 4 to 6 forecast employment and state revenue s at a more disaggregated level.

Tables 4 and 5 show NGS to cumulatively generate ap proximately $383 million (2011$) in adjusted state

revenues during the period 2011-2044. Coconino, as the host county, benefits the greatest (66.8%).

However, Maricopa (16.7%) and Yavapai (11.1%) also receive a significant proportion of the adjusted

state revenues generated.

Table 6 provides a breakdown by tax revenue source for the period 2011-2044. The table excludes

intergovernmental revenue, charges, insurance trust revenue, and other miscellaneous revenue, as

these are of no relevance when examining the fiscal impact of NGS. Table 6 suggests that general sale s

tax cumulatively accounts for 34.5% of adjusted sta te revenues throughout the period, income tax

31.5% and corporate income tax 11.68%.

The continued operation of the Navajo Generating St ation is therefore forecast to result in a signific ant

increase in economic activity, both in Coconino Cou nty and the state of Arizona as a whole.Page | 9Table 3: NGS’ Private Non-Farm Employment across Sectors, 2011-2044 (Full-Time Job Years)Sector20112012201320142015201620172018201920242029203420392044Forestry, Fishing, RelatedActivities, & Other1.76 1.96 2.06 2.08 2.05 2 1.95 1.91 1.87 1.78 1.851.99 2.18 2.45Mining 5.47 5.39 5.26 5.1 4.92 4.75 4.59 4.45 4.333.86 3.5 3.19 2.86 2.51Utilities 539.39 541.74 541.74 541.67 541.54 541.4541.27 541.14 541.01 540.55 540.27 540.04 539.81 539.64Construction 190.02 256.16 287.75 298.54 296.02 286.29 273.48 259 244.78 186.16 154.54 138.43 129.46 124.39Manufacturing 12.85 12.6 11.2 9.19 7 4.79 2.91 1.40.12 -2.76 -2.81 -2.15 -1.45 -0.69Wholesale Trade 25.96 27.58 28.08 27.88 27.27 26.4825.7 24.99 24.21 21.22 19.19 17.75 16.52 15.6Retail Trade 168.21 184.33 193.7 198.61 200.81 201.02 200.62 200.29 199.22 195.19 194.49 196.87 200.38205.32Transportation &Warehousing14.87 15.41 15.27 14.77 14.01 13.14 12.51 11.95 11.45 9.9 9.52 9.66 9.87 10.42Information 8.59 9.37 9.7 9.76 9.66 9.45 9.22 9 8.79 7.98 7.68 7.55 7.45 7.45Finance & Insurance 69.08 70.01 68.48 65.73 62.29 58.44 55.11 52.14 49.36 40.12 35.45 32.76 30.69 29.16Real Estate, Rental &Leasing74.16 83.5 88.99 91.37 91.8 90.94 89.84 88.81 87.8986.58 90.03 94.02 97.84 103.88Professional & TechnicalServices91.14 100.28 104.51 106.03 105.61 103.93 103 101.99100.77 96.37 94.54 93.11 91.06 89.26Management ofCompanies & Enterprises2.99 3.2 3.21 3.14 2.98 2.79 2.7 2.61 2.53 2.33 2.33 2.29 2.18 2.05Administrative & Waste 106.14 112.95 115.45 115.66114.29 111.82 109.56 107.3 105.22 96.74 91.49 86.8882.09 77.7Educational Services 10.69 12.23 13.21 13.87 14.2914.58 14.89 15.27 15.64 17.95 20.73 23.8 26.25 27.4Health Care & SocialAssistance121.49 128.78 133.24 135.86 137.73 138.85 140.08 142.06 143.98 160 185.12 215.52 251.16 292.85Arts, Entertainment, &Recreation23.9 25.99 27.37 28.22 28.75 29.07 29.43 29.91 30.39 34.02 39.05 43.78 47.97 52.58Accommodation & FoodServices65.16 69.49 71.47 72.24 72.11 71.56 70.37 69.82 69.12 69 70.16 70.74 69.82 68.51Other Services, exceptPublic Administration85.04 88.85 90.19 90.24 89.26 87.72 86.79 86.26 85.51 84.09 85.78 88.68 92.22 97.9**Yearly Total 1,617 1,750 1,811 1,830 1,822 1,799 1, 774 1,750 1,726 1,651 1,643 1,665 1,698 1,748** **Source: Authors’ Calculations**Page | 10Table 4: NGS’ Cumulative Adjusted State Tax Revenues by County, 2011-2044RegionCumulative Impact2011-2044(Millions 2011$)PercentageApache County1.180.3%Cochise County0.310.1%Coconino County255.866.8%Gila County0.770.2%Graham County0.180.05%Greenlee County0.080.02%La Paz County0.060.01%Maricopa County64.0716.7%Mohave County2.040.5%Navajo County6.111.6%Pima County3.851%Pinal County5.561.5%Santa Cruz County0.160.04%Yavapai County42.4211.1%Yuma County0.390.1%**All Regions 382.96 100% Sour** **ce: Authors’ Calculations**Page | 11Table 5: NGS’ Aggregate Adjusted State Tax Revenuesfor Arizona, 2011-2044RegionYear (Millions 2011$)CumulativeImpact2011-204420112012201320142015201620172018201920242029203420392044Arizona 6.71 7.46 7.81 7.98 8.29 8.56 8.81 9.05 9.26 10.25 11.4 12.69 14.2 16.02 382.96**Source: Authors’ Calculations**Table 6: NGS’ Adjusted State Tax Revenues by Tax Type, 2011-20448CategoryYear (Millions 2011$)Cumulative Impact2011-204420112012201320142015201620172018201920242029203420392044Income Tax 2.04 2.28 2.47 2.61 2.7 2.78 2.85 2.92 2.97 3.22 3.56 3.96 4.46 5.06 120.55General Sales Tax 2.51 2.83 2.84 2.76 2.88 2.98 3.07 3.16 3.23 3.58 3.94 4.34 4.81 5.37 132.09Selective Sales Tax 0.62 0.7 0.76 0.81 0.84 0.87 0.9 0.92 0.94 1.05 1.15 1.27 1.4 1.57 38.28Corporate Income Tax 1.54 1.64 1.73 1.8 1.86 1.93 1.99 2.05 2.11 2.41 2.75 3.13 3.54 4.02 92.03**Total**6.71 7.46 7.81 7.98 8.29 8.56 8.81 9.05 9.26 10.3 11.4 12.7 14.2 16.0 382.96**Source: Authors’ Calculations**8General State Sales Tax includes authors’ estimates of revenue from Prop 100 temporary tax.Page | 12

3.2 Kayenta Mine

Kayenta Mine, located 10 miles southwest of Kayenta , in Navajo County, AZ., has been operated by

Peabody Western Coal Company since 1973 through lea se agreements with the Navajo Nation and Hopi

Tribe. The 40,000-acre mine produces approximately 8 million tons of coal annually, which it ships by

rail to the Navajo Generating Station.

Peabody currently employs 320 union-represented wor kers at Kayenta, plus 110 company workers.

Approximately 93% of the union workers are Native A merican, primarily drawn from the Navajo Nation.

SRP estimates that 20-40% of company employees are also Native American.

Table 7 estimates Kayenta Mine’s impact on selected standard macro-economic variables. This suggests

that Arizona-wide employment in 2011 is approximate ly 1,046 higher, relative to the baseline, due to

the operation of the mine. Real GSP is higher rela tive to the state baseline by approximately $136

million (2011$). Real disposable income is $49 mil lion higher (2011$) and state revenues $4.3 million

(2011$) higher. Navajo County benefits the most fr om these positive economic impacts (greater than

77% for each variable).

In 2019, Arizona-wide employment is forecast to be approximately 1,382 higher relative to the baseline

. Real GSP is $185 million (2011$) higher. Real disp osable income is approximately $105 million (2011$)

higher, and state revenues $6.2 million (2011$) hig her. Again, the vast majority of these positive

economic impacts are forecast to occur within Navaj o County (ranging from 74% to 79% of the variables

examined). However, over the period of report, the re is also a slight increase in economic activity

occurring outside of the host county. 9

If an agreement is reached and production continues until 2044, in aggregate terms and for the report

period 2011-2044, Kayenta Mine accounts for 54,927 total private non-farm job years, 72.5% of which is

based in Navajo County. Total real GSP in the stat e is cumulatively higher by $8.3 billion (2011$). Total

real disposable income is cumulatively higher by $5 .8 billion (2011$), and total state revenues

cumulatively higher by almost $297 million (2011$).

9 This is expected as some of the economic activity “ripples” into other counties.Page | 13Table 7: Overview of Kayenta Mine’s Economic Impact, 2011-204410TotalPrivate NonFarm Employment(Full-Time Job Years)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona 1,046 1,148 1,215 1,261 1,295 1,319 1,340 1,361 1,382 1,493 1,633 1,796 1,959 2,141 54,927Navajo County 853 909 945 969 986 1,000 1,011 1,0231,034 1,101 1,183 1,276 1,369 1,468 39,834Host County % of Total 81.5% 79.2% 77.8% 76.8% 76.1% 75.8% 75.4% 75.2% 74.8% 73.7% 72.4% 71.0% 69.9% 68.6% 72.5%Gross State Product(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona136 146 155 161 167 172 176 180 185 210 242 282 328384 8,296Navajo County117 123 127 130 134 137 139 142 145 161 180 204 232265 6,158Host County % of Total 86.0% 84.2% 81.9% 80.7% 80.2% 79.7% 79.0% 78.9% 78.4% 76.7% 74.4% 72.3% 70.7% 69.0% 74.2%Real DisposablePersonal Income(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactArizona49 58 67 74 81 87 93 100 105 135 169 212 265 334 5,811Navajo County38 44 50 55 60 65 69 74 78 100 123 154 191 238 4,232Host County % of Total77.6% 75.9% 74.6% 74.3% 74.1% 74.7% 74.2% 74.0% 74.3% 74.1% 72.8% 72.6% 72.1% 71.3% 72.8%State Revenue(Millions 2011$)20112012201320142015201620172018201920242029203420392044CumulativeImpactFrom activity acrossArizona4.34 4.78 4.95 5.05 5.31 5.57 5.78 6.01 6.22 7.34 8.67 10.31 12.23 14.64 296.63From activity based inNavajo County3.55 3.86 3.97 4.03 4.23 4.43 4.60 4.77 4.93 5.78 6.73 7.90 9.24 10.86 228.70Host County % of Total 81.8% 80.7% 80.1% 79.8% 79.7% 79.6% 79.5% 79.4% 79.3% 78.7% 77.7% 76.6% 75.5% 74.1% 77.1%**Source: Authors’ Calculations**10Figures may not add up exactly due to rounding-up.Page | 14

Table 8 disaggregates employment or job years into direct and indirect/induced jobs. This table

suggests that for every full-time or equivalent job created at Kayenta Mine between 2011 and 2044, an

additional 2.75 full-time or equivalent jobs are ge nerated in other industries.

Table 9 estimates non-farm private sector employmen t. This suggests that the main indirect

beneficiaries of Kayenta Mine in terms of employmen t are the retail trade, health care and constructio n

sectors. The mining sector is obviously the main d irect beneficiary.

Tables 10 to 12 forecast employment and state reven ues at a disaggregated level.

Tables 10-11 show Kayenta Mine to generate $296.6 m illion in total, adjusted state revenues during the

period 2011-2044. Navajo, as the host county, bene fits the greatest (77.1%). Maricopa (11.9%) and

Coconino (4.6%) also receive a significant proporti on of these adjusted state revenues. Two counties

experience insignificant negative effects. These a re Greenlee and Yuma.

Table 12 provides a breakdown by tax revenue source for the period 2011-2044. The table excludes

intergovernmental revenue, charges, insurance trust revenue, and other miscellaneous revenue, as

these are of no relevance when examining the fiscal impact of Kayenta Mine. This suggests that genera l

sales tax cumulatively accounts for 48.6% of adjust ed state revenues throughout the period, income tax

28%, selective sales tax 14.1% and corporate income tax 9.3%.

The continued operation of Kayenta Mine is therefor e forecast to result in a relatively significant

increase in economic activity in Navajo County and the state of Arizona as a whole.Page | 15Table 8: Kayenta Mine’s Direct and Indirect/InducedJob Years for Private Non-Farm Employment, 2011-204420112012201320142015201620172018201920242029203420392044CumulativeImpact2011-2044(Job Years)Direct Full-Time JobYears430 430 430 430 430 430 430 430 430 430 430 430 430430 14,620Indirect/Induced FullTime Job Years616 718 785 832 865 889 910 931 952 1,063 1,203 1,366 1,528 1,711 40,306Indirect/Induced as aPercentage of Direct143% 167% 183% 193% 201% 207% 212% 217% 221% 247% 280% 318% 355% 398% 276%S**ource: Authors’ Calculations**Page | 16Table 9: Kayenta Mine’s Private Non-Farm Employmentacross Sectors, 2011-2044 (Full-Time Job Years)Sector20112012201320142015201620172018201920242029203420392044Forestry, Fishing, Related0.56 0.60 0.58 0.53 0.47 0.39 0.33 0.27 0.230.12 0.17 0.28 0.42 0.62Mining408.16 406.04 404.31 402.92 401.77 400.84 400.09 399.42 398.88397.45 396.93 396.70 396.62 396.65Utilities6.32 6.61 6.78 6.90 6.96 7.01 7.06 7.13 7.187.45 7.71 7.92 8.03 8.08Construction104.42 148.35 173.54 186.71 191.96 192.29 190.22 186.43 182.42162.43 152.44 152.07 153.44 158.23Manufacturing8.61 8.91 8.67 8.09 7.43 6.61 5.98 5.49 5.044.12 4.41 5.17 6.04 7.22Wholesale Trade17.48 18.42 18.94 19.07 19.04 18.88 18.78 18.68 18.5217.81 17.22 16.92 16.65 16.69Retail Trade96.07 108.58 118.41 126.46 133.39 139.62 144.99 150.39 155.61180.08 204.59 231.75 258.36 286.93Transportation &Warehousing15.05 15.33 15.27 15.08 14.79 14.43 14.32 14.24 14.1814.48 15.50 16.78 18.05 19.61Information5.60 6.00 6.19 6.25 6.24 6.16 6.10 6.03 6.016.07 6.46 6.95 7.36 7.87Finance & Insurance31.66 32.46 32.26 31.54 30.49 29.21 28.18 27.25 26.3723.88 23.39 23.90 24.44 25.24Real Estate, Rental & Leasing60.58 70.98 78.80 84.78 89.63 93.63 97.41 101.14 104.80124.02 146.03 168.61 190.12 213.81Professional & Tech Services43.32 48.57 52.06 54.47 56.30 57.42 58.72 60.09 61.2266.86 73.15 79.04 83.59 87.86Management of Companies &Enterprises12.32 12.21 11.97 11.68 11.33 10.96 10.86 10.78 10.6810.20 9.64 8.83 7.79 6.79Administrative & WasteServices57.01 62.26 65.49 67.44 68.82 69.46 70.19 70.77 71.4474.62 78.31 81.67 83.47 84.99Educational Services6.55 7.87 8.91 9.79 10.63 11.46 12.34 13.26 14.2719.85 26.05 32.73 38.83 43.58Health Care & SocialAssistance64.79 71.17 76.90 82.09 87.46 92.80 98.08 104.00 110.23146.51 191.53 244.75 303.71 373.11Arts, Entertainment, &Recreation15.76 17.88 19.81 21.61 23.35 25.10 26.82 28.70 30.5941.26 54.02 68.21 83.11 99.78Accommodation & FoodServices43.73 53.65 62.16 70.01 77.18 83.68 89.29 95.03 100.16122.53 140.14 154.79 165.65 174.59Other Services, except PublicAdministration48.25 51.73 54.20 56.11 57.65 58.88 60.41 62.18 63.8973.59 85.56 99.03 112.79 129.76**Yearly Total 1046.2 1147.6 1215.3 1261.5 1294.9 1318.8 1340.2 13** **61.3 1381.7 1493.4 1633.2 1796.1 1958.5 2141.4** **Source: Authors’ Calculations**Page | 17Table 10: Kayenta Mine’s Cumulative Adjusted StateTax Revenues by County, 2011-2044RegionCumulative Impact2011-2044(2011$)PercentageApache County$6,450,981 2.2%Cochise County$281,243 0.1%Coconino County$13,687,786 4.6%Gila County$2,237,916 0.8%Graham County$14,491 0.0%Greenlee County-$198,758 -0.1%La Paz County$2,201 0.0%Maricopa County$35,171,969 11.9%Mohave County$462,479 0.2%Navajo County$228,700,634 77.1%Pima County$2,315,435 0.8%Pinal County$4,779,067 1.6%Santa Cruz County$100,920 0.0%Yavapai County$3,590,112 1.2%Yuma County-$969,834 -0.3%**All Regions $296,626,643 100%** **Sour ce: Authors’ Calculations** Page | 18Table 11: Kayenta Mine’s Aggregate Adjusted State Tax Revenues for Arizona, 2011-2044RegionYear (Millions 2011$)CumulativeImpact2011-204420112012201320142015201620172018201920242029203420392044Arizona 4.34 4.78 4.95 5.05 5.31 5.57 5.78 6.01 6.22 7.34 8.67 10.31 12.23 14.64 296.63**Source: Authors’ Calculations**Table 12: Kayenta Mine’s Adjusted State Tax Revenues by Tax Type, 2011-204411CategoryYear (Millions 2011$)CumulativeImpact 2011-204420112012201320142015201620172018201920242029203420392044Income Tax1.16 1.30 1.40 1.49 1.56 1.62 1.67 1.73 1.78 2.05 2.40 2.87 3.41 4.12 83.17General Sales Tax2.13 2.36 2.36 2.32 2.46 2.60 2.71 2.84 2.95 3.55 4.23 5.05 6.01 7.19 144.16Selective Sales Tax0.53 0.58 0.63 0.68 0.72 0.76 0.79 0.83 0.86 1.04 1.24 1.47 1.76 2.10 41.85Corporate Income Tax0.52 0.54 0.55 0.57 0.58 0.59 0.60 0.61 0.62 0.70 0.80 0.92 1.06 1.23 27.44**Total**4.34 4.78 4.95 5.05 5.31 5.57 5.78 6.01 6.22 7.34 8.67 10.31 12.23 14.64 296.62**Source: Authors’ Calculations**11General State Sales Tax includes authors’ estimates of revenue from Prop 100 temporary tax.Page | 19

3.3 Cumulative Economic Impact of Navajo Generating Station and Kayenta Mine

To arrive at a total economic impact assessment of both operations at a county and state-wide level, t he

respective results for Navajo Generating Station an d Kayenta Mine are aggregated.

Tables 13-15 illustrate the total economic impact, private non-farm employment across sectors, and

adjusted state tax revenues for both operations.

Table 13: NGS and Kayenta Mine’s Total Economic Imp act, 2011-2044

Total Private Non-Farm Employment (
(Full-Time or Equivalent Job Years) Cumulative

Impact

2011-2044

Arizona 112,720

Gross State Product (Billions 2011$)

Arizona 20.46

Real Disposable Personal Income (Billions 2011$)

Arizona 11.16

**Source: Authors’ Calculations**

Table 13 suggests that NGS and Kayenta Mine cumulat ively support 112,720 full-time or equivalent job

years in Arizona, 2011-2044. Real GSP during this period is higher relative to the baseline by $20.46

billion (2011$) throughout the state. Real disposa ble income during 2011-2044 is higher relative to t he

baseline by $11.16 billion (2011$) throughout Arizo na.

Table 14 unsurprisingly suggests that the utilities (16.5%) and mining (12.1%) sectors enjoy the great est

employment benefits, measured in job years, with th e retail trade (11.9%), health care (11.5%) and

construction (10.4%) sectors also enjoying signific ant indirect job creation.Page | 20

Table 14: NGS and Kayenta Mine’s Total Private Non- Farm Employment across Sectors, 2011-2044

Sector Cumulative

Impact

2011-2044
(Full-Time Job
Years)

Forestry, Fishing, Related Activities & Other 79

Mining 13,675

Utilities 18,631

Construction 11,756
Manufacturing 206

Wholesale Trade 1,303

Retail Trade 13,410
Transportation and Warehousing 914

Information 500

Finance and Insurance 2,302
Real Estate and Rental and Leasing 7,887

Professional and Technical Services 5,652
Management of Companies and Enterprises 410

Administrative and Waste Services 5,814

Educational Services 1,525

Health Care and Social Assistance 12,979

Arts, Entertainment, and Recreation 3,095

Accommodation and Food Services 6,692
Other Services, except Public Administration 5,887
**Yearly Total 112,718**  **12**

**Source: Authors’ Calculations**

12 This differs slightly to Table 13 due to rounding- up.Page | 21

Table 15: NGS and Kayenta Mine’s Total Adjusted Sta te Tax Revenues by Tax Type, 2011-2044 13

Category Cumulative Impact

2011-2044 (Millions 2011$) 14

Income Tax 203.72

General Sales Tax 276.25

Selective Sales Tax 80.13

Corporate Income Tax 119.47

Total 679.58

**Source: Authors’ Calculations**

Table 15 suggests that the cumulative total adjuste d state tax revenues for NGS and Kayenta Mine,

2011-2044 are approximately $680 million (2011$), o f which 40.7% is general sales tax, 30% is income

tax, 17.6% is corporate income tax and 11.8% select ive sales tax. Coconino County benefits from 39.7%

of the 2011-2044 adjusted state tax revenues, equat ing to $269.5 million (2011$). Navajo County

benefits from 34.6% of the 2011-2044 adjusted state tax revenues, equating to $228.7 million (2011$).

Maricopa County benefits from 14.5% of the 2011-204 4 adjusted state tax revenue, and Yavapai County

6.8%.

The continued operation of NGS and Kayenta Mine is therefore forecast to result in a significant incre ase

in economic activity within Coconino County and Ari zona as a whole.

13 Numbers do not add up exactly due to rounding-up.

14 General State Sales Tax includes authors’ estimate s of revenue from Prop 100 temporary tax.Page | 22



## 4. Direct Payments to the Navajo Nation

The analysis presented in the previous sections sum marizes the significant economic impact of NGS and

Kayenta Mine at both a state and county level. Giv en the large percentage of Native American or

Navajo workers employed by these facilities, one mi ght also tentatively conclude that the closure of o ne

or both facilities will have a **significant** negative impact upon the Navajo Nation’s economy. The REMI

model used by this report is unable to estimate any impact exclusively for the Navajo Nation.

As a result, a second study is under way focusing e xclusively on the economic impacts for the Navajo

Nation. This second study will include all direct payments made by NGS and Kayenta Mine to the Navajo

Nation throughout the period 2011 to 2044.Page | 23



## 5. Conclusions and Recommendations

The goal of this report is to provide an assessment of the economic impact of NGS and Kayenta Mine at

both an operation-specific and aggregate level duri ng the period 2011-2044, with a focus on

employment, real GSP, real disposable personal inco me and state tax revenues.

A summary of the economic impact of NGS and Kayenta Mine, individually and cumulatively, in the state

of Arizona is displayed in Table 16, emphasizing th e importance of both operations for the Arizona

economy.

Table 16 shows that both operations cumulatively ac count for 112,720 job years during 2011-2044. This

equates to almost $20.5 billion (2011$) in real GSP , approximately $11.2 billion (2011$) in real

disposable income, and just under $680 million (201 1$) in adjusted state tax revenues.

Table 16: Summary of the Statewide Economic Impact of NGS and Kayenta Mine, 2011-2044

Total
Employment
(Full-Time Job
Years) Real Gross

State Product
(Millions 2011$) Real

Disposable

Income
(Millions 2011$) Adjusted State

Taxes
(Millions 2011$)

Navajo Generating Station 57,793 12,161 5,352 382.9 6

Kayenta Mine 54,927 8,296 5,811 296.62

**Cumulative Total 112,720 20,457 11,163 679.58**

**Source: Authors’ Calculations**

From an employment perspective, the mining and util ities sectors benefit the greatest throughout

Arizona, accounting for 28.6% of the cumulative pri vate, non-farm employment job years generated by

NGS and Kayenta Mine during 2011-2044. However, re tail trade (11.9%), health care and social

assistance (11.5%), and construction (10.4%) also e njoy significant, positive employment impacts

throughout the state.

A significant percentage of each impact per macro-e conomic variable occurs in the host county of each

facility, as summarized in Table 17.Page | 24

Table 17: Percentage Impact of Key Macro-Economic V ariables by Facility and Host County, 2011-2044

Total
Employment Real Gross

State Product Real

Disposable

Income Adjusted State

Taxes

Navajo Generating Station – Coconino

County 71.1% 81.8% 67.9% 66.8%

Kayenta Mine – Navajo County 72.5% 74.2% 72.8% 77.1%

**Source: Authors’ Calculations**

Table 18 summarizes the total adjusted state tax re venues of NGS and Kayenta Mine impacting at a

county level, and the total percentage of tax reven ue impacts.

Table 18: NGS and Kayenta Mine’s Cumulative Adjuste d State Revenue Impact by County, 2011-2044

Region Cumulative Impact 2011-2044 (2011$) Percentage of

Cumulative State

Total NGS Kayenta Mine Total

Apache County $1,180,119 $6,450,981 $7,631,100 1.12 %

Cochise County $309,909 $281,243 $591,152 0.09%

Coconino County $255,778,467 $13,687,786 $269,466,2 53 39.65%

Gila County $768,968 $2,237,916 $3,006,884 0.44%

Graham County $177,477 $14,491 $191,968 0.03%

Greenlee County $76,372 ($198,758) ($122,386) (0.02%)

La Paz County $55,395 $2,201 $57,596 0.01%

Maricopa County $64,074,325 $35,171,969 $99,246,294 14.60%

Mohave County $2,044,777 $462,479 $2,507,256 0.37%

Navajo County $6,113,656 $228,700,634 $234,814,290 34.55%

Pima County $3,846,390 $2,315,435 $6,161,825 0.91%

Pinal County $5,561,877 $4,779,067 $10,340,944 1.52 %

Santa Cruz County $155,214 $100,920 $256,134 0.04%

Yavapai County $42,424,381 $3,590,112 $46,014,493 6 .77%

Yuma County $387,295 ($969,834) ($582,539) (0.09%)

**All Regions $382,954,622** $296,626,643 $679,581,265

**Source: Authors’ Calculations**

Every county enjoys positive economic impacts throu ghout 2011-2044, with the exception of Greenlee

and Yuma, who receive no benefits. Coconino County benefits to the greatest extent, receiving 39.65%Page | 25

of the adjusted state tax revenues during 2011-2044 . Navajo County also benefits significantly, recei ving

34.55% of the adjusted state tax revenues during 20 11-2044.

40.7% of the adjusted state tax revenues throughout Arizona are for general sales tax, 30% for income

tax, 17.6% for corporate income tax and 11.8% for s elective sales tax.

Given the significant economic impact of NGS and Ka yenta Mine, coupled with the large percentage of

Native American or Navajo workers employed by these facilities, one might tentatively conclude that th e

closure of one or both facilities will have a **significant** negative impact upon the Navajo Nation’s

economy. However, it is impossible to quantify the exact economic impact without first knowing:

(a) The distribution of Navajo employees, in terms of b oth salaries earned from, and company

positions held at, NGS and Kayenta Mine;

(b) The current percentage of the Navajo working popula tion employed by both facilities; and

(c) Of greatest importance, the extent to which Navajo employees spend and invest any monies

earned within the confines of their Nation, rather than elsewhere within or outside Arizona.

Additional research is therefore needed, consisting of a survey of Navajo expenditure patterns and the

development of a bespoke Navajo-specific IMPLAN imp act analysis for 2011, to robustly estimate the

economic impact of NGS and Kayenta Mine exclusively for the Navajo Nation.Page | 26



## References

Arizona Department of Economic Security. www.azdes. gov.

U. S. Bureau of Census (2009) **State Government Finance Database** . www.census.gov.

U. S. Bureau of Economic Analysis (2009) **State Personal Income and Employment Database**

. www.bea.gov.

U. S. Bureau of Labor Statistics (2009) **Quarterly Census of Employment and Wages Database**

. www.bls.gov.

U. S. Bureau of Labor Statistics (2010) **Occupational Employment Statistics Database** . www.bls.gov.Page | 27



## Glossary

Gross State Product (GSP): The dollar value of all goods and services produce d in Arizona for final

demand/consumption.

Job Year : A job year is equivalent to one person having a j ob for exactly one year.

Real Disposable Personal Income : The household income that is available to be spen t after taxes have

been paid. Technically speaking, real disposable p ersonal income is the sum of wage and salary

disbursements, supplements to wages and salaries, p roprietors’ income, rental income of persons,

personal dividend income, personal interest income, and personal current transfer receipts, less

personal taxes and contributions for government soc ial insurance.Page | 28 

## L. WILLIAM SEIDMAN RESEARCH INSTITUTE

660 S MILL AVENUE, SUITE 300

TEMPE

AZ 85281-4011

Tel: (480) 965 5362
Fax: (480) 965 5458

www.seidmaninstitute.com