# FOUR CORNERS POWER PLANT

AND NAVAJO MINE

An Economic Impact Analysis

Dr. Anthony Evans and Eva Madly

L. William Seidman Research Institute

W. P. Carey School of Business

Arizona State University

September 30, 2014



## FINAL REPORT

### L. WILLIAM SEIDMAN RESEARCH INSTITUTE

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

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, Seidman collects, analyzes and disseminates information

about local economies, benchmarks industry practices, 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 economies, Seidman today offers a host of economic

research and consulting services, including economic impact analyses, economic forecasting, general

survey research, attitudinal and qualitative studies, and strategic analyses of economic development

opportunities.

Working on behalf of government agencies, regulatory bodies, public or privately

‐ owned firms, academic

institutions, and non

‐ profit organizations, Seidman specializes in studies at the city, county or state

‐ wide

level. Recent and current clients include:

 Arizona Commerce Authority (ACA)

 Arizona Corporation Commission (ACC)

 Arizona Dept. Mines and Mineral Resources

 Arizona Hospital and Healthcare Association

 Arizona Investment Council (AIC)

 Arizona Mining Council

 Arizona Public Service Corporation (APS)

 Arizona School Boards Association

 Arizona Town Hall

 ASU Athletics

 BHP Billiton

 The Boeing Company

 The Central Arizona Project (CAP)

 Chicanos Por La Causa

 The City of Phoenix Fire Department

 Curis Resources (Arizona)

 De Menna & Associates

 Epic Rides/The City of Prescott

 Excelsior Mining

 Executive Budget Office State of Arizona

 First Things First  Freeport McMoran

 Glendale Community College

 Goodwill Industries

 Greater Phoenix Economic Council

 Intel Corporation

 iState Inc.

 The McCain Institute

 Maricopa Integrated Health System

 Navajo Nation Div. Economic Development

 Phoenix Convention Center

 Phoenix Sky Harbor International Airport

 Public Service New Mexico (PNM)

 Raytheon

 Rosemont Copper Mine

 Salt River Project (SRP)

 Science Foundation Arizona (SFAZ)

 The Tillman Foundation

 Turf Paradise Valley METRO Light Rail

 Twisted Adventures Inc.

 Vote Solar Initiative

 Waste Management Inc.i 

## Executive Summary

 This study estimates the economic impact of Four Corners Power Plant (FCPP) and Navajo Mine,

individually and combined, in terms of employment, labor income and gross Navajo Nation product

(GNNP) for the Navajo Nation, based on the original five

‐ unit and current two

‐ unit operation at

FCPP.

 Estimated impacts include both the direct effects of the two facilities’ operations and the indirect

and induced effects that arise when income is recycled within the Navajo Nation economy.

 Results are provided for 2011 and 2016

‐ 2041, expressed in 2011 dollars (2011 $)

 The study uses an IMPLAN model at zip code level to estimate multiplier effects for the Navajo

Nation, 1 in conjunction with a Navajo Nation Household Survey implemented by the Seidman

Institute in partnership with the Navajo Nation Division of Economic Development in 2012.

 80% of the direct employees at FCPP and Navajo Mine are assumed to originate from the Navajo

Nation throughout this study.

 The individual economic impact analyses for FCPP and Navajo Mine presented in this study assume

that each facility operates independently of the other. The combined economic impact assumes

that FCPP and Navajo Mine operate effectively as a single, combined entity.

 In 2011, FCPP was estimated to generate 977 jobs for the Navajo Nation, $85.9 million in labor

income, and $248.5 million GNNP (both 2011 $).

 In 2011, Navajo Mine was estimated to generate 1,507 jobs for the Navajo Nation, $100.2 million

labor income, and $176.2 million GNNP (both 2011 $).

1 The IMPLAN model used by Seidman uses a 2011 economic database.ii  In 2011, FCPP and Navajo Mine (combined) were estimated to generate 2,483 jobs for the Navajo

Nation, $186.1 million labor income, and $424.8 million GNNP (both 2011 $).

Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2011 2

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Economic impact of FCPP 3 977 85.9 248.5

Economic impact of Navajo Mine 4 1,507 100.2 176.2

Combined Economic Impact 5 2,483 186.1 424.8

Source: Authors

 In 2014, APS permanently reduced FCPP’s generation capacity to 1,540 MW (Units 4

‐ 5 only); and the

Navajo Nation purchased the Navajo Mine.

 The annual economic impact of FCPP, based on a Units 4

‐ 5 operation, is estimated to generate 700

jobs for the Navajo Nation, $61.6 million in labor income, and $178 million GNNP (both 2011 $).

 The annual economic impact of Navajo Mine, based on the change in ownership and reduced coal

production demands of FCPP, is estimated to generate 1,593 jobs for the Navajo Nation, $97.4

million labor income, and $160 million GNNP (both 2011 $).

 The annual economic impact of FCPP and Navajo Mine (combined), based on the two

‐ unit

generating station operation and change in mine ownership, is estimated to generate 2,293 jobs for

the Navajo Nation, $159 million labor income, and $338 million GNNP (both 2011 $).

2 Numbers may not completely tally due to rounding

‐ up.

3 This assumes FCPP operates independently of Navajo Mine.

4 This assumes Navajo Mine operates independently of FCPP.

5 This assumes that FCPP and Navajo Mine is a single, combined entity.iii Annual Economic Impact of FCPP and Navajo Mine for the Navajo Nation, Units 4

‐ 5 Operation 6

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Economic impact of FCPP 7 700 61.6 178.0

Economic impact of Navajo Mine 8 1,593 97.4 160.0

Combined Economic Impact 9 2,293 159.0 338.0

Source: Authors

 Assuming that FCPP and Navajo Mine continue to operate at their current levels for a 2016

‐ 2041

time horizon, their combined economic impact is estimated to cumulatively generate $8.8 billion

GNNP for the Navajo Nation, including $4.1 billion labor income (both 2011 $).



###  The cumulative employment impact is estimated at 59,612 job years in the Navajo Nation, 2016

‐

2041. 10

Cumulative Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2016

‐ 2041 11

Economic Impacts Employment

(Jobs) Labor Income

(Billions

2011 $) GNNP

(Billions

2011 $)

Economic impact of FCPP 12 18,194 1.6 4.6

Economic impact of Navajo Mine 13 41,418 2.5 4.2

Combined Economic Impact 14 59,612 4.1 8.8

Source: Authors

6 Numbers may not completely tally due to rounding

‐ up.

7 This assumes FCPP operates independently of Navajo Mine.

8 This assumes Navajo Mine operates independently of FCPP.

9 This assumes that FCPP and Navajo Mine is a single, combined entity.

10 The label “job year” is important and should not be simplified or abbreviated to “job”. A “job year” is defined as one person

having a full

‐ time job for exactly one year.

11 Numbers may not completely tally due to rounding

‐ up.

12 This assumes FCPP operates independently of Navajo Mine.

13 This assumes Navajo Mine operates independently of FCPP.

14 This assumes that FCPP and Navajo Mine is a single, combined entity.iv  Caution should be exercised comparing these results with those reported in an earlier Seidman

study dated March 2013 15 for three reasons:

o The geographical focus of the two studies is different

‐ the State of New Mexico and San Juan

County in 2013 compared to the Navajo Nation.

o The impact of tribal taxes and royalties were evaluated separate to, rather than combined with,

the estimated impacts for San Juan County and the State of New Mexico in the original study.

o The IMPLAN model in the current study uses regional purchase coefficients and trade flow data

based on the consumption patterns identified in Seidman’s Navajo Nation Household

Expenditure Survey.

 This study therefore suggests that FCPP and Navajo Mine exert a significant impact in the Navajo

Nation economy.

15 Four Corners Power Plant and Navajo Mine: An Economic Impact Study (March 2013), Dr. Anthony Evans, Dr. Timothy James,

and Eva Madly, Seidman Research Institute.v 

## Table of Contents

Executive Summary i

1. Introduction 1

2. Data and Method 3

3. Economic Impact of Four Corners Power Plant (FCPP) and Navajo Mine, 2011 5

3.1. FCPP impacts for the Navajo Nation, 2011 5

3.2. Navajo Mine in the Navajo Nation, 2011 7

3.3. Combined Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2011 8

4. Annual Economic Impact of FCPP (Units 4

‐ 5) and Navajo Mine for the Navajo Nation 11

4.1. FCPP in the Navajo Nation, Units 4

‐ 5 Operation 11

4.2. Navajo Mine in the Navajo Nation, Units 4

‐ 5 Operation 13

4.3. Combined Economic Impact for the Navajo Nation, Units 4

‐ 5 Operation 15

5. Cumulative Economic Impact of FCPP and Navajo Mine, 2016

‐ 2041 17

Technical Appendix: Data and Economic Impact Method 19

TA1: The IMPLAN model 19

TA 2: Data 20

TA 3: Changes made to the IMPLAN model 21vi 

## List of Tables

Table 1: Economic Impact of FCPP for the Navajo Nation, 2011

................................................................. 6

Table 2: Economic Impact of Navajo Mine for the Navajo Nation, 2011

.................................................... 7

Table 3: Combined Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2011

................... 9

Table 4: Annual Economic Impact of FCPP, Units 4

‐ 5 Operation, for the Navajo Nation

.......................... 12

Table 5: Annual Economic Impact of Navajo Mine, Units 4

‐ 5 Operation, for the Navajo Nation

............. 14

Table 6: Annual Combined Economic Impact of FCPP and Navajo Mine, Units 4

‐ 5, Navajo Nation

......... 15

Table 7: Cumulative Economic Impact of FCPP and Navajo Mine, 2016

‐ 2041

.......................................... 17

Table 8: Navajo Nation Zip Codes

.............................................................................................................. 201 

## 1. Introduction

Four Corners Power Plant (FCPP) is a coal

‐ fired generating station located on the Navajo Indian

Reservation in Fruitland, San Juan County, New Mexico. FCPP first produced electricity in 1963, and

from 1970 had a generation capacity of approximately 2,000 MW from five units. However, Units 1

‐ 3

have been permanently shut down in 2014 as part of a greater than $500 million plan for Arizona Public

Service Co. (APS) to meet federally

‐ imposed environmental regulations, thereby reducing FCPP’s current

generating capacity to 1,540 MW.

Ownership of FCPP Units 4 and 5 is currently shared across five utility companies, under the operational

management of APS. Coal for the plant is exclusively sourced from Navajo Mine, located south of

Farmington, New Mexico, and acquired by the Navajo Nation from BHP Billiton for $85 million at the

start of 2014. Navajo Mine produces around 8 million tons of coal each year, and brings in an estimated

$41 million annually for the Navajo Nation

– about a third of the Nation’s general fund. 16

In late 2012, the Seidman Research Institute was commissioned by APS and BHP to measure the

economic impact of FCPP and Navajo Mine, individually and in aggregate, for the State of New Mexico

and San Juan County economies. This previous study used employment, vendor, tax, and royalty 2011

data supplied by APS and BHP Navajo Coal Company. Seidman additionally assessed the impact of FCPP

and Navajo Mine, individually and in aggregate, for the State of New Mexico and San Juan County

economies based on the assumption that Units 1

‐ 3 at FCPP would be shut down, for a 2016

‐ 2041 time

horizon.

FCPP and Navajo Mine are a key source of employment in the Navajo Nation; and the clients were also

interested in an estimate of the economic impacts exclusively for the Navajo Nation. This was not

possible at the time of the original report, due to the granularity and coverage of the data included in

the IMPLAN model. However, Seidman has since worked in partnership with the Navajo Nation Division

of Economic Development on a Navajo Nation Household Expenditure Survey. The current study

therefore uses IMPLAN data for 57 zip codes collectively assumed by Seidman to represent the Navajo

16 Source: Minard, A., (2014). Navajo Nation is Coal Country as Mine Sale Finalized, Indian Country

, January 6, 2014, available

at: http://indiancountrytodaymedianetwork.com/2014/01/06/navajo

‐ nation

‐ coal

‐ country

‐ mine

‐ sale

‐ finalized

‐ 1529812 Nation, supplemented by household expenditure survey data, 17 to estimate the impact of FCPP and

Navajo Mine exclusively for the Navajo Nation.

The objectives of this supplement to the original study are to:

 Individually quantify the direct economic impacts and indirect/induced effects of all 5 FCPP units and

Navajo Mine exclusively for the Navajo Nation in 2011.

 Calculate the total contribution of all 5 FCPP units and Navajo Mine (combined) to the Navajo Nation

economy in 2011.

 Estimate the total impact of FCPP and Navajo Mine (combined) exclusively for the Navajo Nation,

2016

‐ 2041, now that only Units 4

‐ 5 at FCPP remain in operation.

Estimated impacts include the direct effects of FCPP and Navajo Mine’s operations, and the indirect and

induced effects that arise when income is recycled within the Navajo Nation’s economy. Any impacts

extending beyond the Navajo Nation’s borders, including vendors based off the reservation, or state and

federal government payments, are excluded from the analyses.

Section 2 summarizes the economic impact method and the primary data used in the calculations.

Section 3 estimates the impact of all 5 FCPP units and the Navajo Mine, individually and in aggregate, for

the Navajo Nation in 2011.

Section 4 estimates the current economic impact of the 2

‐ unit FCPP operation and associated coal

production at the Navajo Mine, for one full year. 18

Section 5 extrapolates from the annual impacts to estimate the economic impact of the current FCPP

operation in conjunction with the reduced coal production operation of Navajo Mine for a 2016

‐ 2041

time horizon.

17 Seidman’s Navajo Nation Household Expenditure Survey was conducted between July 2012 and December 2012 at over 200

households. The purpose of this survey was to understand the extent to which Navajo residents spent their income within the

Nation, plus leakages outside the Nation.

18 No assumptions are made about the new forms of electricity generation to replace the shutdown units.3 

## 2. Data and Method

Economic impact analysis traces the full impact

‐ direct, indirect and induced

‐ of an economic activity

on jobs and incomes in a defined economy. Operations at companies such as FCPP and Navajo Mine

directly affect an economy through the jobs provided to company workers. Indirect effects arise when a

company makes purchases from suppliers to support its operation. Induced effects occur when workers

either directly or indirectly associated with the operations spend their incomes in the local economy,

when suppliers place upstream demands on other producers, and when governments spend new tax

revenues. The cumulative changes in jobs and incomes are a multiple of the initial direct effects.

Economic impacts in this study are estimated using zip code modules from the latest version of

IMPLAN, 19 an input

‐ output model developed and maintained by the Minnesota IMPLAN Group, Inc.,

which have been amended in line with a 2012 Navajo Nation Household Expenditure Survey conducted

by the Seidman Research Institute. The economic impacts are measured by three variables:

 Employment : this is a count of full

‐ and part

‐ time jobs. It includes both wage and salary workers,

and the self

‐ employed.

 Labor Income : this includes all forms of employment income, including employee compensation

(wages and benefits) and proprietor income.

 Gross Navajo Nation Product (GNNP) : this is synonymous with value added, and is usually referred

to as Gross State Product (GSP) or Gross Domestic Product (GDP). It represents the dollar value of

all goods and services produced for final demand in the Navajo Nation. It excludes the value of

intermediate goods and services purchased as inputs to final production. It can also be defined as

the sum of employee compensation (wages, salaries and benefits, including employer contributions

to health insurance and retirement pensions), proprietor income, property income, and indirect

business taxes.

Primary company

‐ level data was originally provided by APS and BHP for total wage and salary payments,

benefits, and employment at FCPP and Navajo Mine in 2011. The validity of this data was reconfirmed

by the client at the commencement of the current Navajo Nation

‐ specific study. APS and BHP also

19 The latest IMPLAN model uses a 2011 survey of the economy.4 provided a complete record of payments made to suppliers for goods and services, and taxes and

royalties paid to federal, state and local governments. The data used in the analysis is for the year 2011,

to ensure consistency with the prior State of New Mexico and San Juan County study. All monetary

amounts in this report are expressed in 2011 dollars (2011 $).

A technical appendix at the end of this report provides additional details on the data and estimation

procedures used in the current analysis.5 

## 3. Economic Impact of Four Corners Power Plant (FCPP) and Navajo Mine, 2011

3.1. FCPP impacts for the Navajo Nation, 2011

In 2011, FCPP employed 504 workers with total wages and salaries of approximately $54 million. When

health and retirement benefits and government social insurance were included, the total employee

compensation was $75.3 million in 2011. The average annual wage of a FCPP worker was therefore over

four times higher than the 2007 median household income for the Navajo Nation. 20 For the purpose of

this analysis, 80% of FCPP’s employees are assumed to originate from the Navajo Nation.

FCPP made significant contributions to the local economy through the purchase of goods and services

from local suppliers. In 2011, total FCPP transactions with suppliers located at a zip code in the Navajo

Nation amounted to $5.3 million (excluding coal purchases). 21

Table 1 summarizes the total economic impact of FCPP in the Navajo Nation for 2011, based on the

assumption that FCPP operated independently of Navajo Mine, and that 80% of its employees originated

from the Navajo Nation.

The first line of the table shows the direct contribution of FCPP operations to employment, labor

income, and GNNP in the Navajo Nation for 2011. The direct effects were estimated at 403 Navajo jobs,

$60.2 million Navajo labor income, and $211.4 million GNNP.

The second line of Table 1 shows the indirect impacts that were generated in the Navajo Nation

economy through FCPP’s 2011 supplier purchases. In purchasing $5.3 million of non

‐ coal goods and

services from Navajo Nation

‐ based suppliers, FCPP indirectly generated 34 jobs, $1.3 million labor

income, and $3.0 million GNNP.

In economic impact analysis, estimates are also made of the induced effects that arise when workers

either directly or indirectly associated with a company’s operations spend a portion of their incomes in a

20 FCPP’s average salary was compared with a 2007 employment and income survey conducted by the Support Services of the

Navajo Nation. See: The Navajo Nation (2010), 2009

‐ 2010 Comprehensive Economic Development Strategy

, Division of

Economic Development: Window Rock.

21 Coal purchases from BHP Navajo Coal Company are excluded to demonstrate the impact of FCPP, separate to Navajo Mine.6 specific geography, and when first

‐ tier suppliers place upstream demands on other producers. These

effects are shown on lines three and four of Table 1.

Table 1: Economic Impact of FCPP for the Navajo Nation, 2011

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from FCPP’s operations 403 60.2 211.4

Indirect effects from FCPP’s supplier

purchases 34 1.3 3.0

Induced effects from consumer spending

by FCPP employees 147 4.5 9.2

Induced effects related to FCPP’ supplier

purchases 8 0.3 0.7

Induced effects from spending of Navajo

Nation tribal taxes and royalties 384 19.5 24.3

Total Economic Impact 977 85.9 248.5

Source: Authors

The third line of Table 1 estimates the induced effects associated with the consumer spending of FCPP’s

Navajo Nation employees in 2011: that is, 147 jobs, $4.5 million labor income, and $9.2 million GNNP.

The fourth line of Table 1 shows the induced effects stemming from FCPP’s supplier purchases in 2011:

that is, 8 jobs, $0.3 million labor income, and $0.7 million GNNP. These arose when the Navajo Nation

‐

based suppliers engaged in additional local spending.

Estimates of the economic impacts generated when the Navajo Nation government spent 2011 tax

revenues and royalties associated with FCPP are shown in line five of Table 1. FCPP was estimated to

generate, both directly and indirectly, a total of $21 million in tribal taxes and royalties in 2011 for the

Navajo Nation government. The spending of these 2011 taxes and royalties was responsible for 384

jobs, $19.5 million labor income, and $24.3 million GNNP in the Navajo Nation.

The total impact of FCPP operations on the Navajo Nation economy for 2011 was estimated at 977 jobs,

$85.9 million labor income, and $248.5 million GNNP.7 

### 3.2. Navajo Mine in the Navajo Nation, 2011

In 2011, Navajo Mine employed a total of 528 workers with total wages and salaries of $46.8 million.

When health and retirement benefits and government social insurance were included, the total annual

compensation of these employees was $63.8 million. A Navajo Mine worker’s average annual wage was

therefore three and a half times higher than the 2007 median household income for the Navajo

Nation. 22 For the purpose of this analysis, 80% of Navajo Mine’s employees are assumed to originate

from the Navajo Nation.

In 2011, the Navajo Mine entered into $132.5 million transactions with vendors, $2.5 million of which

was with suppliers located on the Navajo Nation. 23

Table 2 summarizes the total economic impact of Navajo Mine on the Navajo Nation for 2011, based on

the assumption that Navajo Mine operated independently of FCPP, and that 80% of its employees

originated from the Navajo Nation.

Table 2: Economic Impact of Navajo Mine for the Navajo Nation, 2011

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations 422 51.1 111.7

Indirect effects from Navajo Mine’s

supplier purchases 27 0.7 1.0

Induced effects from consumer spending

by Navajo Mine employees 127 3.9 8.0

Induced effects related to Navajo Mine’s

supplier purchases 3 0.1 0.2

Induced effects from spending of Navajo

Nation tribal taxes and royalties 926 44.4 55.3

Total Economic Impact 1,507 100.2 176.2

Source: Authors

22 The average salary was compared with a 2007 employment and income survey conducted by the Navajo Nation. See: The

Navajo Nation (2010), 2009

‐ 2010 Comprehensive Economic Development Strategy

, Division of Economic Development: Window

Rock.

23 This excluded transactions with government agencies.8 The first line of Table 2 shows the direct contribution of Navajo Mine operations to employment, labor

income, and GNNP in the Navajo Nation for 2011. These direct effects were estimated at 422 Navajo

jobs, $51.1 million Navajo labor income, and $111.7 million GNNP.

The second line of Table 2 shows the indirect impacts that were generated in the Navajo Nation

economy because of Navajo Mine’s 2011 supplier purchases. In purchasing $2.5 million of goods and

services from Navajo Nation

‐ based suppliers, Navajo Mine indirectly generated 27 jobs, $0.7 million

labor income, and $1.0 million GNNP.

The third line of Table 2 estimates the induced effects associated with the consumer spending of Navajo

Mine employees originating from the Navajo Nation in 2011: that is, 127 jobs, $3.9 million labor income,

and $8.0 million GNNP.

The fourth line of Table 2 shows the induced effects stemming from Navajo Mine’s 2011 Navajo Nation

‐

based supplier purchases: that is, 3 jobs, $0.1 million labor income, and $0.2 million GNNP.

Estimates of the economic impacts generated when the Navajo Nation government spends 2011 tax

revenues and royalties associated with Navajo Mine are shown in line five of Table 2. Navajo Mine was

estimated to generate, both directly and indirectly, a total of approximately $47.7 million in tribal taxes

and royalties for the Navajo Nation in 2011. The spending of these 2011 tax dollars was responsible for

926 jobs, $44.4 million labor income, and $55.3 million GNNP in the Navajo Nation.

The total impact of Navajo Mine operations for the Navajo Nation economy in 2011 was estimated at

1,507 jobs, $100.2 million labor income, and $176.2 million GNNP.



### 3.3. Combined Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2011

Table 3 summarizes the combined economic impact of FCPP and Navajo Mine for the Navajo Nation in

2011. This assumes that FCPP and Navajo Mine operated as a single, combined entity.9 The combined employment of both facilities in 2011 was 1,032 workers, with wage and salary payments

of $100.7 million and labor income of $139.1 million. 80% of the employees originated from the Navajo

Nation.

The direct effects are therefore 826 Navajo jobs, $111.3 million Navajo labor income, and $323 million

GNNP.

Table 3: Combined Economic Impact of FCPP and Navajo Mine for the Navajo Nation, 2011

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 826 111.3 323.0

Indirect effects from FCPP and Navajo Mine

supplier purchases 61 2.1 4.0

Induced effects from consumer spending by

FCPP and Navajo Mine employees 274 8.5 17.2

Induced effects related to FCPP and Navajo

Mine supplier purchases 12 0.4 1.0

Induced effects from spending of Navajo

Nation tribal taxes and royalties 1,311 63.9 79.6

Total Economic Impact 2,483 186.1 424.8

Source: Authors

FCPP and Navajo Mine’s 2011 purchases from Navajo Nation

‐ based suppliers amounted to

approximately $7.8 million (excluding coal purchases). The indirect impacts associated with all Navajo

Nation

‐ based supplier purchases were 61 jobs, $2.1 million labor income, and $4.0 million GNNP.

The consumer spending of FCPP and Navajo Mine employees originating from the Navajo Nation in 2011

generated 274 jobs, $8.5 million labor income, and $17.2 million GNNP.

The induced effects stemming from FCPP and Navajo Mine’s Navajo Nation

‐ based supplier purchases in

2011 generated 12 jobs, $0.4 million labor income, and $1 million GNNP.10 FCPP and Navajo Mine were estimated to generate over $68.7 million in total taxes and royalties for the

Navajo Nation. The spending of these tax dollars generated 1,311 jobs, $63.9 million labor income, and

$79.6 million GNNP.

The total impact of the combined operations of FCPP and Navajo Mine on the 2011 Navajo Nation

economy was estimated at 2,483 jobs, $186.1 million labor income, and $424.8 million GNNP.11 

## 4. Annual Economic Impact of FCPP (Units 4

‐ 5) and Navajo Mine for the Navajo

Nation

In 2014, APS permanently shut down Units 1

‐ 3 at FCPP as part of a greater than $500 million plan to

meet federally

‐ imposed environmental regulations, thereby reducing FCPP’s current capacity to 1,540

MW. Immediately prior to this, in December 2013, the Navajo Nation also agreed to purchase the

Navajo Mine from BHP Billiton, thereby becoming an owner and operator of a coal mine for the very

first time.

The current section therefore considers the economic impact of FCPP and Navajo Mine, individually and

in aggregate, for one full year, based on the downsizing of the generating station and mine’s operations,

and also the change in ownership of the mine.

Direct employment impacts are provided by FCPP and Navajo Mine, and the 2011 supplier purchases are

reduced proportionally to reflect the downsizing of the generating station and mine’s operations. Tax

and royalty payments are also adjusted proportionately. 24 No assumptions are made about any new

forms of electricity generation to replace these coal units. To maintain consistency with Section 3, all

monetary amounts are described in 2011 dollars (2011 $).



### 4.1. FCPP in the Navajo Nation, Units 4

‐ 5 Operation

Current direct employment at FCPP (Units 4

‐ 5 only) is 361 employees, with wages/salaries of $38.6

million (2011 $). 25 When health and retirement benefits and government social insurance are included,

the total annual employee compensation is $53.9 million (2011 $). For the purpose of this analysis, 80%

of FCPP’s Units 4

‐ 5 employees are assumed to originate from the Navajo Nation.

Table 4 summarizes the total economic impact of FCPP for the Navajo Nation for one year based on a

two

‐ unit operation at FCPP, the assumption that FCPP operates independently of Navajo Mine, and also

24 The analysis assumes that tribal royalties and taxes previously paid by BHP Billiton will continue to be spent in the same way

by the Nation, on the Nation. It also assumes that the Nation will treat the federal, state and county tax exemptions accrued

through their purchase of the mine as tribal royalties.

25 These employment and wages/salaries estimates are provided by APS.12 the assumption that 80% of both units’ employees originate from the Navajo Nation. GNNP and labor

income are expressed in 2011 $ in the table.

Table 4: Annual Economic Impact of FCPP, Units 4

‐ 5 Operation, for the Navajo Nation

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from FCPP’s operations 289 43.1 151.4

Indirect effects from FCPP’s supplier

purchases 22 0.9 1.9

Induced effects from consumer spending

by FCPP employees 105 3.2 6.6

Induced effects related to FCPP’s supplier

purchases 5 0.2 0.5

Induced effects from spending of Navajo

Nation tribal taxes and royalties 278 14.1 17.6

Total Economic Impact 700 61.6 178.0

Source: Authors

The first line of Table 4 estimates the annual direct contribution of the operation of FCPP Units 4

‐ 5 to

employment, labor income, and GNNP in the Navajo Nation. The annual direct effects are estimated at

289 Navajo jobs, $43.1 million Navajo labor income, and $151.4 million GNNP.

The second line of Table 4 estimates the indirect annual impacts generated in the Navajo Nation

economy from FCPP Units 4

‐ 5’s supplier purchases. In purchasing an estimated $3.5 million goods and

services from Navajo Nation

‐ based suppliers, 26 FCPP is estimated to indirectly generate 22 jobs, $0.9

million labor income, and $1.9 million GNNP in one full fiscal or calendar year.

The third line of Table 4 estimates the induced annual effects associated with the consumer spending of

FCPP’s Navajo employees at Units 4

‐ 5: that is, 105 jobs, $3.2 million labor income, and $6.6 million

GNNP.

26 This is based on a 65.78% share of the 2011 figure, provided by APS, which excludes coal purchases.13 The fourth line of Table 4 shows the induced annual effects stemming from FCPP supplier purchases for

Units 4

‐ 5: that is, 5 jobs, $0.2 million labor income, and $0.5 million GNNP.

Estimates of the economic impacts generated when the Navajo Nation government spends annual tax

revenues and royalties associated with FCPP are shown in line five of Table 4. The current two

‐ unit FCPP

operation is estimated to generate, both directly and indirectly, a total of $15.2 million in annual tax

revenues and royalties for the Navajo Nation government. The spending of these tribal taxes and

royalties is estimated to generate 278 jobs, $14.1 million labor income, and $17.6 million GNNP in the

Navajo Nation (2011 $).

The total annual impact of a two

‐ unit FCPP operation on the Navajo Nation economy is estimated at 700

jobs, $61.6 million labor income, and $178 million GNNP.



### 4.2. Navajo Mine in the Navajo Nation, Units 4

‐ 5 Operation

397 employees are required at the Navajo Mine to meet the lower coal demands of the current two

‐ unit

operation at FCPP. The annual wages/salaries of these employees is $35.2 million (2011 $). 27 When

health and retirement benefits and government social insurance are included, the total annual

employee compensation is $48 million (2011 $). For the purpose of this analysis, 80% of Navajo Mine’s

employees are assumed to originate from the Navajo Nation.

Table 5 summarizes the total annual economic impact of Navajo Mine on the Navajo Nation, taking into

account the two

‐ unit operation at FCPP, the fact that the mine has been purchased by the Navajo

Nation, and the assumption that 80% of the Mine’s employees originate from the Navajo Nation.. The

estimated annual economic impacts are also based on the assumption that Navajo Mine operates

independently of FCPP. GNNP and labor income are again expressed in 2011 $ in the table.

The first line of Table 5 shows the direct contribution of Navajo Mine’s current operations to annual

employment, labor income, and GNNP in the Navajo Nation. The direct effects are estimated at 318

Navajo jobs, $38.4 million Navajo labor income, and $84.0 million GNNP.

27 These employment and wages/salaries estimates are provided by BHP Navajo Coal Company.14 The second line of Table 5 shows the indirect impacts that could be generated in the Navajo Nation

economy through the mine’s annual supplier purchases. In purchasing an estimated $1.8 million goods

and services from Navajo Nation

‐ based suppliers, 28 Navajo Mine is estimated to indirectly generate 19

jobs, $0.5 million labor income, and $0.7 million GNNP.

Table 5: Annual Economic Impact of Navajo Mine, Units 4

‐ 5 Operation, for the Navajo Nation

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations 318 38.4 84.0

Indirect effects from Navajo Mine’s

supplier purchases 19 0.5 0.7

Induced effects from consumer spending

by Navajo Mine employees 96 3.0 6.0

Induced effects related to Navajo Mine’s

supplier purchases 2 0.1 0.2

Induced effects from spending of Navajo

Nation tribal taxes and royalties 1,158 55.5 69.1

Total Economic Impact 1,593 97.4 160.0

Source: Authors

The third line of Table 5 estimates the induced effects associated with the current consumer spending of

Navajo Mine employees originating from the Navajo Nation: that is, 96 jobs, $3.0 million labor income,

and $6.0 million GNNP.

The fourth line of Table 5 shows the induced effects stemming from Navajo Mine’s current annual

supplier purchases: that is, 2 jobs, $0.1 million labor income, and $0.2 million GNNP.

Estimates of the annual economic impacts generated from the spending of Navajo Nation government

revenues and royalties associated with Navajo Mine are shown in line five of Table 5. Navajo Mine is

estimated to directly and indirectly generate an annual total of $59.7 million in tax revenues and

royalties for the Navajo Nation government. The spending of these tribal taxes and royalties is

28 This is an estimate of supplier purchases, based on 70% of the 2011 figure, provided by BHP Navajo Coal Company.15 estimated to generate 1,158 jobs, $55.5 million labor income, and $69.1 million GNNP in the Navajo

Nation.

The total annual impact of current Navajo Mine operations on the Navajo Nation economy is estimated

at 1,593 jobs, $97.4 million labor income, and $160.0 million GNNP.



### 4.3. Combined Economic Impact for the Navajo Nation, Units 4

‐ 5 Operation

Table 6 summarizes the combined annual economic impact of FCPP and Navajo Mine for the Navajo

Nation economy based on the current Units 4

‐ 5 operation at FCPP, the associated reduction in coal

production, and the change in ownership at Navajo Mine. This also assumes that 80% of the employees

at the plant and mine originate from the Navajo Nation

The direct effects are therefore 606 Navajo jobs, $81.5 million Navajo labor income, and $235.4 million

GNNP (2011 $).

Table 6: Annual Combined Economic Impact of FCPP and Navajo Mine, Units 4

‐ 5, Navajo Nation

Economic Impacts Employment

(Jobs) Labor Income

(Millions

2011 $) GNNP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 606 81.5 235.4

Indirect effects from FCPP and NAVAJO MINE

supplier purchases 42 1.4 2.7

Induced effects from consumer spending by

FCPP and Navajo Mine employees 201 6.2 12.6

Induced effects related to FCPP and Navajo

Mine supplier purchases 8 0.3 0.7

Induced effects from spending of Navajo

Nation tribal taxes and royalties 1,436 69.6 86.7

Total Economic Impact 2,293 159.0 338.0

Source: Authors

The indirect impacts associated with all non

‐ coal, Navajo Nation

‐ based supplier purchases is estimated

at 42 jobs, $1.4 million labor income, and $2.7 million GNNP.16 The consumer spending of FCPP and Navajo Mine employees originating from the Navajo Nation for a

year is estimated to generate 201 jobs, $6.2 million labor income, and $12.6 million GNNP.

Induced effects stemming from FCPP and Navajo Mine’s current annual Navajo Nation

‐ based supplier

purchases is estimated to generate 8 jobs, $0.3 million labor income, and $0.7 million GNNP.

FCPP and Navajo Mine’s current operations are estimated to generate, through direct, indirect and

induced effects, approximately $74.9 million in annual tax revenues and royalties for the Navajo Nation.

The Navajo Nation government’s spending of these tax and royalty revenues is estimated to generate

1,436 jobs, $69.6 million labor income, and $86.7 million GNNP in the Navajo Nation.

The total annual impact of the current combined operations of FCPP and Navajo Mine on the Navajo

Nation economy is an estimated 2,293 jobs, $159.0 million labor income, and $338.0 million GNNP.17 

## 5. Cumulative Economic Impact of FCPP and Navajo Mine, 2016

‐ 2041

This study has used an IMPLAN input

‐ output model to estimate the economic impact of FCPP and

Navajo Mine, individually and in aggregate, on GNNP, employment and labor income for the Navajo

Nation. The findings are heavily reliant on the knowledge and reliability of the IMPLAN model, the

quality of the inputs provided by FCPP and the Navajo Mine, and the representative nature of the

Navajo Household Expenditure Survey. The impacts described in this report therefore represent best

guess estimates, rather than definitive, actual economic impacts.

An IMPLAN analysis usually provides a snapshot estimate of economic impacts for one year. It is a

static, linear model which does not capture the dynamics of how a regional economy might change over

time, because it assumes that wage levels, prices, property values, input costs, labor supply, productivity

and other key variables remain constant. IMPLAN also fails to take into account how an economy can

compensate over time for the loss of a particular business or industry, by attracting new business to the

region of study. Nevertheless, Table 7 provides a simplistic, cumulative estimate of the economic

impacts of FCPP and Navajo Mine for the Navajo Nation, 2016

‐ 2041, 29 based on the Units 4

‐ 5 operation,

and the change in ownership at the mine.

Table 7: Cumulative Economic Impact of FCPP and Navajo Mine, 2016

‐ 2041

Economic Impact Measure Cumulative Estimated Impacts 2016

‐ 2041

Employment (Job Years) 30 59,612

Labor Income (Billions 2011 $) 4.13

Gross Navajo Nation Product (Billions 2011 $) 8.79

Source: Authors

Table 7 shows that the Units 4

‐ 5 FCPP operation and reduced associated coal production at Navajo

Mine, alongside the Navajo Nation’s ownership of the mine, is estimated to cumulatively generate

approximately $4.1 billion labor income and almost $8.8 billion GNNP (both 2011 $) for the Navajo

Nation.

29 The period of study has been suggested by the client, consistent with contractual intentions.

30 A “job year” is defined as one person having a full

‐ time job for exactly one year.18 The cumulative employment impact is estimated at 59,612 job years in the Navajo Nation, 2016

‐ 2041.

The label “job year” is important and should not be simplified or abbreviated to “job”. A “job year” is

defined as one person having a full

‐ time job for exactly one year. This means, for example, that one

FCPP employee based at the plant throughout 2016

‐ 2041 will account for 26 job years. FCPP and Navajo

Mine actually directly account for 758 jobs each year in the Navajo Nation, 80% of which are assumed to

be held by workers originating from the Navajo Nation.

The cumulative impacts summarized in Table 7 do not take into account any state and property tax

payments made by FCPP and Navajo Mine, the economic impact of non

‐ Navajo Nation employees at the

plant and mine, or any supplier purchases made outside the Navajo Nation.

Caution should also be exercised in any comparison of these results with those reported in an earlier

Seidman study dated March 2013 31 for three reasons:

 The geographic areas examined by both reports are very different. The 2013 report was

concerned with the economic effects for the State of New Mexico and San Juan County. The

current study examines the economic effects exclusively for the Navajo Nation.

 The impact of FCPP and Navajo Mine payments to the Navajo Nation were evaluated separate

to, rather than combined with, the estimated impacts for San Juan County and the State of New

Mexico in the original study.

 Several modifications have been made to the IMPLAN model in the current study, including the

regional purchase coefficients (RPCs) and trade flows based on the consumption patterns

identified in the Navajo Nation Household Expenditure Survey. This has resulted in a greater use

of detailed local information in the current study, compared to the previous study issued to the

client in March 2013.

This study therefore suggests that FCPP and Navajo Mine exert a significant impact in the Navajo Nation

economy.

31 Four Corners Power Plant and Navajo Mine: An Economic Impact Study (March 2013), Dr. Anthony Evans, Dr. Timothy James,

and Eva Madly, Seidman Research Institute.19 

## Technical Appendix: Data and Economic Impact Method

TA1: The IMPLAN model

Seidman used the IMPLAN economic model to assess the impacts of FCPP and Navajo Mine on the

economy of the Navajo Nation.

IMPLAN is maintained and licensed by the Minnesota IMPLAN Group, Inc. (MIG). The IMPLAN model

organizes the economy into 440 separate industries and has comprehensive data on every area of the

United States. It is widely used by economists to assess impacts of economic activities on the local

economy. Version 3.0 of the software was used.

The specific model used by Seidman in this study was based on IMPLAN’s 2011 economic database for

57 zip codes, which the authors accepted as a representation of the Navajo Nation. The 57 zip codes

represented parts of Apache, Navajo, and Coconino Counties in Arizona; McKinley, San Juan, Cibola,

Socorro, and Sandoval Counties in New Mexico; and San Juan County in Utah.

Consultation with the Navajo Nation’s Division of Economic Development initially identified 59 zip codes

within the Navajo Nation, illustrated in Table 7; and American FactFinder states that most of these 59 zip

codes are majority inhabited by members of the Navajo Nation. However there are exceptions:

 Page

‐ where approximately 46% of the population of 10,373 are Navajo.

 Winslow

– where 38% of the 15,195 inhabitants are Navajo.

 Canoncito

– where 23% of 4,288 inhabitants are Navajo.

 Bloomfield

– where 19% of the population of 15,891 are Navajo.

To compensate for this, and avoid any over

‐ representation of non

‐ Navajo residents, Page and

Bloomfield were excluded from Seidman’s economic impact calculations in the current study. Winslow

and Canoncito were included in Seidman’s economic impact calculations in the current study.20 Table 8: Navajo Nation Zip Codes

Zip State County City Zip State County City

86020 AZ Coconino Cameron 86547 AZ Apache Round Rock

86031 AZ Navajo Indian Wells 86556 AZ Apache Tsaile

86033 AZ Navajo Kayenta 87013 NM Sandoval Cuba

86034 AZ Navajo Keams Canyon 87018 NM Sandoval Counselor

86035 AZ Coconino Leupp 87026 NM Cibola Canoncito

86039 AZ Navajo Kykotsmovi 87037 NM San Juan Nageezi

86040 AZ Coconino Page 87045 NM McKinley Prewitt

86044 AZ Coconino Tonalea 87305 NM McKinley Gallup

86045 AZ Coconino Tuba City 87310 NM McKinley Brimhall

86047 AZ Navajo Winslow 87311 NM McKinley Churchrock

86053 AZ Coconino Kaibeto 87313 NM McKinley Crownpoint

86054 AZ Navajo Shonto 87316 NM McKinley Fort Wingate

86502 AZ Apache Chambers 87319 NM McKinley Mentmore

86503 AZ Apache Chinle 87320 NM McKinley Mexican Springs

86504 AZ Apache Fort Defiance 87321 NM McKinley Ramah

86505 AZ Apache Ganado 87323 NM McKinley Thoreau

86506 AZ Apache Houck 87325 NM McKinley Tohatchi

86507 AZ Apache Lukachukai 87328 NM McKinley Navajo

86508 AZ Apache Lupton 87364 NM San Juan Sheep Springs

86510 AZ Navajo Pinon 87365 NM McKinley Smith Lake

86511 AZ Apache St. Michael 87375 NM McKinley Yahtahey

86512 AZ Apache Sanders 87413 NM San Juan Bloomfield

86514 AZ Apache Teecnospos 87416 NM San Juan Fruitland

86515 AZ Apache Window Rock 87420 NM San Juan Shiprock

86520 AZ Navajo Blue Gap 87455 NM San Juan Newcomb

86535 AZ Apache Dennehotso 87461 NM San Juan Sanostee

86538 AZ Apache Many Farms 87825 NM Socorro Magdalena

86540 AZ Apache Nazlini 84531 UT San Juan Monument

Valley

86544 AZ Apache Red Valley 84534 UT San Juan Montezuma

Creek

86545 AZ Apache Rock Point

Source: Navajo Nation Division of Economic Development



### TA 2: Data

APS provided files containing total wage and salary payments, benefits, and employment for 2011 for

the Four Corners Power Plant (FCPP) and Navajo Mine.21 Total supplier purchase data was supplied for 2011, specifying the name and location of the vendors and

the amount of purchase, as well as the type of service/product being purchased. Seidman reduced the

supplier purchase transactions proportionately to 65.78% of the 2011 value for FCPP and 70% of the

2011 value for Navajo Mine, following the closure of Units 1

‐ 3 at FCPP. For the purpose of this study,

Navajo Nation

‐ based supplier data alone was used.

To incorporate supplier information into IMPLAN, a detailed industry code was assigned to each

transaction indicating the nature of the good or service purchased and produced. Seidman assigned

NAICS (North American Industry Classification) codes to each supplier transaction category, which was

then linked to an IMPLAN code using a correspondence table provided by the IMPLAN group.

Another important aspect of economic impact analysis is the indirect effects of a company’s payroll.

These are generated when employees spend a portion of their incomes on goods and services produced

within the local economy. The detailed commodity make

‐ up of these expenditures was drawn from a

Navajo Nation Household Expenditure Survey conducted by Seidman at over 200 homes on the Navajo

Nation between July and December 2012.

Tribal tax revenues, fees and royalties generated during the economic impact process were also

assumed to be spent and included in the results. However, Seidman’s calculations for these areas were

performed outside of IMPLAN, and then added to the model’s results.



### TA 3: Changes made to the IMPLAN model

Several changes were made to the standard IMPLAN model to make it more specific to the Navajo

Nation. Following the construction of a specific zip code

‐ based geographic area for the impact analysis,

Seidman modified IMPLAN’s default regional purchase coefficients (RPCs) and trade flows based on the

consumption patterns identified by the Navajo Nation Household Expenditure Survey implemented by

the authors in 2012.

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