FOUR CORNERS POWER PLANT

AND NAVAJO MINE

An Economic Impact Analysis

Dr. Anthony Evans, Dr. Tim James and Eva Madly

L. William Seidman Research Institute

W. P. Carey School of Business

Arizona State University

February 24, 2013
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 Department of Mines and Mineral

Resources

 Arizona Hospital and Healthcare Association

 Arizona Investment Council (AIC)

 Arizona Mining Council  

 Arizona Public Service Company (APS)

 Arizona School Boards Association

 Arizona Town Hall

 The Boeing Company

 Chicanos Por La Causa

 Epic Rides

 Excelsior Mining

 Executive Budget Office of the State of

Arizona

 First Things First

 Freeport McMoran

 Glendale Community College

 Goodwill Industries

 Intel Corporation

 Navajo Nation Div. Economic Development

 The Pat Tillman Foundation

 Phoenix Sky Harbor International Airport

 Pierce Eislen

 Public Service New Mexico (PNM)

 Raytheon

 Rosemont Copper Mine

 Salt River Project (SRP)

 Science Foundation Arizona (SFAZ)

 Twisted Adventures

 Turf Paradise & Delaware North

 Valley METRO Light Rail

 Vote Solar Initiative

 Waste Management Inc.
1

Executive Summary

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

individually and in aggregate, on gross state product, employment, and labor income for the

State of New Mexico and San Juan County NM in 2011.   Estimated impacts include both the

direct effects of the two companies’ operations and the indirect and induced effects that arise

when income is recycled within the New Mexico and San Juan County economies.

The study uses the latest version of IMPLAN for the State of New Mexico and San Juan County

NM to estimate multiplier effects.1

The individual economic impact analyses for FCPP and Navajo Mine for 2011 presented in this

report assumed that each facility operated independently of the other.

To assess the combined 2011 economic impact of both the generating station and the mine,

this report assumed that FCPP and Navajo Mine operated as a single, combined entity.

In 2011, the combined employment of both facilities was 1,032 workers, with wage and salary

payments amounting to $100.7 million.    If health and retirement benefits and government

social insurance were included, the gross compensation of these employees was $139.1 million.

Table 1: Combined Economic Impact of FCPP and Navajo Mine for the

State of New Mexico, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Economic impact of FCPP2 1,462 111.4 360.6

Economic impact of Navajo Mine3 2,107 131.5 253.9

Combined Economic Impact4 3,569 242.8 614.5

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

 

1 The latest version uses a 2010 economic database. 2 This assumed FCPP operated independently of Navajo Mine. 3 This assumed Navajo Mine operated independently of FCPP. 4 This assumed that FCPP and Navajo Mine was a single, combined entity.
2

Table 1 estimates total state effects for both facilities, individually and cumulatively, for 2011,

excluding tribal taxes and royalties.  The total impact of the combined operations of FCPP and

Navajo Mine in the State of New Mexico economy was estimated at $614.5 million gross state

product.    Both facilities were estimated to cumulatively generate 3,569 direct and

indirect/induced jobs, and labor income of $242.8 million.

Table 2 estimates the effects of both facilities, individually and cumulatively, in San Juan County

NM for 2011, excluding tribal taxes and royalties.  Cumulatively, FCPP and Navajo Mine in 2011

were estimated to generate 2,940 jobs, $213.8 million labor income, and $516 million gross

state product.

Table 2: Combined Economic Impact of FCPP and Navajo Mine for San Juan County NM, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Economic impact of FCPP5 1,363 106.4 301.7

Economic impact of Navajo Mine6 1,577 107.4 214.3

Combined Economic Impact7 2,940 213.8 516.0

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

In addition, FCPP and Navajo Mine paid a total of $49.8 million in Possessory Interest Tax (PIT),8

Business Activity Tax (BAT)9 and tribal royalties to the Navajo Nation, plus $14.3 million in other

tribal taxes in 2011.    The impact of the latter payments extended beyond the State of New

Mexico and San Juan County NM.   Using a blended series of multipliers for four Arizona and

New Mexico counties, these tribal taxes and royalties were estimated to generate an additional

1,468 jobs, $65 million labor income, and $84.3 million gross state product on tribal lands.  

These impacts for 2011 are displayed in Table 3.

 

5 This assumed FCPP operated independently of Navajo Mine 6 This assumed Navajo Mine operated independently of FCPP. 7 This assumed that FCPP and Navajo Mine was a single, combined entity. 8 This is a tax on the taxable value of a possessory interest granted by the Navajo Nation.  A possessory interest is

the right to be on Navajo land performing a particular activity.  The most common forms of possessory interests

are oil and gas leases, coal leases, rights‐of‐way, and business site leases. 9 This is essentially a sales tax paid to the Navajo Nation, assessed on contract work done at the plant by

businesses not based on the reservation.
3

Table 3: Combined Economic Impact of FCPP and Navajo Mine’s Tribal Taxes and Royalties

for the Navajo Nation, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Induced effects from spending of FCPP

PIT and BAT

422 18.7 24.2

Induced effects from spending of Navajo

Mine’s Tribal Royalties and Taxes 1,046 46.3 60

Total Economic Impact from Tribal

Taxes and Royalties 1,468 65.0 84.3

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

Despite being one of the largest and most important suppliers of electricity in the Southwest,

FCPP and Navajo Mine face an uncertain future, due to the potential closure and/or change of

ownership of some electricity generating units, and federal environmental rulings.  As a result,

this study also assessed the economic impact of both facilities if Units 1‐3 at FCPP are shut

down, and only Units 4‐5 remain in operation.

Table 4 estimates the total state effects for both facilities, individually and cumulatively, for a

Units 4‐5 operation (excluding tribal royalties and taxes) in the State of New Mexico.    In

contrast to the 2011 historical scenario, the Units 4‐5 Operation scenario also assumes Navajo

Nation, rather than BHP Navajo Coal Company, ownership of Navajo Mine.10  

Table 4: Annual Economic Impact of FCPP and Navajo Mine for the State of New Mexico,

based on a Units 4‐5 FCPP Operation

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Economic impact of FCPP11 1,027 79.0 257.2

Economic impact of Navajo Mine12 1,307 85.9 173.6

Combined Economic Impact13 2,334 164.9 430.8

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

 

10 Navajo Mine would have federal, state and county tax exemptions as a result of this change in ownership. 11 This assumed FCPP operated independently of Navajo Mine. 12 This assumed Navajo Mine operated independently of FCPP. 13 This assumed that FCPP and Navajo Mine was a single, combined entity.
4

If FCPP Units 1‐3 are shut down and the mine changes ownership, this could result in a

combined loss of 1,235 jobs, $77.9 million labor income, and $183.7 million gross state product

in the State of New Mexico in one year, compared to the situation in 2011 when all five units

operated at FCPP.

Table 5 estimates the total effects for both facilities, individually and cumulatively, in San Juan

County NM for one year after a Units 1‐3 shutdown (excluding tribal royalties and taxes).

Table 5: Annual Economic Impact of FCPP and Navajo Mine for San Juan County NM,

based on a Units 4‐5 FCPP Operation

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Economic impact of FCPP14 954 75.4 215.0

Economic impact of Navajo Mine15 1,115 77.5 156.5

Combined Economic Impact16 2,069 153.0 371.5

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

If FCPP Units 1‐3 are shut down, this could result in a combined loss of 872 jobs, $60.9 million

labor income, and $144.5 million gross state product for the San Juan County economy in one

year, compared to the situation in 2011 when all five units operated at FCPP.

A Units 1‐3 shutdown at FCPP and associated reduction in coal production at Navajo Mine will

also reduce FCPP’s PIT and BAT payments to $13.4 million and Navajo Mine’s tribal royalties

and taxes to an estimated $40.2 million.  However, the Mine, if purchased by the Nation, will

also benefit from $17.9 million federal, state and county tax exemptions.17   Using a blended

series of multipliers for the counties affected, these tribal taxes and royalties and tax

exemptions alone are estimated to generate an additional 1,637 jobs, $72.5 million labor

income, and $94 million gross state product in a range of Arizona and New Mexico counties,

summarized in Table 6.

 

14 This assumed FCPP operated independently of Navajo Mine. 15 This assumed Navajo Mine operated independently of FCPP. 16 This assumed that FCPP and Navajo Mine was a single, combined entity. 17 The study assumed that the tribal royalty and tax rates previously paid by BHP Billiton will continue to be spent

in the same way by the Nation, on the Nation, after they have purchased Navajo Mine. It also assumed that the

Nation will treat the federal, state, and county tax exemptions after their purchase as additional tribal royalties.
5

A Units 1‐3 shutdown at FCPP and associated reduction in coal production at Navajo Mine and

the change in Navajo Mine’s ownership could therefore result in a combined gain of 169 jobs,

$7.5 million labor income, and $9.7 million gross state product for the Navajo Nation from tribal

royalties and taxes alone in one year, compared to the situation in 2011 when all five units

operated at FCPP and the Mine was owned by BHP Billiton.18

Table 6: Annual Impact of Tribal Taxes, Royalties, and Exemptions for the Navajo Nation,

based on a Units 4‐5 FCPP Operation

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Induced effects from spending of FCPP

PIT and BAT

306 13.5 17.6

Induced effects from spending of Navajo

Mine tribal royalties and taxes 1,331 58.9 76.5

Total Economic Impact from Tribal

Taxes and Royalties 1,637 72.5 94.0

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

An IMPLAN analysis is linear in nature, unable to capture the dynamics of how a regional

economy might change over time, and is therefore best suited to one year snapshots.

Nevertheless, a simplistic evaluation of the cumulative economic impacts of FCPP and Navajo

Mine for 2016 ‐ 2041 19 is illustrated in Table 7.

Table 7: Cumulative Economic Impact of FCPP and Navajo Mine, Units 4‐5 Operation,

2016‐2041 for the State of New Mexico and San Juan County NM

Economic Impact Cumulative Impacts, 2016‐2041

State of New

Mexico

San Juan County

NM

Host County as

% of State

Employment (Job Years) 60,685 53,790 88.6%

Labor Income (Billions 2011 $) 4.29 3.98 92.7%

Gross State Product (Billions 2011 $) 11.20 9.66 86.2%

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

 

18 This included the impact of federal, state and county tax savings from the Navajo Nation’s purchase of the mine. 19 The period of study has been suggested by the client, consistent with contractual intentions.
6

Table 7 estimates almost $4.3 billion labor income and $11.2 billion gross state product (both

2011 $) throughout the 26‐year period for the State of New Mexico.  For San Juan County NM,

2016‐2041, the estimated cumulative impacts could be approximately $4 billion labor income

and over $9.6 billion gross state product (both 2011 $).    The employment impacts could be

60,685 job years in New Mexico for the 26‐year study period, including 53,790 job years in San

Juan County NM.20

The cumulative impacts for the Navajo Nation derived exclusively from tribal taxes and

royalties, plus federal, state and county tax exemptions for 2016‐2041 could be approximately

$1.88 billion labor income, $2.45 billion gross state product (both 2011 $) and 42,574 job years.

Table 8: Cumulative Economic Impact of Tribal Taxes, Royalties, and Exemptions Units 4‐5

Operation, for the Navajo Nation, 2016‐2041

Economic Impact Cumulative Impacts 2016‐2041

Navajo Nation

Employment (Job Years) 42,574

Labor Income (Billions 2011 $) 1.88

Gross State Product (Billions 2011 $) 2.45

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

It is important to note that the total economic impact of FCPP and Navajo Mine for the Navajo

Nation will extend far beyond these tribal taxes, royalties and tax exemptions.    However, a

Navajo Nation specific analysis has not been possible based on the data supplied by the client,

the geographical limitations of IMPLAN, and the lack of a contemporary, reliable assessment of

expenditure leakages from the Nation.

It is also important to note that this study only estimates the economic impacts in the State of

New Mexico and San Juan County NM.    The fact that FCPP and Navajo Mine’s supplier

purchases extend to vendors located outside the State of New Mexico will ultimately mean that

their total national impact is even greater than the estimates described in this study.

 

20 A “job year” is defined as one person having a full‐time job for exactly one year.  The label “job year” is not

equivalent to, and therefore should not be simplified or abbreviated as “job”.
7

Table of Contents

Executive Summary 1

Table of Contents 7

Table of Figures 8

1. Introduction 9

2. Data and Method 11

3. Economic Impact of Four Corners Power Plant (FCPP), 2011 12

     3.1. FCPP in the State of New Mexico, 2011 12

     3.2. FCPP in San Juan County NM, 2011 14

     3.3. Impact on 2011 State and Local Government Tax Revenues 15

4. Economic Impact of Navajo Mine, 2011 17

     4.1. Navajo Mine in the State of New Mexico, 2011 17

     4.2. Navajo Mine in San Juan County NM, 2011 19

     4.3. Impact on 2011 State and Local Government Tax Revenues 20

5. Combined Economic Impact of FCPP and Navajo Mine, 2011 22

     5.1. Combined Economic Impact of FCPP and Navajo Mine for New Mexico, 2011 22

     5.2. Combined Economic Impact of FCPP and Navajo Mine for San Juan County NM, 2011 23

6. Economic Impact of Tribal Taxes and Royalties, 2011 25

7. Economic Impact of FCPP, Units 4‐5 Operation 27

     7.1. FCPP in the State of New Mexico, Units 4‐5 Operation 27

     7.2. FCPP in San Juan County NM, Units 4‐5 Operation 29

8. Economic Impact of Navajo Mine, Units 4‐5 Operation 32

     8.1. Navajo Mine in the State of New Mexico, Units 4‐5 Operation 32

     8.2. Navajo Mine in San Juan County NM, Units 4‐5 Operation 34

9. Combined Economic Impact of FCPP and Navajo Mine, Units 4‐5 Operation 36

     9.1. Combined Economic Impact for New Mexico, Units 4‐5 Operation 36

     9.2. Combined Economic Impact for San Juan County NM, Units 4‐5 Operation 37

10. Economic Impact of Tribal Taxes, Royalties, and Exemptions, Units 4‐5 Operation 39

11. Cumulative Economic Impact of a Units 4‐5 Operation, 2016‐2041 41

References 44

Technical Appendix: Data and Economic Impact Method 45

     TA.1. Employment and Payroll 45

     TA.2. Consumer Spending 45

     TA.3. Vendor Purchases 45

     TA.4. Estimating Tax Revenues 45

     TA.5. The IMPLAN Model 46
8

Table of Figures

Table 1: Combined Economic Impact of FCPP and Navajo Mine for New Mexico, 2011 1

Table 2: Combined Economic Impact of FCPP and Navajo Mine for San Juan County NM, 2011 2

Table 3: Combined Economic Impact of Tribal Taxes and Royalties for Navajo Nation, 2011 3

Table 4: Annual Combined Economic Impact for New Mexico, Units 4‐5 Operation 3

Table 5: Annual Combined Economic Impact for San Juan County NM, Units 4‐5 Operation 4

Table 6: Annual Combined Economic Impact of Tribal Taxes, Royalties, Exemptions, Units 4‐5   5

Table 7: Cumulative Economic Impact of FCPP and Navajo Mine, 2016‐2041 5

Table 8: Cumulative Economic Impact of Tribal Taxes, Royalties, Exemptions, 2016‐2041 6

Table 9: Economic Impact of FCPP for New Mexico, 2011 13

Table 10: Economic Impact of FCPP for San Juan County NM, 2011 15

Table 11: Economic Impact of Navajo Mine for New Mexico, 2011 17

Table 12: Economic Impact of Navajo Mine for San Juan County NM, 2011 20

Table 13: Combined Economic Impact of FCPP and Navajo Mine for New Mexico, 2011 22

Table 14: Combined Economic Impact for San Juan County NM, 2011 24

Table 15: Combined Economic Impact of Tribal Taxes and Royalties for Navajo Nation, 2011 26

Table 16: Annual Economic Impact of FCPP, Units 4‐5 Operation, for New Mexico 28

Table 17: Annual Economic Impact of FCPP , Units 4‐5 Operation, for San Juan County NM 30

Table 18: Annual Economic Impact of Navajo Mine , Units 4‐5 Operation, New Mexico 33

Table 19: Annual Economic Impact of Navajo Mine, Units 4‐5 Operation, San Juan County 34

Table 20: Annual Combined Economic Impact for New Mexico, Units 4‐5 Operation 36

Table 21: Annual Combined Economic Impact for San Juan County NM, Units 4‐5 Operation 38

Table 22: Annual Combined Economic Impact Tribal Taxes, Royalties, Exemptions, Units 4‐5 40

Table 23: Cumulative Economic Impact of FCPP and Navajo Mine, 2016‐2041 42

Table 24: Cumulative Economic Impact of Tribal Taxes, Royalties, Exemptions, 2016‐2041 42
9

1.  Introduction

Four Corners Power Plant (FCPP) is one of the largest coal‐fired generating stations in the

United States, serving about 500,000 households in New Mexico, Arizona, California and Texas.  

Located on the Navajo Indian Reservation in Fruitland, San Juan County, New Mexico, the plant

first produced electricity in 1963, and has a current capacity of 2,100 MW from five generating

units.

Ownership of the plant is currently shared across six utility companies, although the plant is

exclusively operated by Arizona Public Service (APS).  A key local employer, FCPP employed 504

workers in 2011, and currently employs approximately 450 full‐time workers, a significant

proportion of which are Navajo.

Four Corners annually uses around 8.5 million tons of coal, exclusively sourced from BHP

Navajo Coal Company which employs 528 people.  The coal supply contract is due for renewal

in 2016; and BHP Navajo Coal Company has proposed the development of a new mine area

(Pinabete) within the existing Navajo Mine lease, to supply coal to FCPP up to 2041.   APS is

considering the closure of Units 1‐3 at Four Corners in late 2012 (subject to regulatory review),

which will cut the generating capacity to 1,540 MW.  APS has also agreed to purchase Southern

California Edison’s share of Units 4‐5.

The objectives of this study are to:

 Measure the 2011 economic impact of FCPP and Navajo Mine, based on a five unit FCPP

operation, for the State of New Mexico and San Juan County, expressed in terms of

employment, gross state product, labor income and tax revenues.

 Quantify the impact of the 2011 tribal royalties and taxes for the Navajo Nation.21

 Estimate the economic impact of a reduced two unit FCPP operation and associated

reduction in coal production at a state and county level for one year after closure, including

the impacts from tribal taxes and royalties.

 Assess the potential cumulative impacts of FCPP and Navajo Mine for the period 2016‐2041,

based on the planned Units 4‐5 operation.

 

21 A Navajo Nation‐specific analysis has not been possible based on the data supplied by the client, the

geographical limitations of IMPLAN, and the lack of a contemporary, reliable assessment of expenditure leakages

from the Nation.
10

Estimated impacts in the current report 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

state’s and county’s economy.

Section 2 of the report summarizes the economic impact method and the primary data used in

the calculations.

Sections 3 ‐ 5 estimate the impact of FCPP and Navajo Mine’s operations on the economies of

the State of New Mexico and San Juan County for 2011.

Section 6 considers the impact of the 2011 tribal royalties and taxes separately.

Sections 7  ‐ 10 consider the economic impact for one year if Units 1‐3 are shutdown at FCPP

and the Navajo Mine is purchased by the Navajo Nation.  No assumptions are made about the

new forms of electricity generation to replace the shutdown units.    Sections 7  ‐  9 simply

estimate the revised annual economic impact of FCPP and Navajo Mine based on a Unit 4‐5

operation for the State of New Mexico and San Juan County NM.    Section 10 considers in

isolation the annual impact of tribal taxes and royalties after a Units 1‐3 shutdown.

Section 11 concludes the study with some comments about the robustness of IMPLAN analysis,

and also estimates the total economic impact of FCPP and Navajo Mine for the period 2016 to

2041 (expressed in 2011 dollars) based on the Units 4‐5 and reduced coal production operation,

and the change in ownership for the Mine.
11

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 are estimated using the New Mexico and San Juan County modules of the

latest version of IMPLAN22, an input‐output model developed and maintained by the Minnesota

IMPLAN Group, Inc.  The economic impacts are measured by three variables:  

 Gross State Product: this is synonymous with value added.  It represents the dollar value of

all goods and services produced for final demand in the state or county.   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.

 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.

Primary company‐level data was provided by APS and BHP Navajo Coal Company for total wage

and salary payments, benefits, and employment at FCPP and Navajo Mine.  APS and BHP Navajo

Coal Company also 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 is

for the year 2011.  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 this analysis.  

 

22 The latest version uses a 2010 economic database.
12

3. Economic Impact of Four Corners Power Plant (FCPP), 2011

3.1. FCPP in the State of New Mexico, 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 are included,

the total employee compensation was $75.3 million in 2011.    The average annual wage of a

FCPP worker was therefore well above 2011 average pay in the State of New Mexico, and over

four times higher than the 2007 median household income for the Navajo Nation (2010).23

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

services from local suppliers.    In 2011, total FCPP transactions with New Mexico vendors

(excluding coal purchases) amounted to almost $14.6 million.24

Table 9 summarizes the total economic impact of FCPP on New Mexico for 2011, based on the

assumption that FCPP operated independently of Navajo Mine.

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

labor income, and gross state product in New Mexico for 2011.    These direct effects were

estimated at 504 jobs, $75.3 million labor income, and $303.5 million gross state product.

The second line of Table 9 shows the indirect impacts that were generated in the New Mexico

economy because of FCPP’s 2011 vendor purchases.  In purchasing over $14.6 million of non‐

coal goods and services from New Mexico‐based suppliers, FCPP indirectly generated 204 jobs,

created $7.1 million labor income, and $9.1 million gross state product.

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 the state, and when first‐tier suppliers place upstream demands on other

producers.  These effects are shown on lines three and four of Table 9.

The third line of Table 9 estimates the induced effects associated with the consumer spending

of FCPP employees for 2011: 449 jobs, $15.6 million labor income, and $29.2 million gross state

product.

 

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

Services of the Navajo Nation. 24 Coal purchases from BHP Navajo Coal Company were excluded to demonstrate the impact of FCPP, separate to

Navajo Mine.
13

Table 9: Economic Impact of FCPP for the State of New Mexico, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP’ operations 504 75.3 303.5

Indirect effects from FCPP’ supplier

purchases 204 7.1 9.1

Induced effects from consumer

spending by FCPP employees 449 15.6 29.2

Induced effects related to FCPP’

supplier purchases 96 3.5 6.1

Induced effects from spending of state

and local tax revenues

209 9.9 12.7

Total Economic Impact 1,462 111.4 360.6

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

The fourth line of Table 9 shows the induced effects stemming from FCPP supplier purchases

for 2011: 96 jobs, $3.5 million labor income, and $6.1 million gross state product.  These arose

when the local vendors engaged in additional local spending, and the impacts were quite

substantial.    For example, as measured by employment, the total of the latter two induced

multiplier effects was 545 jobs – that is, 77% as large as the sum of the direct and indirect

effects (708 jobs).

A discussion of the impact of FCPP operations on New Mexico tax revenues is presented in

Section 3.3.  Estimates of the economic impacts generated when these 2011 tax revenues were

spent by state and local governments are shown in line five of Table 9.    These figures

encompass all of the taxes generated throughout the economic impact process, including taxes

associated with the incomes and spending of FCPP employees and the taxes generated when

suppliers produce goods and services for use in FCPP operations.

FCPP was estimated to generate, both directly and indirectly, a total of $8.7 million in 2011 tax

revenues for the New Mexico state government.  The spending of these 2011 tax dollars was

responsible for 209 jobs, $9.9 million labor income, and $12.7 million gross state product in

New Mexico.

The total impact of FCPP operations on the New Mexico economy for 2011 was estimated at

1,462 jobs, $111.4 million labor income, and $360.6 million gross state product.
14

3.2. FCPP in San Juan County NM, 2011

To provide insights at the county‐level, the IMPLAN model was run separately for San Juan

County NM, again based on the assumption that FCPP operated independently of Navajo Mine.   

Employment, wages, salaries and benefits were assumed to be the same as at the state level.  

However, vendor transactions were smaller since they were restricted to a smaller geographic

area.    For 2011, total FCPP transactions with San Juan County entities (excluding coal

purchases) amounted to $13.1 million.

Table 10 summarizes the total economic impact of FCPP on San Juan County for 2011.  The first

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

income, and gross state product in San Juan County for 2011.    These direct effects were

estimated at 504 jobs, $75.3 million labor income, and $253.1 million gross state product.

The second line of Table 10 shows the indirect impacts that were generated in the economy of

San Juan County through FCPP’s 2011 vendor purchases from local suppliers.  FCPP’s purchase

of $13.1 million goods and services (excluding coal) from San Juan County‐based suppliers in

2011 indirectly created 215 jobs, $6.6 million labor income, and $8.5 million gross state

product.

The third line of Table 10 estimates the induced effects associated with the consumer spending

of FCPP employees in 2011.  These were 404 jobs, $14.1 million labor income, and $25.7 million

gross state product.

The fourth line of Table 10 shows the induced effects stemming from FCPP supplier purchases

in 2011: 75 jobs, $2.7 million labor income, and $4.7 million gross state product.  As measured

by employment, the total of the latter two induced effects was 479 jobs, which represented

approximately 67% of the sum of the direct and indirect effects (719 jobs).

A discussion of the impact of FCPP operations on San Juan County’s 2011 tax revenues is

presented in Section 3.3.  Line five of Table 10 estimates the economic impacts generated when

the 2011 non‐tribal tax revenues were spent by local governments.    FCPP was estimated to

generate, both directly and indirectly, a total of over $6.9 million in 2011 local tax revenues.  

The spending of these tax dollars was responsible for 165 jobs, $7.6 million labor income, and

$9.7 million gross state product in San Juan County.
15

Table 10: Economic Impact of FCPP for San Juan County NM, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP’ operations 504 75.3 253.1

Indirect effects from FCPP’ supplier

purchases 215 6.6 8.5

Induced effects from consumer

spending by FCPP employees 404 14.1 25.7

Induced effects related to FCPP’

supplier purchases 75 2.7 4.7

Induced effects from spending of state

and local tax revenues

165 7.6 9.7

Total Economic Impact 1,363 106.4 301.7

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

The total impact of FCPP operations on the economy of San Juan County for 2011 was

estimated at 1,363 jobs, $106.4 million labor income, and $301.7 million gross state product.

3.3. Impact on 2011 State and Local Government Tax Revenues

This section estimates the impact of FCPP on the 2011 tax revenues of state and local

governments in New Mexico and San Juan County.    The figures include not only the direct

business taxes paid by FCPP, but also the taxes that were associated with the income and

spending of FCPP employees and the economic activity of FCPP suppliers.

FCPP’s 2011 New Mexico state and local taxes included $3.7 million in property taxes, most of

which were spent at the local level, and $475,000 in gross receipts and compensating tax.  

There were no 2011 payments related to New Mexico corporate income tax.

The total 2011 state tax impact of the company was estimated at $8.7 million, with taxes paid

by employees amounting to over $7 million, and taxes generated by suppliers over $1 million.  

The remainder was the state portion of the property taxes, plus the gross receipts and

compensating state taxes.
16

At the county level, the total 2011 tax impact of FCPP was estimated at over $6.9 million, with

$3.1 million indirect taxes paid by employees, and $0.4 million local taxes generated by vendor

purchases.  The remaining $3.5 million was FCPP’s direct local property tax.

Tribal taxes and royalties were excluded from these tax figures, for separate analysis in Section

6.
17

4. Economic Impact of Navajo Mine, 2011

4.1. Navajo Mine in the State of New Mexico, 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 are included,

the total compensation of these employees was $63.8 million for that year.   A Navajo Mine

worker’s average annual wage was therefore well above 2011 average pay in the State of New

Mexico, and three and a half times higher than the 2007 median household income for the

Navajo Nation (2010).25

Navajo Mine made significant contributions to the local economy through their purchase of

goods and services from local suppliers.    In 2011, total Navajo Mine transactions with New

Mexico vendors were $62.3 million, plus a further $70.2 million goods and services from

vendors based outside New Mexico.26

Table 11: Economic Impact of Navajo Mine for the State of New Mexico, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations

528 63.8 145.8

Indirect effects from Navajo Mine’s

supplier purchases

299 15.3 27.6

Induced effects from consumer

spending by Navajo Mine employees

390 13.6 25.3

Induced effects related to Navajo

Mine’s supplier purchases

348 13.2 22.4

Induced effects from spending of state

and local tax revenues

542 25.6 32.9

Total Economic Impact 2,107 131.5 253.9

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

Table 11 summarizes the total economic impact of Navajo Mine on New Mexico for 2011, based

on the assumption that Navajo Mine operated independently of FCPP.

 

25 The average salary was compared with a 2007 employment and income survey conducted by the Navajo Nation. 26 This excluded transactions with government agencies.
18

The first line of Table 11 shows the direct contribution of Navajo Mine operations to

employment, labor income, and gross state product in New Mexico for 2011.    These direct

effects were estimated at 528 jobs, $63.8 million labor income, and $145.8 million gross state

product.

The second line of Table 11 shows the indirect impacts that were generated in the New Mexico

economy because of Navajo Mine’s 2011 vendor purchases.    In purchasing $62.3 million of

goods and services from New Mexico‐based suppliers, Navajo Mine indirectly generated 299

jobs, $15.3 million labor income, and $27.6 million gross state product.

The third line of Table 11 estimates the induced effects associated with the consumer spending

of Navajo Mine employees in 2011: 390 jobs, $13.6 million labor income, and $25.3 million

gross state product.

The fourth line of Table 11 shows the induced effects stemming from Navajo Mine’s 2011

supplier purchases: 348 jobs, $13.2 million labor income, and $22.4 million gross state product.  

These effects arose when the local vendors engaged in additional local spending.  The induced

effects were substantial.    As measured by employment, for example, the total of the two

induced effects was 738 jobs – that is, over 89% as large as the sum of the direct and indirect

effects (827 jobs).

A discussion of the impact of Navajo Mine operations on New Mexico’s 2011 tax revenues is

presented in Section 4.3.  Estimates of the economic impacts generated when these 2011 tax

revenues were spent by state and local governments are shown in line five of Table 11.  These

figures encompass all of the taxes generated throughout the economic impact process,

including taxes associated with the incomes and spending of Navajo Mine employees and the

taxes generated when suppliers produce goods and services for use in Navajo Mine operations.

Navajo Mine was estimated to generate, both directly and indirectly, a total of approximately

$22.7 million in non‐tribal state tax revenues for New Mexico in 2011.  The spending of these

2011 tax dollars was responsible for 542 jobs, $25.6 million labor income, and $32.9 million

gross state product in New Mexico.  

The total impact of Navajo Mine operations on the New Mexico economy for 2011 was

estimated at 2,107 jobs, $131.5 million labor income, and $253.9 million gross state product.
19

4.2. Navajo Mine in San Juan County NM, 2011

To provide insights on the economic impacts of Navajo Mine at the county‐level, the IMPLAN

model was run separately for San Juan County NM, again based on the assumption that Navajo

Mine operated independently of FCPP.

Employment, wages, salaries and benefits were assumed to be the same as at the state level.  

However, vendor transactions were smaller since they were restricted to a smaller geographic

area.  For 2011, total Navajo Mine transactions with San Juan County‐based entities amounted

to $58.1 million.27

Table 12 summarizes the total economic impact of Navajo Mine on San Juan County for 2011.  

The first line of the table shows the direct contribution of Navajo Mine operations to

employment, labor income, and gross state product in San Juan County for 2011.  These direct

effects were estimated at 528 jobs, $63.8 million labor income, and $141.3 million gross state

product.

The second line of the table shows the indirect impacts that were generated in the economy of

San Juan County because of Navajo Mine’s 2011 vendor purchases from local suppliers.    In

purchasing $58.1 million of goods and services from San Juan County‐based suppliers in 2011,

Navajo Mine indirectly generated 284 jobs, $14.4 million labor income, and $25.3 million gross

state product.  

The third line of Table 12 estimates the induced effects associated with the consumer spending

of Navajo Mine employees for 2011: 350 jobs, $12.3 million labor income, and $22.3 million

gross state product.

The fourth line of Table 12 shows the induced effects stemming from Navajo Mine’s 2011

supplier purchases: 269 jobs, $10.1 million labor income, and $16.8 million gross state product.  

These arose when the local vendors engaged in additional local spending.  The effects shown on

lines three and four were substantial.  As measured by employment, for example, the total of

the two induced effects was 619 jobs, which represented approximately 76% of the sum of the

two direct and indirect effects (812 jobs).

 

27 This excluded transactions with government entities.
20

Table 12: Economic Impact of Navajo Mine for San Juan County NM, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations

528 63.8 141.3

Indirect effects from Navajo Mine’s

supplier purchases

284 14.4 25.3

Induced effects from consumer

spending by Navajo Mine employees

350 12.3 22.3

Induced effects related to Navajo

Mine’s supplier purchases

269 10.1 16.8

Induced effects from spending of state

and local tax revenues

146 6.8 8.5

Total Economic Impact 1,577 107.4 214.3

Source: L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University

A discussion of the impact of Navajo Mine operations on San Juan County tax revenues for 2011

is presented in Section 4.3.  Estimates of the economic impacts generated when the 2011 tax

revenues were spent by local (non‐tribal) governments are shown on line five of Table 12.  

Navajo Mine was estimated to generate, both directly and indirectly, a total of $6.1 million

2011 tax revenues for San Juan County local governments.28  The spending of these 2011 tax

dollars was responsible for 146 jobs, $6.8 million labor income, and $8.5 million gross state

product in San Juan County.

The total impact of Navajo Mine operations on the economy of San Juan County for 2011 was

estimated at 1,577 jobs, $107.4 million labor income, and $214.3 million gross state product.

4.3. Impact on 2011 State and Local Government Tax Revenues

This section estimates the impact of Navajo Mine on the 2011 tax revenues of state and local

governments in New Mexico and San Juan County.    The figures include not only the direct

business taxes paid by Navajo Mine, but also the taxes that were associated with the income

and spending of Navajo Mine employees and the economic activity of Navajo Mine’s suppliers.

 

28 This excluded tribal taxes and royalty payments.
21

In 2011, Navajo Mine paid $13.3 million in state tax.  The total 2011 tax impact of the company

at the state level was estimated at $22.7 million, with employee taxes amounting to $6 million,

and supplier taxes $3.4 million.  The remainder was direct state tax payments paid by Navajo

Mine.

At the county level, the total 2011 tax impact of Navajo Mine was estimated at $6.1 million,

with indirect taxes paid by employees totaling $2.6 million and local taxes generated by vendor

purchases totaling almost $1.3 million.    The remainder was San Juan County property tax

payments paid by Navajo Mine.

Tribal taxes and royalties were excluded from the tax figures for separate analysis in Section 6.
22

5. Combined Economic Impact of FCPP and Navajo Mine, 2011

5.1. Combined Economic Impact of FCPP and Navajo Mine for New Mexico, 2011

Table 13 summarizes the combined economic impact of FCPP and Navajo Mine for New Mexico

for 2011.  This assumed that FCPP and Navajo Mine operated as a single, combined entity.

The combined employment of both facilities for 2011 was 1,032 workers, with wage and salary

payments of $100.7 million and labor income of $139.1 million.   Gross state product directly

associated with FCPP and Navajo Mine was $449.3 million.

Table 13: Combined Economic Impact of FCPP and Navajo Mine for

the State of New Mexico, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 1,032 139.1 449.3

Indirect effects from FCPP and Navajo

Mine supplier purchases 503 22.4 36.7

Induced effects from consumer spending

by FCPP and Navajo Mine employees 839 29.2 54.5

Induced effects related to FCPP and

Navajo Mine supplier purchases 443 16.7 28.4

Induced effects from spending of state and

local tax revenues

751 35.4 45.5

Total Economic Impact 3,569 242.8 614.5

Source: L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University

FCPP and Navajo Mine’s 2011 purchases from New Mexico‐based vendors amounted to

approximately $77 million (excluding coal purchases).    The indirect employment impacts

associated with all New Mexico‐based vendor purchases were 503 jobs, $22.4 million labor

income, and $36.7 million gross state product.

The consumer spending of FCPP and Navajo Mine employees for 2011 generated 839 jobs,

$29.2 million labor income, and $54.5 million gross state product.
23

The induced effects stemming from FCPP and Navajo Mine’s New Mexico‐based supplier

purchases in 2011 generated 443 jobs, $16.7 million labor income, and $28.4 million gross state

product.

FCPP and Navajo Mine were estimated to generate, through direct, indirect and induced

effects, over $31.4 million in total in 2011 state tax revenues for New Mexico.29  The spending

of these tax dollars generated 751 jobs, $35.4 million labor income, and $45.5 million gross

state product.

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

Mexico economy was estimated at 3,569 jobs, $242.8 million labor income, and $614.5 million

gross state product.

5.2. Combined Economic Impact of FCPP and Navajo Mine for San Juan County NM, 2011

Table 14 summarizes the combined 2011 economic impact of FCPP and Navajo Mine on the

economy of San Juan County NM.  For the combined impact analysis, FCPP and Navajo Mine

were again assumed to operate as a single, combined entity.

The combined employment of both facilities for 2011 in San Juan County was 1,032 workers,

with wage and salary payments amounting to $100.7 million, and labor income of $139.1

million.  Gross state product directly associated with FCPP and Navajo Mine was $394.4 million

in San Juan County.

FCPP and Navajo Mine purchased $71.2 million goods and services from San Juan County‐based

vendors in 2011 (excluding coal purchases).  The indirect employment impacts associated with

all vendor purchases were 499 jobs, $21.1 million labor income, and $33.9 million gross state

product.

The consumer spending of FCPP and Navajo Mine employees for 2011 generated 753 jobs,

$26.4 million labor income, and $48 million gross state product.

The induced effects stemming from FCPP and Navajo Mine’s supplier purchases in 2011

generated 344 jobs, $12.8 million labor income, and $21.5 million gross state product.

 

29 This excluded tribal taxes and royalty payments.
24

Table 14: Combined Economic Impact of FCPP and Navajo Mine for San Juan County NM, 2011

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 1,032 139.1 394.4

Indirect effects from FCPP and Navajo

Mine supplier purchases 499 21.1 33.9

Induced effects from consumer spending

by FCPP and Navajo Mine employees 753 26.4 48

Induced effects related to FCPP and

Navajo Mine supplier purchases 344 12.8 21.5

Induced effects from spending of state and

local tax revenues

312 14.4 18.2

Total Economic Impact 2,940 213.8 516.0

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

FCPP and Navajo Mine were estimated to generate a total of $13.1 million in 2011 tax revenues

for San Juan County local governments.30    The spending of these 2011 tax dollars was

responsible for 312 jobs, $14.4 million labor income, and $18.2 million gross state product in

San Juan County.

The total impact of the combined operations of FCPP and Navajo Mine on the economy of San

Juan County NM for 2011 was estimated at 2,940 jobs, $213.8 million labor income, and $516

million gross state product.

 

30 This excluded tribal taxes and royalty payments.
25

6. Economic Impact of Tribal Taxes and Royalties, 2011

In 2011, FCPP paid the Navajo Nation $18.4 million in Possessory Interest Tax (PIT) and Business

Activity Tax (BAT).  PIT is a tax paid on the taxable value of a possessory interest granted by the

Navajo Nation.31  BAT is essentially a sales tax paid to the Navajo Nation, assessed on contract

work done at the plant by businesses not based on the reservation.

In 2011, Navajo Mine also paid $31.4 million tribal royalties, and $14.3 million tribal taxes.  

The FCPP and Navajo Mine tribal taxes and royalties in total in 2011 accounted for 28% of the

Navajo Nation’s General Fund annual total gross revenue.32

These payments were excluded from the analyses presented in the previous Sections, as their

impact did not apply exclusively to either the State of New Mexico or San Juan County – the

two geographies primarily examined in this economic impact analysis.    The impact of tribal

taxes and royalties was felt throughout the Navajo Nation, including parts of Arizona and Utah,

which presents difficulties for IMPLAN analysis.33

To conservatively assess the economic impact of the tribal tax and royalty payments alone, a

blended series of Government expenditure multipliers was used for Navajo and Apache

Counties in Arizona, and San Juan and McKinley Counties in New Mexico.    The results are

shown in Table 15.

The blended series of multipliers estimated the total impact of tribal taxes and royalties alone

at 1,468 jobs, $65 million labor income, and $84.3 million gross state product for the Navajo

Nation in 2011.

These impacts were in addition to some of the economic impacts described in Sections 3 – 5 for

New Mexico and San Juan County.  However, they must not be added to the impacts in Sections

3‐5, because the geographical focus of the previous sections was very different, and also

included non‐Navajo impacts.   By contrast, the ripple effects of the tribal taxes and royalties

 

31 A possessory interest is the right to be on Navajo land performing a particular activity.  The most common forms

of possessory interests are oil and gas leases, coal leases, rights‐of‐way, and business site leases.    32 Source: Navajo Nation Office of Management and Budget (2011), Fiscal Year 2012: Budget Instructions and

Policies Manual. 33 The IMPLAN analysis in Section 3‐5 used U.S. state and county multipliers.  IMPLAN does not offer multipliers

specific to the Navajo Nation.    Some form of analysis is possible at zip code level.    However, the quality of

IMPLAN’s Navajo Nation’s zip code data is questionable, and was therefore not used for this analysis.
26

extended beyond San Juan County and New Mexico to other parts of the Navajo Nation,

including parts of Arizona and Utah.

Table 15: Combined Economic Impact of FCPP and Navajo Mine’s Tribal Taxes and Royalties

for the Navajo Nation, 2011

Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Induced effects from spending of FCPP

PIT and BAT

422 18.7 24.2

Induced effects from spending of

Navajo Mine tribal royalties and taxes 1,046 46.3 60.0

Total Economic Impact from Tribal

Taxes and Royalties 1,468 65.0 84.3

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

It is also important to note that the total economic impact of FCPP and Navajo Mine for the

Navajo Nation extended far beyond these tribal taxes and royalties in 2011.  A Navajo Nation

specific analysis, though, was not possible based on the data supplied by the client, the

geographical limitations of IMPLAN, and the lack of a contemporary, reliable assessment of

expenditure leakages from the Nation.
27

7. Economic Impact of FCPP, Units 4‐5 Operation

Despite being one of the largest and most important suppliers of electricity in the Southwest,

FCPP and Navajo Mine face an uncertain future, due to the potential closure and/or change of

ownership of some electricity generating units, and federal environmental rulings.    The

ownership of Navajo Mine is also anticipated to switch from BHP Navajo Coal Company to the

Navajo Nation, which will have federal, state and county tax implications.    Sections 7  ‐  10

consider the economic impact of both facilities for one full year following the potential

shutdown of Units 1‐3 at FCPP and the Mine’s sale to the Navajo Nation.

Direct employment impacts for this future one year scenario have been provided by FCPP and

Navajo Mine, and the 2011 supplier purchases reduced proportionally to reflect the potential

downscaling of the generating station and mine’s operations.    Tax and royalty payments are

also adjusted proportionately.34  No assumptions are made about any new forms of electricity

generation to replace these coal units.    Sections 7  ‐  9 simply estimate the revised economic

impact of FCPP and Navajo Mine, individually and cumulatively, after a Units 1‐3 shutdown, for

the State of New Mexico and San Juan County NM.  Section 10 quantifies the impact for the

Navajo Nation emanating exclusively from tribal taxes and royalties.

7.1. FCPP in the State of New Mexico, Units 4‐5 Operation

If FCPP Units 1‐3 are shutdown, direct employment at FCPP could fall to an estimated 361

employees, and wages/salaries to $38.6 million.35

Table 16 summarizes the total economic impact of FCPP for the State of New Mexico for one

year following the shutdown of Units 1‐3, based on the assumption that FCPP operates

independently of Navajo Mine.  Gross state product and labor income are expressed in 2011 $

in the tables.

The first line of Table 16 shows the direct contribution of FCPP operations to employment,

labor income, and gross state product in New Mexico for one year after the three unit

shutdown.  The direct effects are estimated at 361 jobs, $53.9 million labor income, and $217.4

million gross state product.

 

34 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. 35 These employment and wages/salaries estimates are provided by APS.
28

The second line of Table 16 shows the indirect impacts that could be generated in the New

Mexico economy because of FCPP vendor purchases for one year following the three unit

shutdown.    In purchasing an estimated $9.6 million goods and services36 from New Mexico

suppliers, FCPP could indirectly generate 134 jobs, $4.7 million labor income, and $6 million

gross state product.

Table 16: Annual Economic Impact of FCPP, Units 4‐5 Operation, for the State of New Mexico

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP’s operations 361 53.9 217.4

Indirect effects from FCPP’s supplier

purchases 134 4.7 6.0

Induced effects from consumer

spending by FCPP employees 322 11.2 20.9

Induced effects related to FCPP’s

supplier purchases 63 2.3 4.0

Induced effects from spending of state

and local tax revenues

147 6.9 8.9

Total Economic Impact 1,027 79.0 257.2

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

The third line of Table 16 estimates the induced effects associated with the consumer spending

of FCPP employees for one year after the three unit shutdown: 322 jobs, $11.2 million labor

income, and $20.9 million gross state product.

The fourth line of Table 16 shows the induced effects stemming from FCPP supplier purchases

for one year after the three unit shutdown: 63 jobs, $2.3 million labor income, and $4 million

gross state product.

Estimates of the economic impacts generated when FCPP tax revenues are spent by state

government are shown in line five of Table 16.  These figures encompass all of the non‐tribal

taxes generated throughout the economic impact process, including taxes associated with the

 

36 This is based on a 65.78% share of the 2011 figure, provided by APS, which excludes coal purchases.
29

incomes and spending of FCPP employees and the taxes generated when suppliers produce

goods and services for use in FCPP operations.

FCPP could generate, both directly and indirectly, a total of $6.1 million in non‐tribal tax

revenues for the State of New Mexico government for the year following a three unit

shutdown.    The spending of these tax dollars could be responsible for 147 jobs, $6.9 million

labor income, and $8.9 million gross state product in New Mexico.

The total impact of FCPP operations on the New Mexico economy for the year following a three

unit shutdown is estimated at 1,027 jobs, $79 million labor income, and $257.2 million gross

state product.  This represents an estimated loss of 435 jobs, $32.3 million labor income, and

$103.4 million gross state product for the State of New Mexico for the year following a three

unit shutdown, compared to a scenario in which all five units continue to operate at FCPP.

7.2. FCPP in San Juan County NM, Units 4‐5 Operation

To provide insights on the economic impacts of FCPP at the county‐level after a Units 1‐3

shutdown, the IMPLAN model is run separately for San Juan County NM, based on the

assumption that FCPP operates independently of Navajo Mine.

Employment, wages, salaries and benefits are assumed to be the same as the state level.  

However, vendor transactions are smaller as they are restricted to a smaller geographic area.  

For the year following a three unit shutdown, total FCPP transactions with San Juan County

entities are estimated to amount to $8.6 million (excluding coal purchases).37

Table 17 summarizes the total economic impact of FCPP on San Juan County for the year

following a three unit shutdown.    The first line of the table shows the direct contribution of

FCPP operations to employment, labor income, and gross state product in San Juan County for

the year following a three unit shutdown.  These direct effects could be 361 jobs, $53.9 million

labor income, and $181.3 million gross state product.

The second line of the table shows the indirect impacts generated in the economy of San Juan

County through FCPP vendor purchases from local suppliers in the year following a three unit

shutdown.   In purchasing an estimated $8.6 million of non‐coal goods and services from San

Juan County suppliers for the year following a three unit shutdown, FCPP could indirectly

generate 141 jobs, $4.4 million labor income, and $5.6 million gross state product.  

 

37 This excludes transactions with government entities, and is based on a 65.78% share of the 2011 figure.
30

The third line of Table 17 estimates the induced effects associated with the consumer spending

of FCPP employees for the year following a three unit shutdown: 289 jobs, $10.1 million labor

income, and $18.4 million gross state product.

Table 17: Annual Economic Impact of FCPP, Units 4‐5 Operation, for San Juan County NM

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP’s operations 361 53.9 181.3

Indirect effects from FCPP’s supplier

purchases 141 4.4 5.6

Induced effects from consumer

spending by FCPP employees 289 10.1 18.4

Induced effects related to FCPP’s

supplier purchases 50 1.8 3.1

Induced effects from spending of state

and local tax revenues

113 5.2 6.6

Total Economic Impact 954 75.4 215.0

Source: L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University

The fourth line of Table 17 shows the induced effects stemming from FCPP supplier purchases

for the year following a three unit shutdown: 50 jobs, $1.8 million labor income, and $3.1

million gross state product.

Estimates of the economic impacts generated when the non‐tribal tax revenues are spent by

local governments are shown on line five of Table 17.38  FCPP could generate, both directly and

indirectly, a total of $4.7 million non‐tribal tax revenues for San Juan County local governments

for the year following a three unit shutdown.    The spending of these tax dollars could be

responsible for 113 jobs, $5.2 million labor income, and $6.6 million gross state product in San

Juan County.

The total impact of FCPP operations on the economy of San Juan County for the year following

a three unit shutdown is estimated at 954 jobs, $75.4 million labor income, and $215 million

gross state product.  This represents an estimated loss of 410 jobs, $31 million labor income,

 

38 This excludes tribal taxes and royalty payments.
31

and $86.7 million gross state product for San Juan County for the year following a three unit

shutdown, compared to a scenario in which all five units continue to operate at FCPP.
32

8. Economic Impact of Navajo Mine, Units 4‐5 Operation

8.1. Navajo Mine in the State of New Mexico, Units 4‐5 Operation

If FCPP Units 1‐3 are shutdown, direct employment at Navajo Mine could fall to an estimated

397 employees, and wages/salaries to $35.2 million.39

Table 18 summarizes the total economic impact of Navajo Mine on New Mexico in a year,

based on the assumption that Navajo Mine operates independently of FCPP, there has been a

three unit shutdown at FCPP, and the mine has been purchased by the Navajo Nation.  Gross

state product and labor income are expressed in 2011 $ in the tables.

The first line of Table 18 shows the direct contribution of Navajo Mine operations to

employment, labor income, and gross state product in New Mexico for one year after a FCPP

three unit shutdown.  The direct effects are estimated at 397 jobs, $48 million labor income,

and $109.7 million gross state product.

The second line of Table 18 shows the indirect impacts that could be generated in the New

Mexico economy because of Navajo Mine vendor purchases for one year following a three unit

shutdown.  In purchasing an estimated $43.6 million goods and services40 from New Mexico‐

based suppliers, Navajo Mine could indirectly generate 209 jobs, $10.7 million labor income,

and $19.3 million gross state product.

The third line of Table 18 estimates the induced effects associated with the consumer spending

of Navajo Mine employees for one year after a three unit shutdown: 293 jobs, $10.2 million

labor income, and $19 million gross state product.

The fourth line of Table 18 shows the induced effects stemming from Navajo Mine supplier

purchases for one year after a three unit shutdown: 243 jobs, $9.2 million labor income, and

$15.6 million gross state product.

Estimates of the economic impacts generated from Navajo Mine tax revenues spent by New

Mexico state government are shown in line five of Table 18.  These figures encompass all of the

non‐tribal taxes generated throughout the economic impact process, including taxes associated

 

39 These employment and wages/salaries estimates are provided by BHP Navajo Coal Company. 40 This is an estimate of supplier purchases, based on 70% of the 2011 figure, provided by BHP Navajo Coal

Company.
33

with the incomes and spending of Navajo Mine employees and the taxes generated when

suppliers produce goods and services for use in Navajo Mine operations.

Table 18: Annual Economic Impact of Navajo Mine, Units 4‐5 Operation,

for the State of New Mexico

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations 397 48.0 109.7

Indirect effects from Navajo Mine’s

supplier purchases 209 10.7 19.3

Induced effects from consumer

spending by Navajo Mine employees 293 10.2 19.0

Induced effects related to Navajo

Mine’s supplier purchases 243 9.2 15.6

Induced effects from spending of state

and local tax revenues

164 7.7 10.0

Total Economic Impact 1,307 85.9 173.6

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

Navajo Mine could indirectly generate an estimated total of $6.9 million in non‐tribal, state tax

revenues for the New Mexico government for the year following a three unit shutdown.41  The

spending of these tax dollars could generate 164 jobs, $7.7 million labor income, and $10

million gross state product in New Mexico.  

The total impact of Navajo Mine operations on the New Mexico economy for the year following

a three unit shutdown is estimated at 1,307 jobs, $85.9 million labor income, and $173.6 million

gross state product.  This represents an estimated loss of 800 jobs, $45.6 million labor income,

and $80.3 million gross state product for the State of New Mexico for the year following a three

unit shut down and associated reduction in coal production, plus the change in ownership,

compared to 2011 when all five units operated at FCPP.

 

41 Navajo Mine will pay no direct federal, state and county taxes if it is sold to the Navajo Nation.
34

8.2. Navajo Mine in San Juan County NM, Units 4‐5 Operation

To provide insights on the economic impacts of Navajo Mine at the county‐level, the IMPLAN

model is run separately for San Juan County NM, based on the assumption that Navajo Mine

operates independently of FCPP.

Table 19: Annual Economic Impact of Navajo Mine, Units 4‐5 Operation,

for San Juan County NM

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from Navajo Mine’s

operations 397 48.0 106.3

Indirect effects from Navajo Mine’s

supplier purchases 199 10.1 17.7

Induced effects from consumer

spending by Navajo Mine employees 263 9.2 16.7

Induced effects related to Navajo

Mine’s supplier purchases 188 7.1 11.8

Induced effects from spending of state

and local tax revenues

68 3.1 4.0

Total Economic Impact 1,115 77.5 156.5

Source: L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University

Employment, wages, salaries and benefits are assumed to be the same as the state level.  

However, vendor transactions are smaller as they are restricted to a smaller geographic area.  

For the year following a three unit shutdown, total Navajo Mine transactions with San Juan

County entities are estimated at $40.7 million.42

Table 19 summarizes the total economic impact of Navajo Mine on San Juan County for the

year following a three unit shutdown.

The first line of the table shows the direct contribution of Navajo Mine operations to

employment, labor income, and gross state product in San Juan County for the year following a

 

42 This excludes transactions with government entities, and is based on BHP Navajo Coal Company’s 70% estimate

of the 2011 figure.
35

three unit shutdown.  These direct effects are an estimated 397 jobs, $48 million labor income,

and $106.3 million gross state product.

The second line of the table shows the indirect impacts generated in the economy of San Juan

County because of Navajo Mine vendor purchases from local suppliers in the year following

shutdown.    In purchasing an estimated $40.7 million of goods and services from San Juan

County suppliers in the year following a three unit shutdown, Navajo Mine could indirectly

generate 199 jobs, $10.1 million labor income, and $17.7 million gross state product.  

The third line of Table 19 estimates the induced effects associated with the consumer spending

of Navajo Mine employees for the year following a three unit shutdown: 263 jobs, $9.2 million

labor income, and $16.7 million gross state product.

The fourth line of Table 19 shows the induced effects stemming from Navajo Mine supplier

purchases for the year following a three shutdown: 188 jobs, $7.1 million labor income, and

$11.8 million gross state product.

Estimates of the economic impacts generated from non‐tribal tax revenues spent by local

governments are shown on line five of Table 19.  Navajo Mine could generate, both directly and

indirectly, an estimated total of $2.9 million non‐tribal tax revenues for San Juan County local

governments for the year following a three unit shutdown. The spending of these tax dollars

could be responsible for 68 jobs, $3.1 million labor income, and $4 million gross state product

in San Juan County.

The total impact of Navajo Mine operations on the economy of San Juan County for the year

following a three unit shutdown is an estimated 1,115 jobs, $77.5 million labor income, and

$156.5 million gross state product.  This represents an estimated loss of 462 jobs, $29.8 million

labor income, and $57.8 million gross state product for San Juan County for the year following a

three unit shut down and associated reduction in coal production, plus the change in

ownership, compared to 2011 when all five units operated at FCPP.
36

9. Combined Economic Impact of FCPP and Navajo Mine, Units 4‐5 Operation

9.1. Combined Economic Impact for the State of New Mexico, Units 4‐5 Operation

Table 20 summarizes the combined economic impact of FCPP and Navajo Mine on the economy

of New Mexico for one year following a three unit shutdown at FCPP and the change in

ownership at the mine.

The combined employment of both facilities following a three unit shutdown is estimated at

758 workers, with labor income of $101.9 million and gross state product of $327.1 million.

The indirect employment impacts associated with all non‐coal, New Mexico‐based vendor

purchases could be 344 jobs, $15.4 million labor income, and $25.3 million gross state product.

The consumer spending of FCPP and Navajo Mine employees for a year following a three unit

shutdown could generate 615 jobs, $21.4 million labor income, and $40 million gross state

product.

Table 20: Annual Combined Economic Impact of FCPP and Navajo Mine,

Units 4‐5 Operation, for the State of New Mexico

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 758 101.9 327.1

Indirect effects from FCPP and NAVAJO

MINE supplier purchases 344 15.4 25.3

Induced effects from consumer spending

by FCPP and Navajo Mine employees 615 21.4 40.0

Induced effects related to FCPP and

Navajo Mine supplier purchases 306 11.5 19.6

Induced effects from spending of state

and local tax revenues

311 14.7 18.9

Total Economic Impact 2,334 164.9 430.8

Source: L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University
37

Induced effects stemming from FCPP and Navajo Mine supplier purchases for a year following a

three unit shutdown could generate 306 jobs, $11.5 million labor income, and $19.6 million

gross state product.

FCPP and Navajo Mine could generate, through direct, indirect and induced effects, an

estimated total of approximately $13 million in state tax revenues for New Mexico for one year

following a three unit shutdown.43  The spending of these non‐tribal tax dollars could generate

an estimated 311 jobs, $14.7 million labor income, and $18.9 million gross state product in the

State of New Mexico.

The total impact of the combined operations of FCPP and Navajo Mine on the economy of New

Mexico for one year following a three unit shutdown could be an estimated 2,334 jobs, $164.9

million labor income, and $430.8 million gross state product.    This represents an estimated

combined loss of 1,235 jobs, $77.9 million labor income, and $183.7 million gross state product

for the State of New Mexico for the year following a three unit shut down and associated

reduction in coal production, plus the change in ownership, compared to 2011 when all five

units operated at FCPP.

9.2. Combined Economic Impact for San Juan County NM, Units 4‐5 Operation

Table 21 summarizes the combined economic impact of FCPP and Navajo Mine on the economy

of San Juan County NM for one year following a three unit shutdown.  For the combined impact

analysis, FCPP and Navajo Mine are again assumed to operate as a single, combined entity.

The combined employment of both facilities for one year following a three unit shutdown in

San Juan County is an estimated 758 workers, with labor income of $101.9 million and gross

state product of $287.6 million.

The indirect employment impacts associated with all non‐coal, San Juan County‐based vendor

purchases could be 341 jobs, $14.5 million labor income, and $23.3 million gross state product.

The consumer spending of FCPP and Navajo Mine employees for one year following a three unit

shutdown could generate an estimated 552 jobs, $19.4 million labor income, and $35.2 million

gross state product.

 

43 This excludes tribal taxes and royalty payments.
38

Induced effects stemming from FCPP and Navajo Mine supplier purchases for one year

following a three unit shutdown could generate 238 jobs, $8.9 million labor income, and $14.9

million gross state product.

Table 21: Annual Combined Economic Impact of FCPP and Navajo Mine,

Units 4‐5 Operation, for San Juan County NM

Economic Impacts Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Direct effects from FCPP and Navajo Mine

operations 758 101.9 287.6

Indirect effects from FCPP and Navajo

Mine supplier purchases 341 14.5 23.3

Induced effects from consumer spending

by FCPP and Navajo Mine employees 552 19.4 35.2

Induced effects related to FCPP and

Navajo Mine supplier purchases 238 8.9 14.9

Induced effects from spending of state and

local tax revenues

181 8.3 10.6

Total Economic Impact 2,069 153.0 371.5

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

FCPP and Navajo Mine could generate an estimated total of $7.6 million in non‐tribal tax

revenues for San Juan County local governments for one year following a three unit

shutdown.44  The spending of these tax dollars could be responsible for 181 jobs, $8.3 million

labor income, and $10.6 million gross state product in San Juan County.

The total impact of the combined operations of FCPP and Navajo Mine on the economy of San

Juan County NM for one year following a three unit shutdown could be an estimated 2,069

jobs, $153 million labor income, and $371.5 million gross state product.    This represents an

estimated combined loss of 872 jobs, $60.9 labor income, and $144.5 million gross state

product for San Juan County for the year following a three unit shut down and associated

reduction in coal production, plus the change in ownership, compared to 2011 when all five

units operated at FCPP.

 

44 This excludes tribal taxes and royalty payments.
39

10. Economic Impact of Tribal Taxes, Royalties, and Exemptions Units 4‐5

Operation

FCPP and Navajo Mine will also pay PIT, BAT and tribal taxes and royalties excluded from the

analyses described in Sections 7‐9 following a Units 1‐3 shutdown.    These are estimated at

$53.6 million,45 but are excluded from Sections 7‐9’s results, as their economic impact will not

apply exclusively to the State of New Mexico or San Juan County.   In addition, Navajo Mine,

under Navajo Nation ownership, will be exempt from federal, state and county taxes worth

$17.9 million, also excluded from Section 7‐9’s results.    The reach of this $71.5 million will

extend throughout the Navajo Nation, including parts of Arizona and Utah.

The revised annual tribal taxes and royalties and tax exemptions represent an estimated

increase of $7.4 million, compared to a scenario in which all five units continue to operate at

FCPP.  This is based on two assumptions:

(a) the tribal royalty and tax rates that would be generated from non‐Navajo ownership of the

mine will be spent by the Nation, on the Nation, after they have purchased Navajo Mine;

and

(b) the Nation will additionally treat state, county and other federal tax exemptions accrued

through their ownership of the mine as tribal royalties.

To further estimate the economic impact of the tribal tax and royalty payments, a blended

series of Government expenditure multipliers are used for Navajo and Apache Counties in

Arizona, and San Juan and McKinley Counties in New Mexico.  The results are shown in Table

22.

Table 22 estimates the total impact of the tribal taxes, royalties and tax exemptions alone at

1,637 jobs, $72.5 million labor income, and $94 million gross state product, following a Units 1‐

3 shutdown and Navajo Nation ownership of the Mine.

These latter impacts are in addition to the economic impacts described in Sections 7 ‐ 9 for New

Mexico and San Juan County.  However, they cannot simply be added to the impacts described

in Sections 7 ‐ 9, because the geographical focus of the previous sections is very different, and

also includes non‐Navajo impacts.  By contrast, the ripple effects of the tribal taxes, royalties

 

45 This consists of $13.4 million PIT and BAT payments by FCPP, and $40.2 million tribal taxes and royalties at

Navajo Mine.
40

and tax exemptions referred to in this Section will extend beyond San Juan County and New

Mexico to other parts of the Navajo Nation, including parts of Arizona and Utah.

Table 22: Annual Combined Economic Impact of FCPP and Navajo Mine’s Tribal Taxes,

Royalties, and Exemptions, Units 4‐5 Operation, for the Navajo Nation

Employment

(Jobs)

Labor Income

(Millions

2011 $)

GSP

(Millions

2011 $)

Induced effects from spending of FCPP

PIT and BAT

306 13.5 17.6

Induced effects from spending of

Navajo Mine tribal royalties and taxes 1,331 58.9 76.5

Total Economic Impact from Tribal

Taxes, Royalties, and Exemptions 1,637 72.5 94.0

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

If FCPP Units 1‐3 are shut down, coupled with an associated reduction in coal production and

the change in ownership at Navajo Coal Mine, this could result in a combined estimated gain of

169 jobs, $7.5 million labor income, and $9.7 million gross state product from tribal taxes,

royalties and tax exemptions alone for the following year in the Navajo Nation, compared to

the situation in 2011 when all five units operated at FCPP and Navajo Mine was owned by BHP

Navajo Coal Company.

It is also important to note that the total economic impact of FCPP and Navajo Mine for the

Navajo Nation will extend far beyond these tribal taxes and royalties.  A Navajo Nation specific

analysis, though, is not possible based on the data supplied by the client, the geographical

limitations of IMPLAN, and the lack of a contemporary, reliable assessment of expenditure

leakages from the Nation.
41

11. Cumulative Economic Impact of a Units 4‐5 Operation, 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 gross state product, employment and labor

income for the State of New Mexico and San Juan County NM.  The findings are heavily reliant

on the knowledge and reliability of the IMPLAN model, and the quality of the inputs provided

by APS and BHP Navajo Coal Company.    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 23 provides a

simplistic, cumulative estimate of the economic impacts of FCPP and Navajo Mine for the State

of New Mexico and San Juan County NM, 2016‐2041,46 based on the Units 4‐5 operation, and

the change in ownership at the mine.

Table 23 suggests that the Units 4‐5 FCPP operation and reduced associated coal production at

Navajo Mine, alongside the Navajo Nation’s purchase of the mine, could cumulatively generate

approximately $4.3 billion labor income and $11.2 billion gross state product (both 2011 $) for

the State of New Mexico, 2016‐2041.    For San Juan County NM, the estimated cumulative

impacts could be approximately $4 billion labor income and $9.7 billion gross state product

(both 2011 $).

The cumulative employment impact for a Units 4‐5 operation could be 60,685 job years in the

State of New Mexico, 2016‐2041.    Over 88% of these job impacts could occur in San Juan

County NM (53,790 job years).  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 generate 2,334 jobs in

the State of New Mexico (2,069 of which are based in San Juan County NM) as a result of a

Units 4‐5 operation, the reduced associated coal production, and the Navajo Nation’s purchase

of Navajo Mine.

 

46 The period of study has been suggested by the client, consistent with contractual intentions.
42

Table 23: Cumulative Economic Impact of FCPP and Navajo Mine, 2016‐2041

Economic Impacts Cumulative Impacts 2016‐2041

Employment (Job Years)47

State of New Mexico 60,685

San Juan County NM 53,790

Host County as Percentage of New Mexico 88.6%

Labor Income (Billions 2011 $)

State of New Mexico 4.29

San Juan County NM 3.98

Host County as Percentage of New Mexico 92.7%

Gross State Product (Billions 2011 $)

State of New Mexico 11.20

San Juan County NM 9.66

Host County as Percentage of New Mexico 86.2%

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

The cumulative impacts summarized in Table 23 do not take into account the additional

benefits of tribal taxes and royalties paid to the Navajo Nation.  These are estimated at $71.5

million48 each year, therefore cumulatively amounting to almost $1.86 billion in total gross

revenue to the Navajo Nation for the 26‐year period of study (2016‐2041).  Table 24 estimates

the impacts of the tribal taxes and royalties alone for the Navajo Nation.

Table 24: Cumulative Economic Impact of Tribal Taxes, Royalties, and Exemptions

for the Navajo Nation, 2016‐2041

Economic Impact Cumulative Impacts 2016‐2041

Employment (Job Years) 42,574

Labor Income (Billions 2011 $) 1.88

Gross State Product (Billions 2011 $) 2.45

Source: L. William Seidman Research Institute, W. P. Carey School of Business, Arizona State University

 

47 A “job year” is defined as one person having a full‐time job for exactly one year. 48 This assumes that the tribal royalty and tax rates previously paid by BHP Billiton will continue to be spent in the

same way by the Nation, on the Nation, after they have purchased Navajo Mine. It also assumes that the Nation

will treat the federal, state, and county tax exemptions accrued after their purchase of the mine as tribal royalties.
43

Table 24 suggests that the tribal taxes and royalties paid by FCPP and Navajo Mine for the Units

4‐5 operation and reduced associated coal production, 2016‐2041, could cumulatively generate

approximately $1.88 billion labor income and $2.45 billion gross state product (both 2011 $) for

the Navajo Nation.

The cumulative employment impacts from the tribal taxes and royalties alone could be 42,574

job years in the Navajo Nation.  Once again, the label “job year” is important and should not be

simplified or abbreviated to “job”, as one Navajo worker could hold the same job for multiple

years.

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

economies of the State of New Mexico and San Juan County NM.

This study also suggests the economic importance of the power plant and mine for the Navajo

Nation, based exclusively on an estimate of the impacts associated with tribal taxes and

royalties and the federal, state and county tax exemptions, if the mine is purchased by the

Nation.  It is important to note that the total economic impact of FCPP and Navajo Mine for the

Navajo Nation will extend far beyond these tribal taxes, royalties and tax exemptions.  

However, a Navajo Nation specific analysis has not been possible based on the data supplied by

the client, the geographical limitations of IMPLAN, and the lack of a contemporary, reliable

assessment of expenditure leakages from the Nation.

Finally, the focus of this study has been to only estimate regional impacts.  The fact that FCPP

and Navajo Mine’s supplier purchases extend to vendors based outside the State of New

Mexico will mean that their total national impact is even greater than the estimates described

in this study.
44

References

APS Company website,

http://www.APS.com

Bureau of Economic Analysis, US Department of Commerce: Table SA04: State income and

employment summary,

http://www.bea.gov/regional/docs/footnotes.cfm?tablename=SA04

Bureau of Labor Statistics, Consumer Expenditure Survey, 2010 (Table 2301),  

http://www.bls.gov/cex/#tables  

Minnesota IMPLAN Group, Inc., IMPLAN Professional: Social Accounting & Impact Analysis

Software, Version 2.0 (Stillwater, MN).

The Navajo Nation (2010), 2009‐2010 Comprehensive Economic Development Strategy, Division

of Economic Development: Window Rock

The Navajo Nation Office of Management and Budget (2011), Fiscal Year 2012 Budget

Instructions and Policies Manual, Office of Management and Budget: Window Rock

U.S. Census Bureau, State and Local Government Finances, FY 2009,

http://www.census.gov/govs/estimate/
45

Technical Appendix: Data and Economic Impact Method

TA.1 Employment and Payroll

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

2011 for the Four Corners Power Plant (FCPP) and Navajo Mine.  

TA.2 Consumer Spending

In economic impact analysis, estimates are made of the effects of a company’s payroll that are

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

within the local economy.    Based on information in the Bureau of Labor Statistics’ annual

Consumer Expenditure Survey (CES), we assumed that 85 % of the money income of FCPP and

Navajo Mine employees is spent on consumption.  The detailed commodity make‐up of these

expenditures is based on data from the CES on the spending patterns of households with

incomes $75,000‐$100,000.

TA.3 Vendor Purchases

Companies make potentially significant contributions to the local economy through their

purchases of goods and services from local suppliers.    APS provided two files containing all

vendor purchases for 2011, one for Four Corners Power Plant and one for Navajo Mine.  The

files contain each payment the companies made to vendors during the year.    Each record

included the category of the transaction, the alias of the vendor, the amount, the NAICS code,

and the vendor’s zip code.  The companies made purchases from both in‐state and out‐of state

vendors.  For the purpose of this study, New Mexico vendors were of interest for the state‐level

analysis, and San Juan County vendors for the county‐level analysis.    To incorporate this

information into IMPLAN, NAICS codes were converted to IMPLAN codes based on a table of

correspondences provided by the IMPLAN group.

TA.4 Estimating Tax Revenues

One of the objectives of this report was to estimate the total impact of Four Corners Power

Plant and Navajo Mine operations on New Mexico state and San Juan County local tax

revenues.   APS provided information on the taxes paid directly by the companies—property

taxes, royalties, etc.  While direct taxes paid were easy to know, it is a difficult task to estimate

the taxes paid by Four Corners Power Plant and Navajo Mine employees and any of the other
46

taxes connected with the economic impact process.  Many important taxes would be local ‐ for

example, the property taxes paid to school districts or sales taxes paid to cities.  In theory, to

estimate these, one would need to have and utilize information with a high degree of

geographic granularity on the incomes and spending of employees, suppliers and anyone else

connected with the multiplier process.  Such an analysis was beyond the scope of this project.

To make the calculations meaningful, yet manageable, the tax revenues generated at any phase

of the economic impact process (apart from the business taxes paid directly by the companies)

were estimated by multiplying the income attributable to production in that phase by the

economy‐wide ratio of state and local taxes to gross state product.  The most recent year for

which this data is available from the U.S. Census Bureau was Fiscal Year 2009.   In that year,

total state and local taxes in New Mexico represented 6.7% of gross state product.   In other

words, on average, income generated from production in New Mexico was taxed by state and

local governments at a combined rate of 6.7 %.  With this figure in mind, taxes connected with

the income earned and spent by FCPP and Navajo Mine employees was estimated by taking 6.7

% of their labor income in New Mexico.   Taxes associated with the production of goods and

services that FCPP and Navajo Mine purchased from New Mexico suppliers were estimated by

taking 6.7 % of the income generated from that production. Taxes associated with the

multiplier process were also estimated in this way.

TA.5 The IMPLAN Model

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.

The specific model used in this report was based on IMPLAN’s 2010 economic database.49  In

addition to providing estimates of multiplier effects, IMPLAN has a detailed database which

makes it possible to estimate the direct jobs and incomes associated with any given dollar

amount of vendor purchases.

Type SAM (Social Accounting Matrix) multipliers were used with the amount of recycled

spending limited to private sector spending. State and local tax revenues generated during the

economic impact process were also assumed to be spent, but these calculations were

performed outside of IMPLAN.

 

49 This is the latest version of IMPLAN available.
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