* Navajo plant needs costly environmental upgrades
* Plant and mine employ 1,000 workers
HOUSTON, Jan 4 (Reuters) - A federal working group will address concerns about air pollution and jobs at the largest coal-fired power plant in the western United States, the Navajo Generating Station on an Indian reservation near the Grand Canyon, three U.S. agencies said on Friday.
A joint statement from the Department of the Interior, the Department of Energy and the Environmental Protection Agency (EPA) said the agencies would work together to find ways to produce "clean, affordable and reliable power" while "minimizing negative impacts on those who currently obtain significant benefits from (the Navajo station), including tribal nations."
The 2,250-megawatt 1970s-era coal plant is located on the Navajo Indian reservation just 15 miles from the Grand Canyon.
The Interior Department's Bureau of Reclamation owns 24 percent of the plant and is the largest single owner.
Navajo supplies electricity to customers in Arizona, California, and Nevada. The Bureau of Reclamation's share of the power is used to move water to tribal, agricultural, and municipal water customers in central Arizona.
Proposed EPA rules to reduce regional haze in the West would require expensive new control equipment that could make the plant uneconomical to run.
Shutting the plant would cost more than 1,000 jobs at the plant and the coal mine that supplies it, according to U.S. Congressman Paul Gosar, an Arizona Republican. A majority of the workers are Native Americans.
"After years of mixed messages and uncertainty, today's joint statement seems to imply that the Obama Administration is abandoning a previous proposal that would have done little to improve haze while imposing catastrophic costs on the Arizona economy," Gosar said in a statement.
Gosar said he hopes creation of the working group "signals that the federal government will work with, and not continue to dictate to, Arizona and tribal stakeholders."
Salt River Project, a part-owner and operator of the station, said it was encouraged by the statement which recognizes the importance of the power plant to the region and commits the agencies to work together "to ensure that critical decisions such as the upcoming EPA Best Available Retrofit Technology proposal do not adversely impact the many stakeholders that rely" on electicity from the plant.
In addition to the long-term working group, the agencies said they would fund the second phase of the National Renewable Energy Laboratory's report analyzing a range of options for Navajo Generating and support "near-term investments that align with long-term clean energy goals."
The joint statement was signed by Ken Salazar, secretary of the Interior Department; Steven Chu, secretary of the Energy Department; and Lisa Jackson, outgoing EPA administrator.
Other owners of the station include Arizona Public Service, a unit of Pinnacle West Capital Corp, Tucson Electric Power, a unit of UNS Energy Corp, NV Energy and Los Angeles Department of Water and Power.
Across the U.S., more than 9,000 MW of coal-fired generation was shut last year as stricter federal pollution standards and cheaper natural gas make coal plants less economical to operate. (Reporting by Eileen O'Grady in Houston; Editing by David Gregorio)