Navajo Nation takes a chance on coal

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In last Thursday’s Durango Herald, there was an article about the Navajo Nation’s purchase of a coal mine near Farmington, N.M. It’s the kind of story that’s a little confusing to follow — simply because there are so many issues and so much history.

But the article helps to tease out the challenges confronting the Navajo Nation as it navigates 21st-century energy economics while trying to provide jobs for its people.

As staff writer Chuck Slothower notes, on Dec. 1, the tribe will take over ownership of the Navajo Mine; its current owners will continue to operate it through 2016.

Navajo Mine has been owned by Australia-based BHP Billiton, and it supplies coal to the nearby Four Corners Power Plant, one of the United States’ largest coal-fired power plants.

Slothower tells us the tribe faced the possibility of BHP Billiton pulling out. Had that happened, the mine and neighboring Four Corners Power Plant would have closed, “throwing hundreds of Navajos out of work and costing the tribe millions in tax revenue,” according to his story:

“For the short term, we’re talking about saving existing jobs on the Navajo Nation,” said Erny Zah, spokesman for Navajo Nation President Ben Shelly.

“If you take the mine and the power plant together, we’re talking about more than 800 jobs.”

Unemployment on the Navajo reservation ranges from 40 to 60 percent, Zah said. A majority of employees at the plant and mine are Native American.

It’s worth going back a few months and looking at some of the older coverage of the deal.

The tribe hired Craig Moyer, an attorney at Manatt, Phelps, and Phillips to investigate the purchase. This spring, he urged the Navajo Nation Tribal Council to form a liability company and pointed out to council members that a “no” vote would ensure closure of both the mine and the power plant it supplies. According to a story this spring from Indian Country Today:

He told Council members during their three-hour deliberations that although the mine’s finances would be tight during the first three years of Navajo ownership, by the fourth year the mine should pay for itself.

“Frankly, this transaction looks better than it did when we were discussing our results at phase one,” Moyer told the Council. “Navajo Transitional Energy Company can be the bridge to the future and the revenues to pay for it.”

According to that same story:

It stands to reason that the Navajo Nation could accept a lower price for the Navajo Mine’s coal than BHP could, since the Nation would presumably get a pass on state and federal taxes. In 2011, according to BHP figures, the mine paid $6.6 million in taxes to the federal government and $15.5 million to the state of New Mexico.

One snag in the plan, however, is that the power plant the mine supplies has an uncertain future.

In 2010, California’s SCE, a unit of Edison International, agreed to sell its share in the plant to APS. That’s because California is moving away from purchasing electricity generated via coal-fired power plants. That deal hasn’t gone through yet, but when it does, the plant’s demand for coal from the mine will decrease by about a third.

As Slothower notes in the Herald article, the only remaining customer for the plant’s electricity is Arizona Public Service Company, which “has agreed to shut down three of the plant’s five units under pressure from the U.S. Environmental Protection Agency to reduce emissions.”

This isn’t the first time the Navajo Nation has tried to take control of its coal resources and address unemployment via energy development. Under former President Joe Shirley, Jr. and the tribe’s Diné Power Authority—and in partnership with Sithe Global Power—it had proposed building the Desert Rock Power Plant. After years of planning, that project was put on hold indefinitely when Sithe admitted in 2010 it wasn’t economically feasible and there weren’t enough customers seeking electricity from coal.

In fact, BHP-Billiton’s CEO said earlier this year that the company is “probably finished for a time” investing in coal and focusing more on petroleum, copper and potash.

This week, when Navajo Nation President Ben Shelly signed legislation allocating $4.1 million to the new Navajo Transitional Energy Company—that funding is for start up costs and expenses acquired during the due diligence investigation—he also signed the Navajo Nation Energy Policy, a policy which hasn’t been updated since 1980.

According to a press release from the Navajo Nation on Halloween, when the BHP Billiton and the Navajo Transitional Energy Company signed the mine’s purchase agreement, President Ben Shelly supports the deal. “With the Navajo Nation Energy Policy and Navajo Mine ownership, we are solidifying a Navajo energy future that includes coal, solar, wind, gas, oil, and other forms of energy,” he said. “Our future is stronger with the Energy Policy, and that strength secures the future of Navajo Mine.”

One thought on “Navajo Nation takes a chance on coal

  1. Good article on a complex subject. Every nation has to make difficult energy choices, but the problem is even harder to navigate for Native peoples in the United States. Your article does a good job in framing the unique context of these energy decisions.

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