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Hopis, Navajo look to future without Mohave

FLAGSTAFF, Ariz. - The Mohave Generating Station from which both the Hopi
Tribe and Navajo Nation derive significant income - may be in serious
trouble.

The plant's majority owner, Southern California Edison, filed its monthly
report on Mohave with the California Public Utilities Commission updating
progress on coal and water negotiations, C-aquifer studies, and an
alternatives investigation.

The 35-year-old 1,580 megawatt coal-fired plant, one of the biggest air
pollution emitters in the country, uses Navajo and Hopi coal mined on Black
Mesa by Peabody Coal. The coal goes to the generating station via a coal
slurry pipeline that uses more than 4,000 acre-feet a year of potable water
pumped from the N-aquifer, the sole source of drinking water for the Hopi
Tribe and the Navajos living on Black Mesa.

On Dec. 2, 2004, the CPUC decided not to authorize the installation of the
pollution control equipment required by a 1999 federal consent decree
resulting from a lawsuit brought against Mohave by environmental groups.
According to the decree, Mohave must shut down at the end of 2005 if the
pollution control equipment is not in place.

The CPUC decision concluded a two-year proceeding that involved hundreds of
comments from Black Mesa residents and arguments from the grassroots
organizations Black Mesa Trust and To' Nizhoni Ani, as well as other
interveners, including the Natural Resources Defense Council and the Sierra
Club. The principal stakeholders were the Hopi Tribe, the Navajo Nation,
Peabody Coal, and Mohave owners.

In addition to installing $1.1 billion worth of pollution control
equipment, upgrading the failing coal slurry pipeline and retrofitting the
power plant, the CPUC decision focused on two other critical points. The
first was the Hopi Tribe and the Navajo Nation's resolve that Peabody stop
using the Naquifer as a source of water for the coal slurry. The second was
that royalties from Black Mesa Mine - the sole supplier of coal to Mohave,
which in turn is the mine's only customer - provide a substantial portion
of the revenues on which the Hopi and Navajo governments depend. The Hopi
Tribe stands to lose one-third of its budget, or roughly $7 million, when
the power plant shuts down.

The CPUC decision required SCE to commission a study of the C-aquifer
underlying a large part of northern Arizona as a source of water for the
coal slurry and authorized a study of alternative sources of power
generation to replace Mohave-generated electricity and to help the tribes
recoup some of their financial losses from the plant's closure.

THE C-AQUIFER

The C-aquifer study is, after some initial difficulties, now moving
forward. The report read: "All data obtained from the C-Aquifer test
pumping has now been compiled by the U.S. Geological Survey. From the
USGS's preliminary report on the test data, SCE understands that the
C-aquifer water in the proposed Canyon Diablo well-field area [on land purchased by the tribes] is expected to be of adequate quality, and the
wells are expected to be capable of producing at an adequate rate, for the
proposed project."

The USGS model of the Caquifer has run into some calibration difficulties,
which it is resolving. A "flow model" of the C-aquifer is being conducted
by SS Papadopulos & Associates and is expected by this fall.

Three points of contention have been raised regarding the studies. The most
thorny point is that the Bureau of Reclamation, which owns part of Navajo
Generating Station in Page, Ariz., was in charge of drilling the test wells
and collecting the pumping data. Since NGS also gets its coal from a
Peabody mine on Black Mesa, critics suggest that Reclamation has an
interest in keeping those mines open and therefore should not have
conducted any part of the Caquifer study.

The second point of disagreement is whether the models being used by USGS
are accurate, even leaving aside the issue of calibration.

And the third is that the studies do not take into account the impact of
pumping the Caquifer for mining - and the roughly 5,500 acre-feet per year
that the tribes want for municipal use from the well field - will have on
other users of the aquifer, which include several towns and cities.

The report also states, as did the five prior reports, that confidential
post-2005 coal and water supply negotiations among the tribes, Peabody, and
Mohave owners are continuing.

OFFICE OF SURFACE MINING

Peabody has submitted a new mining plan for Black Mesa Mine, asking the
Office of Surface Mining to combine the two mines under one permit. Black
Mesa has been operating on a "temporary" permit for more than two decades,
largely because the issue of using Naquifer water for the coal slurry has
been in contention ever since the mine opened.

Many Hopi elders maintain that the village leaders never gave permission
for the sale of coal and water; therefore, the leases are invalid. The
validity of the leases were further impugned with the discovery that the
attorney who represented the Hopi Tribe in the original 1960s lease
negotiations was working for Peabody at the same time.

This report also stated that OSM will have a draft environmental impact
statement on the Peabody application by January or February of next year,
less than one year since public scoping meetings were held on the
reservations and in Flagstaff.

The firm of Sargent & Lundy has been retained by SCE to conduct the Mohave
Alternatives/Complements Study process.

One of the two major forces working against reopening Mohave regards the
consent decree. All along, Peabody and the tribes have maintained their
confidence that the plaintiffs in the lawsuit - Sierra Club, Grand Canyon
Trust and National Parks and Conservation Association - would agree to
extend the Dec. 31 deadline for installing the pollution control equipment.

SCE informed the commission that in a May 25 letter, the plaintiffs
informed Hopi Tribal Chairman Wayne Taylor Jr. and Navajo Nation President
Joe Shirley Jr. that they do not support changing any aspect of the decree,
including the deadline.

Secondly, Peabody has informed SCE that it will begin "ramping down" its
activities at Black Mesa Mine in October because there is sufficient coal
stored at Mohave and "in the works" to keep the power plant fueled until
the end of the year. Peabody anticipates that it will send out the first
termination notices to mine workers at the beginning of August.

LOBBYIST WORKED WITH JACK ABRAMOFF

In addition to the energy generation alternatives study ordered by the CPCU
and commissioned by SCE, the tribes themselves have been looking at other
power generation options, including wind, solar and coal.

A May 26 Hopi tribal press release described the tribe's meetings with
Headwaters Corp. officials John Baird and John Ward, and the Department of
Energy, to look at the possibility of constructing a coal liquefaction
plant and electric generating plant "on ranch lands own by the tribe." For
the past eight years, the tribe has been using federal money awarded as
part of the settlement of its land dispute with the Navajo Nation to
purchase land in Flagstaff, ranch land south of Interstate 40 near Canyon
Diablo and farm land near Yuma, Ariz.

The release read: "'We want to brief Energy Department officials on the
proposed [memorandum of understanding] with Headwaters and find out what,
if any funding might be available for clean coal technology projects on
Indian lands,' said Kevin Ring, an attorney for Barnes & Thornburg and
Hopi's Capitol Hill lobbyist."

(The Energy Policy Act of 2005, versions of which have been passed by both
the House and the Senate, has in it money for clean coal technology
development and for the development of power generation facilities on
Indian lands. Whether these provisions will survive the reconciliation
process and final passage of the bill remains to be seen.)

Less than a week later, the tribe announced that its relationship with Ring
was terminated.

The move came after Ring declined to answer questions put to him by the
Senate Indian Affairs Committee during a hearing June 22, the third hearing
held as part of the committee's investigation into the alleged fraud
perpetrated on several Indian tribes by high-powered Washington lobbyists
Jack Abramoff and Mike Scanlon.

According to the Hopi chairman's office, Ring was a lobbyist for the tribe
for five years, which would be roughly from mid-1999 to mid-2005. During
this period, the tribe, with the help of an unnamed lobbyist, entered into
discussions with Reliant Energy to build a coal-fired power plant on Black
Mesa. On March 22, 2002 the tribal council passed a resolution approving a
joint development agreement with Reliant to explore the possibility of
developing an electric generating plant on Hopi land.

In a KUYI Hopi radio forum on May 14, 2002, Taylor said, in response to a
question about why Reliant was chosen to partner with the tribe on this
project: "Reliant Energy worked with same lobbyist we did in the state of
Arizona. Our lobbyists know we have coal resources, and they were the ones
who introduced us to Reliant." Neither former Vice Chairman Elgean
Joshevama nor former Vice Chairman Caleb Johnson can confirm that Ring was
the lobbyist with whom the tribe worked on the Reliant project; Johnson did
say that the law firm involved was Greenberg Traurig, which has an office
in Phoenix, and Ring worked for Greenberg Traurig in 2002.

The tribe pulled out of the Reliant partnership later in May 2002 due to
public pressure and "internal troubles" the company was experiencing as a
result of the 2001 California energy crisis.

Ring worked with Jack Abramoff at Preston Gates and then, beginning in
2002, at Greenberg Traurig. From 1998-2004, the Hopi Tribe paid Greenberg
Traurig $700,000 - more than half of its total lobbying costs for that
period, according to records on The Center for Public Integrity's Web site.
Ring left Greenberg Traurig and moved to Barnes & Thornburg early in 2004.

The June 22 hearing focused on the lobbyists' dealing with the Mississippi
Band of Choctaw Indians. The committee reiterated that the Choctaw were
victims of fraud and were not accused of any wrongdoing.

Ring invoked his Fifth Amendment rights in response to questioning by
Committee Chairman John McCain, R-Ariz. Some of those questions related
Ring's club dues, were discussed in this exchange of e-mails:

Ring to Abramoff: April 24, 2001; Subject: help: "Remember I talked to you
about getting some help from a client to subsidize me joining a club. Well,
I looked around and want to do the University Club. I already know some
people there and they all think it is good for business.

"I know I can bill expenses I incur there, etc, but how can I get help with
the $800 initiation fee? We are trying to join asap. Thanks."

Abramoff to Ring [and others]: "Rodney, please cut Kevin a check from me
for $800."

Ring to Abramoff: "Really? There is no way to bury this in Choctaw or SGMA
bill?"

Abramoff to Ring: "Perhaps, but I want to make sure you get this ..."

Committee Vice Chairman Byron Dorgan, D-N.D., described "Team Abramoff's"
dealings with the tribe as "deception and greed that even by Washington
standards are breathtaking."