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Navajo Council Forms Liability Company to Buy Navajo Mine

The Navajo Nation Council has voted to form Navajo Transitional Energy Company, a limited liability company to buy the Navajo Mine.
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The Navajo Nation Council has voted to form a limited liability company to buy the tribe’s first coal mine, taking the controversial idea one step further.

The Council approved the formation of the new entity, called the Navajo Transitional Energy Company, in a 17-4 vote on April 29. The approval authorizes the company to act as an arm of the Navajo Nation, and to carry out business actions on behalf of the Nation during the possible acquisition of the BHP Navajo Mine.

The Navajo Mine operates southwest of Farmington, New Mexico on the Navajo Nation. It’s owned by BHP Navajo Coal Company (BNCC), a subsidiary of BHP Billiton, an international company with two mines in the United States, and it’s the sole source of coal for the nearby Four Corners Power Plant. The complex is separate from the controversial Navajo Generating Station in Page, Arizona, which gets its coal from the Kayenta Mine.

Craig Moyer, an attorney with the Los Angeles-based firm Manatt, Phelps, & Phillips, was hired by the tribe to investigate the proposal. 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.”

Some grassroots activists oppose the purchase of the mine, because they believe it keeps the Nation depending on coal rather than moving toward cleaner and renewable energy sources. But proponents say at least 10 percent of net income generated by the mine under Navajo ownership will be reinvested to fund the research and development of renewable and alternative sources of energy.

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Erny Zah, spokesman for Navajo Nation President Ben Shelly, has noted that in the short term, the purchase preserves up to 900 mostly Navajo jobs, between the mine and the plant, as well as a revenue stream that poured $41 million into the Navajo Nation economy last year alone. That’s about 32 percent of the Nation’s general fund.

Negotiations around a contract between BHP and APS – the utility that purchases the coal for the Four Corners Plant – hit a snag last year, and that’s when the Navajo Nation stepped in.

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.

Moyer told the Council they weren’t necessarily committing to the purchase of the mine by forming a company to manage it – but to vote against the move would have assured the closure of both the plant and the mine.

 “Although the action this Council is taking is a risk, it is a very courageous risk. It is a risk that has foresight. It is going to open the doors of opportunity,” said Council Delegate Walter Phelps, during discussions before the vote. “If we want to learn to live what it means to be self-sufficient, we have to take risks, and I think this is one step in that direction.”

Barring any snags in several procedural steps, the newly formed Navajo Transitional Energy Company will be on track to sign a mine management agreement with BHP and a coal supply agreement with APS by July 1.