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Navajo Nation Taking Control of Coal Mining on Reservation

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The Navajo Nation is making moves to buy into the coal business, thereby changing its decades-long role of hosting outside companies that mine coal on their land.

BHP Billiton is an international company with two mines in the United States. One of those, the Navajo Mine, operates southwest of Farmington, New Mexico on the Navajo Nation and employs 433 individuals full-time—of which 85 percent are Native American. 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 in northeastern Arizona.

The 2,040-megawatt Four Corners Power Plant has its own problems. Its primary owner, Arizona Public Service (APS), has recently opted to shut down three of its five units rather than install expensive pollution controls in order to meet new Environmental Protection Agency rules for air quality. The plant’s future also relies on the renewal of a coal contract with the Navajo Mine. But negotiations between APS and BHP Billiton hit a snag earlier this year.

“We started seeing how difficult it would be to come to an agreement on the negotiations,” said Norman Benally, head of external affairs for BHP Billiton New Mexico Coal. “As a result we started looking at alternatives. The best alternative we came to was a transfer of ownership to the Navajo Nation.”

The Navajo Nation announced a Memorandum of Understanding with BHP Navajo Coal Company (BNCC) on December 18 that signals its intention to move forward with that idea. According to a press release from Navajo Nation Speaker Johnny Naize’s office, the transfer of ownership of BNCC to the Nation is scheduled to be completed by June 2013. That will begin a three-year transition period during which BHP will continue to manage the mine, although the Navajo Nation will be the full owner of BNCC. Meanwhile, the Nation will build a staff of engineers and managers fit to run it. The Nation has never done this before.

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“The Navajo Nation shouldn’t be underestimated with this,” said Erny Zah, spokesman for Navajo Nation President Ben Shelly. “One of the things President Shelly is always talking about is ‘get your education, come home and help your people.’ We have a great many Navajo people who are very capable. We have some who are working as engineers for the national laboratories and such. We would have a work force in place that would be successful at managing the plant.”

Zah says the effort will pay off—in the immediate sense, up to 900 mostly Navajo workers between the mine and the plant don’t have to worry about losing their jobs. And the deal stands to preserve 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.

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.

“We’ve never taken on a project this large that meant so much revenue to both entities, so we’ll see what happens,” Zah said.

The announcement isn’t likely to please environmental groups on and off the reservation who have been pushing for a move toward more renewable energy sources.

But Zah pointed out that the revenue that’s being created by the mine would buy the mine: “This is not an out-of-pocket expense for the Navajo Nation,” he said. He added that the President’s Office has endorsed an energy policy that includes renewable energy sources, and the mine would open up still more possibilities such as clean coal and coal gasification.