Navajo Nation President Jonathan Nez on Wednesday terminated an agreement with Navajo Transitional Energy Company that would have held NTEC harmless for costly mine cleanup plans.
The contract, which included a general indemnity agreement, was originally for the sole purpose of backing NTEC’s purchase of Navajo Mine in western New Mexico.
But according to testimony in Window Rock during the fall session of the Navajo Nation Council, NTEC argued that the contracts it signed in 2013 and 2015 guarantee cleanup not only for Navajo Mine in northwest New Mexico, but also for three other coal mines NTEC purchased in August in Wyoming and Montana without the Nation’s consent.
Federal law requires that anyone operating a mine in the U.S. must post a bond that is enough to pay for the cleanup and reclamation of the mine in case the company becomes insolvent and the mine closes.
“The Navajo Nation’s financial portfolio as well as our resources would be placed in a state of uncertainty if we allowed NTEC to proceed with finalizing the bonds needed to operate these three mines using the Nation’s consent given in these indemnity agreements. In addition, many experts question the viability of expanding our interests in a coal market that appears to be dwindling. We will not support initiatives that attempt to circumvent or undermine the laws and policies of our Nation,” Nez said Tuesday in a press release.
The termination clause of the contract only relieves the Nation of obligations for bonds issued after the contract date. In other words, the bonds issued for Navajo Mine are unaffected by Nez’s action this week.
NTEC’s new mines in Wyoming and Montana still need reclamation bonds, and it’s unclear who will post those.
“We respect the decision of the Navajo Nation. Regardless, Navajo Transitional Energy Company remains a profitable, viable and successful business entity of the Navajo Nation,” according to a statement from NTEC in response to Nez’s termination of the agreement. “As such, we will explore our options to best serve our interests as NTEC and the Navajo Nation.”
NTEC’s purchase of the three mines from Cloud Peak Energy shocked energy market analysts, who declared the purchases poorly timed.
“By terminating the Navajo Nation’s indemnity support for NTEC, Navajo leaders are wisely and responsibly protecting the Nation from NTEC’s ill-advised acquisition of bankrupt Cloud Peak mines in the Powder River Basin of Montana and Wyoming,” Karl Cates, an analyst with the Institute for Energy Economics and Financial Analysis, told Arizona Mirror.
IEEFA closely watched the developments with Cloud Peak’s mines since NTEC bought them in bankruptcy court in early October. The Institute’s position has been that the purchases were ill-timed in an energy market transitioning to renewables.
“Navajo leaders are shielding the Nation specifically from risks that include some $400 million in reclamation liabilities and from a weak business case that has been evident from the outset,” Cates said.
Some members of the Navajo Nation Council felt the same way, as rumblings of a council resolution occupied most of the last day of the fall session.
“We, as a Nation, have asserted a principle: that in order to waive our sovereign immunity, and in order to place your children’s, your grandchildren’s money on the line as a guarantee … that there must be an affirmative two-thirds vote by the Navajo Council. This is potentially an end run to get around that two-thirds vote,” Council Delegate Carl Slater said of NTEC’s actions when introducing his legislation to cancel the agreements.
Slater’s legislation was tabled, but Nez’s action accomplishes the same thing, at least as far as the Navajo Nation’s interpretation is concerned.
“The Nez-Lizer Administration strongly supports Navajo businesses and enterprises, but business has to be conducted the right way with transparency and integrity,” Vice President Myron Lizer said in Tuesday’s statement. “NTEC should focus more resources into transitioning their energy portfolio to acquire and develop renewable energy for the Navajo Nation.”