The tribe has an abundance of coal, but the $85 million deal with Australian-based BHP Billiton Ltd. that is expected to close Dec. 1 marks the Navajo Nation’s first venture in the coal mining business.
The tribe formed Navajo Transitional Energy Co. LLC earlier this year to look into buying the Navajo Mine near Farmington, which produces up to 8.5 million tons of coal annually. It is the sole provider of coal to the nearby Four Corners Power Plant, which provides electricity to about 300,000 households in Arizona, New Mexico and Texas.
The amount of coal extracted from the mine and the number of jobs likely will decrease as the plant’s operator, Arizona Public Service Co., follows through with plans to shut down three of the units and acquire ownership of two other units.
Regardless, Craig Moyer, an attorney at Manatt, Phelps & Phillips who served as the Navajo Nation’s lead counsel in the deal, said the tribe should see $100 million a year in taxes and royalties from the coal mine and power plant. The cash flow to NTEC as a result of coal sales is expected to bring in $1 billion through 2031, he said.
The Navajo Nation is paying for the coal mine with the profits the mine generates. BHP will manage it until 2016, when the Navajo Nation will have to find a new manager.
LoRenzo Bates, chairman of the Tribal Council’s Budget and Finance Committee, called the deal a major step in taking control of the reservation’s coal resources.
“It puts Navajo Nation in control of its own destiny,” he said.
That feeling doesn’t resonate with Lori Goodman, of the environmental advocacy group DINE Care. She has criticized the tribal government for not making public its studies on the mine and for seemingly releasing BHP from liabilities associated with it.
“If BHP believes all is right, they don’t need to be putting that on the Navajo people,” she said. “That certainly needs to be taken away, and we don’t even know what those liabilities are.”
Moyer said the due diligence studies were not released publicly because of confidential business information contained within them. Redacted portions could be released once the mine is in the hands of NTEC, he said. The studies found no significant external impacts from the mine, he said, and the Navajo Nation will not be saddled with unexpected costs.
The Navajo Nation will acquire mining equipment, improvements at the mine, intellectual property rights and permits. Ten percent of the profits from the mine will be set aside for clean energy development.
Pat Risner of BHP released a statement Thursday saying the company was pleased to work with the Navajo Nation to ensure a future for the mine that will benefit the tribe, mine employees and others.