Black Mesa 'reopener' must be renegotiated.

Kathy Helms, (Dine Bureau/Gallup Independent)

WINDOW ROCK – The Navajo Nation Council spent nearly an entire day last week discussing the 10-year coal royalty rate “reopener” with Peabody Western Coal Co. for Black Mesa leases before it was determined that the deal is dead because the resolution was tabled by Council in December and an attempt to bring it back failed.

“Right now, we don't have a deal between the Navajo Nation and Peabody, with the exception that they will continue digging coal and if there is any revenue to be generated, it would basically be at the 12.5 percent royalty rate, period,” said Resources Committee Chairman George Arthur, sponsor of the resolution.

The bill came before Council the first week of November 2009 but was tabled with a directive that a work session be held within 30 days. The work session was held Dec. 21 and the resolution was tabled again Dec. 22 during a special session.

Another directive was made at that time to hold a work session within 90 days to review all leases since 1960 pertaining to Peabody and to possibly hold public hearings before presenting oral and written reports during spring session. Council has yet to see the leases and the public hearings haven't been held.

Approval of the “reopener” amendment would give the Nation 12.5 percent coal royalties until 2017 – the minimum set by Congress in 1977 – a signing bonus of $1.55 million for both leases, an annual bonus of $3.5 million a year for 10 years, and scholarship funding of $250,000, up from $186,000.

Peabody has operated the Kayenta and Black Mesa mines as two separate surface coal mining operations since the early 1970s. The Kayenta mining operation has supplied coal to Navajo Generating Station near Page since 1973, while Black Mesa supplied coal to Mohave Generating Station near Laughlin, Nev., from 1970 until December 2005.

Mohave and the Black Mesa mine closed in 2005 after utility company owners, led by Southern California Edison, could not reach agreement with the Navajo and Hopi tribes on coal and water supplies for the generating station.

Navajo gets full royalty of 12.5 percent under Lease 8580, which provides coal to Navajo Generating Station; both tribes get 6.25 percent each under Lease 9910, in the former Joint Use Area, which primarily provided coal to Mohave.

“The reopener, at the moment, is gone unless we agree to go back and renegotiate and reestablish an understanding that there is an agreement between the Navajo Nation and Peabody,” Arthur said, but added that the deal might not be the same.

Attorney General Louis Denetsosie said the consequences of not approving the 2007 royalty adjustment is the Navajo Nation would lose the $36.5 million that has been negotiated, compared to the $32.5 million negotiated in 1997.

“We have received $3.5 million already and we would have to return the $3.5 million to Peabody,” he said.

Britt Clapham, former deputy attorney general for the Navajo Nation who has been involved in reopener negotiations, told Council that rejecting the royalty rate adjustment has no impact on Peabody's operation. The company can continue to mine coal under its leases with the Navajo Nation until the coal runs out, whether Navajo approves the rate adjustment or not.

“The reopeners are relatively narrow. They are to adjust the royalty rate only if either party is dissatisfied. We have exercised that option in 1997-98 and again in 2007-2008. The question you have before you is to approve the revised royalty rate.

“The 10-year reopener does not reopen every aspect of the lease agreement. It merely reopens the royalty rate. That's what we can negotiate about. If the federal minimum increased, we would automatically go to that,” Clapham said, however, that has not come into play since the rate was set in 1977.

“The Navajo Nation can't give away under a Black Mesa lease what an administrative law judge vacated in a permit,” said Marsha Monestersky, program director for the Forgotten People. “They can't do anything with the Black Mesa lease. There is no Black Mesa Mine.”

An administrative law judge vacated a life-of-mine permit for the Black Mesa Complex in January, ruling that the Office of Surface Mining Reclamation and Enforcement violated the National Environmental Policy Act, and remanded the permit to OSM for further action.

“All there is, is the Kayenta Mine, because what the judge vacated was actually the Black Mesa Complex. They were going to fold the Kayenta and the Black Mesa mines together in the Black Mesa Complex,” Monestersky said, adding that the Navajo Nation was trying to do in the lease reopener what couldn't be done in the vacated permit.

“You can't issue a permit or a lease for a mine that doesn't exist. If there's only one mine, why would they have two leases? They're running out of good coal. There's no permit for Black Mesa Mine and OSM didn't respond and file an appeal in a timely manner, so if they want to reopen the Black Mesa Mine, they have to issue a whole new Environmental Impact Statement,” she said.

Forgotten People has vowed to file suit, based on the same grounds, against the U.S. Environmental Protection Agency if it issues a wastewater discharge permit for the Black Mesa/Kayenta mines. EPA held a meeting recently in Kayenta to discuss its plan to issue the wastewater permit.