FARMINGTON – The Navajo Nation leadership rejected the Navajo Transitional Energy Co.’s proposal Tuesday to use a general indemnity agreement between the two as financial backing to secure reclamation bonds for the company’s August acquisition of coal mines in Wyoming and Montana.
Navajo Nation President Jonathan Nez and Vice President Myron Lizer cited “the interest of protecting the Navajo peoples’ resources and financial portfolio” in their statement announcing the decision. Securing reclamation bonds is a necessary step for NTEC in obtaining operating permits for its three recently acquired mines. Through the general indemnity agreement, the Navajo Nation would have taken on any potential financial losses the energy company could not cover.
“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,” Nez said in a written statement. Nez also questions the financial stability of coal. “Many experts question the viability of expanding our interests in a coal market that appears to be dwindling.”
In a statement, the energy company said it respected the Nation’s decision and it would remain “a profitable, viable and successful business entity of the Navajo Nation. As such, we will explore our options to best serve our interest as NTEC and the Navajo Nation.”
In 2013 and 2015, the Navajo Nation Council issued general agreements of indemnity to provide financial backing for bonds related to the Navajo Mine. Those agreements will remain in place, according to Nez and Lizer.
The Navajo leadership also urged the energy company to look outside of coal. “NTEC should focus more resources into transitioning their energy portfolio to acquire and develop renewable energy for the Navajo Nation,” Lizer said.
The Institute for Energy Economics and Financial Analysis, an organization which conducts financial and economic analysis on the energy industry, put out a statement supporting the Navajo leaders’ decision to reject the energy company’s proposal and to protect the Nation from its “ill-advised acquisition of bankrupt Cloud Peak mines.” IEEFA’s statement cited specific risks in the energy company’s three new coal mines, including “some $400 million in reclamation liabilities and from a weak business case that has been evident from the outset.”
The energy company purchased the Spring Creek Mine in Montana and the Cordero Rojo and Antelope mines in Wyoming in August during Cloud Peak Energy’s bankruptcy proceedings.
IEEFA said while it remains to be seen how the decision will affect the Powder River Basin, “it creates uncertainty as to NTEC’s plans.”
Nez and Lizer cited the uncertainty as a partial reason in their statement for not backing the indemnity agreement proposal, saying they did not learn of the energy company’s acquisitions until the Aug. 18 news release. “NTEC has not provided the Nation’s leaders with detailed information regarding its financial performance and outlook, so we should not be placed in a position to provide financial backing for NTEC without that critical information.”