Bates asks for more funds to investigate mine purchase
By Noel Lyn Smith
WINDOW ROCK, March 21, 2013
That is how Navajo Nation Council delegate LoRenzo Bates described the bill he is sponsoring that requests $2.3 million in supplemental appropriation from the Unreserved Undesignated Fund Balance to be used for Phase II of the due diligence related to the possible purchase.
The amount would be paid to Manatt, Phelps and Phillips LLP, a law firm that specializes in mergers and acquisitions, to continue investigating whether it is in the tribe's best interest to purchase BHP Navajo Coal Co., which supplies coal from Navajo Mine to the Four Corners Power Plant near Farmington.
The due diligence process started after the Council unanimously passed a $750,000 supplemental appropriation from the UUFB during the fall session in October.
Bates, who represents the Nenahnezad, Newcomb, San Juan, T'iistoh Sikaad, Tsé Daa K'aan and Upper Fruitland chapters, also sponsored that legislation.
The tribe signed a non-binding memorandum of understanding in December with BHP New Mexico Coal to acquire BHP Navajo Coal Co.
On Monday, the Council's Law and Order Committee listened to Bates as he explained the reasons behind the $2.3 million appropriation bill.
"Phase II will require a much more in-depth due diligence to determine any further findings that need to be made in the interest of the Navajo Nation," he said.
That investigation includes examining how the tribe would handle the New Mexico severance tax that BHP Billiton pays, how the tribe would handle the recent five-year contract between BHP and members of the International Union of Operating Engineers Local 953, how the tribe would pay for the acquisition, and whether or not the tribe would continue the contract with BHP or consider seeking another coal company.
"The nation, once it determines whether or not it decides to acquire, the nation still owns the resources, the nation still owns the lease. All we are looking to acquire is the actual ability to mine our resources," Bates said, then added that the deadline is July 1.
Committee member Russell Begaye (Shiprock), who questioned the appropriation request, said a scope of work should be outlined for Phase II since that process was not completed for Phase I.
Begaye added that delegates have not seen the entire results for Phase I and continue to be "fed" information based on the questions they ask.
"I think we made a mistake by not getting a clear scope of work," he said. "We should have said this is the scope of work, this is what we want, this is what we want to pay for."
In Bates' presentation, he said the legislation lists why Phase II is needed based on the due diligence completed in Phase I.
The consultants found that the acquisition of the BHP Navajo Coal Co. will ensure a reliable supply of coal to the Four Corners Power Plant beyond 2016.
The continued operations of both the coal company and the power plant will ensure the continued flow of approximately $88 million of revenue annually to the tribe's general fund. If the tribe does not acquire the coal company by June, the power plant and the Navajo Mine will face closure by 2016.
If the tribe acquires the coal company, the financial due diligence anticipates that the new Navajo Coal Co. can expect yearly profits of $46 million.
During a Dec. 18, 2012 presentation by the consultants, the Council requested additional information and due diligence to make final determination of whether to acquire the Navajo Coal Co.
Elmer Begay (Dilkon/Greasewood Springs/Indian Wells/Teesto/White Cone) echoed the concern of not receiving the results of the Phase I investigation.
Begay added that if more money were allocated to continue the due diligence process, the tribe could be viewed as already purchasing the mine rather than exploring its options.
"That's my problem with this now, the way the legislation is. It's the people's money too," he said.
Bates once again clarified that entering into Phase II does not mean the tribe is wholeheartedly purchasing the mine but continuing to dig further into what would occur if the purchase were to happen.
He added that if the tribe does not acquire the mine, an area of concern is the 23,000 acre-feet of water that is used by Arizona Public Service for operation of the Four Corners Power Plant.
"It's not Navajo water. It's tied with APS. If APS goes away, that 23,000 acre feet may go away and I can guarantee you there'll be a fight for that water," Bates said.
The committee went into executive session after Duane Tsinigine (Bodaway-Gap/Coppermine/K'ai'bii'tó/LeChee/Red Lake-Tonalea) asked about the Navajo Transitional Energy Company, which would be the tribal enterprise that would oversee Navajo Mine when the tribe buys it.
After ending the executive session, the committee gave the bill a "do pass" recommendation.
It also received approval from the Resources and Development Committee during its meeting Tuesday at the Churchrock Chapter house in Church Rock, N.M.
The bill continues to the Budget and Finance Committee, which also met Tuesday but adjourned before the bill could be added to the agenda.
After the Budget and Finance Committee, the bill goes before the Naa'bik'iyati' Committee, which is scheduled to meet March 28, followed by a special session of the Council tentatively scheduled for March 29.