Nez cancels NTEC’s agreements
After the Navajo Nation Council failed to act upon the emergency bill to terminate Navajo Transitional Energy Company’s indemnity agreement, President Jonathan Nez terminated the agreement himself Tuesday afternoon.
“We need to protect the people’s money and be fiscally responsible,” said Nez to the Times. “It’s probably time that leadership re-evaluates all enterprises. There’s a history of concern over enterprises.”
The major concern, other than NTEC quietly purchasing three coal surface mines located in Montana and Wyoming, was NTEC’s use of the indemnity agreement passed in 2013 for the purchase of the Navajo Mine in order to receive $407 million in reclamation bonds for the new mines.
If NTEC defaulted on the bonds or was sued for non-compliance, the bonding company could have gone after the tribe’s assets.
As of Oct. 24, the purchase of the three mines owned by Cloud Peak Energy closed, and now NTEC cannot avoid the cost of reclamation that is related to those mines.
“The recommendation from the Department of Justice is to eliminate those risks and protect the assets of the Nation,” said Attorney General Doreen McPaul during a recent work session. “It would be in the best interest of the Nation to terminate the indemnity agreements.”
Shawnevan Dale, program supervisor for Risk Management, said during the same work session his office manages $1.2 billion of bonding for the Navajo Nation and its entities. NTEC’s portion is $520 million.
“When NTEC purchased the Cloud Peak mines they bought those reclamation liabilities,” said Dale. “So previous owner Cloud Peak doesn’t have an outstanding reclamation bond.
“There is no debt being owed to any surety company, it is purchased by NTEC,” he said. “When NTEC decides to finish up and close the mine they will ensure reclamation will take place.”
The controller’s office and DOJ had already recommended terminating the indemnity agreement during an October special Naabik’iyati meeting.
Since August, when lawmakers learned of the purchase, they held Naabik’iyati meetings in order to get more information – one in September and two in October.
During the Navajo Nation Council’s fall session, Delegate Carl Slater co-sponsored an emergency bill to terminate the indemnity agreement.
“I don’t think anything will be accomplished by tabling this in terms of the acquisition of new information,” said Slater during the session. “Let’s not kick the can down the road. That’s what we keep doing. We are the Council of inaction right now when it comes to our natural resources.”
Council decided with a vote of 11-9 to table the emergency legislation for no more than 30 days. Delegate Edmund Yazzie made the motion and Nathaniel Brown seconded. Last week Council failed to acquire enough signatures to hold a special council session to vote on the emergency bill.
During last Wednesday’s work session on the emergency bill, Chief Legislative Counsel Dana Bobroff said there is a termination clause in the indemnity agreement. She said the president and DOJ have the right to terminate the agreements with or without Council action.
“If the president determines that the general indemnity agreement is being used in a manner that is not consistent with the two resolutions,” said Bobroff, “then the president and Department of Justice do have the authority to execute or implement the termination clause without the passage of the legislation in front of you.”
Since Bobroff and DOJ said Nez could terminate the agreements, that’s exactly what Nez decided to do.
He said it is up to NTEC whether they want to get the bonds on their own or go back to Council and ask for another indemnity agreement. But if they go back to Council, it will not be for $407 million, but rather a lot less.
Regarding all the information Council received during these meetings, Slater said there were many troubling details uncovered regarding how this deal was sourced, the due diligence, and potentially binding commitments made on behalf of the Nation by unauthorized representatives.
“President Nez took the appropriate first step in response to the Council’s hearings and investigations to protect the Navajo Nation’s assets and our grandchildren’s future,” said Slater. “It is critical that the president support further inquiries into this matter to prevent such a potentially precarious situation from arising again.”
Diné CARE, a vocal critic of NTEC’s practices, said that NTEC’s deal directly conflicted with Diné Fundamental Law and the secrecy around the purchases of these mines was disrespectful to the values of the Navajo people.
“NTEC’s purchases of coal mines created a huge financial risk, saddling the Diné people with enormous responsibilities for outstanding taxes, liabilities, and royalties, as well as hundreds of millions of dollars of reclamation responsibilities,” said Carol Davis, Diné CARE coordinator.
“We applaud the action by President Nez to terminate NTEC’s ability to put the Nation’s financial stability at risk (and this) sends a message that this needs to end now,” she said.
After the work session, NTEC Board Chairman Tim McLaughlin stated that terminating current indemnity agreements that support NTEC bonding requirements could have serious negative impacts on the Navajo Mine and other NTEC operations as well as NTEC’s capital structure.
“Regarding the proposed legislation that would terminate the Nation’s general indemnity agreement, we believe the currently proposed legislation would have significant consequences for NTEC in connection with its existing bonds, as well as for costs associated with both existing and future bonding,” McLaughlin wrote in a statement.
After Nez gave his final say on Tuesday, NTEC sent out a general statement: “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. As such, we wil explore our options to best serve our interests as NTEC and the Navajo Nation.”