NTEC mum on money info for Wyoming / Montana coal mines

WINDOW ROCK

Amidst the current Delta COVID-19 surge, last Friday five delegates and Vice President Myron Lizer were treated to an all-expense paid round trip flight and tour of the two Navajo Transitional Energy Company coal mines in Wyoming.

But by all accounts, they did not learn much about the mines’ profitability or sustainability.

With permission from Speaker Seth Damon, delegates Rickie Nez, Pernell Halona, Eugenia Charles-Newton, Paul Begay and Nathanial Brown – all NTEC shareholder representatives – were excused from the regular Naabik’iyati Committee meeting Friday and were actually mid-air for a portion of it.

This did not sit well with a number of delegates who were present for the meeting, which adjourned early, at 5 p.m., at mid-agenda.

Halona said the NTEC trip was a chance to take a look first-hand at the mines and see what the Navajo Nation owns.

“This was mostly an exploratory visit to see what we actually have so that when we talk about the mines, we know what we’re saying because we know what it looks like,” said Halona.

Charles-Newton said that they flew out from Farmington and NTEC covered the flight, hotel and food costs for the shareholder reps.

“This is the first time leadership is out here to visit the coal mines,” she said. “We are taking a tour of the mine and meeting employees because they reached the one million-hour (safety) mark for no accidents and nobody getting hurt on the job.”

In a statement from Lizer on Monday, he said he sees “a great need to gain a better understanding” of the present condition of the Nation’s assets.

“This is an overdue opportunity to check-in on one of our Nation’s investments,” said Lizer.

Halona said that the trip had been planned in the spring of 2020 but then COVID-19 hit and this was their first opportunity to reschedule.

“The two mines we visited were south of Gillette, Wyoming,” said Halona. “We saw the mines, the pit where they were digging out the coal, and the office buildings.”

Acquisition a surprise

In August 2019, NTEC announced it had substantially purchased all of the assets of bankrupt Cloud Peak Energy, including the three coal mines located in the Powder River Basin of Wyoming and Montana: the Antelope, Cordero Rojo, and Spring Creek mines.

With the finalization of the purchase in October 2019, NTEC became the third-largest coal producer in the United States.

“The announcement came as a surprise for leadership,” said Lizer. “We did not know anything on this pending acquisition at the time and I personally challenged NTEC leadership to be more transparent in its dealings.”

Lizer also said at the time coal was on a downward trend as far as demand and the transition nationally was to renewable energy.

According to the International Energy Agency, global coal consumption is estimated to have dropped 7% between 2018 and 2020.

Then in November 2019, President Jonathan Nez exercised the termination provisions of the general indemnity agreements related to the Navajo Mine, rejecting NTEC’s proposal to use them for bonds financially backed by the Nation for the acquisition of the three Wyoming/Montana coal mines.

“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…” Nez said in a press release.

Furthermore, Nez stated that NTEC had not provided the Nation’s leaders with detailed information regarding its financial performance and outlook and would not support initiatives that attempt to “circumvent or undermine” Navajo Nation laws and policies.

“The (president’s office) did not learn of these acquisitions until NTEC issued a press release on Aug. 19 — this action alone is disrespectful of our Nation’s leaders and the interests of the Navajo people,” Nez said.

‘Stronger relationship’

Since then, Lizer said he’s developed a “stronger relationship” with NTEC and accepted the invitation by NTEC leadership to tour the mines.

“…I challenged all of the leadership of the Navajo Nation to peer in from time to time to, if for anything, to become more knowledgeable and receive timely updates on the condition and financial position of one of our Navajo Nation entities,” said Lizer.

However, that piece seems to be what was missing from the mine tour and a request from Navajo Times to Lizer for a report on the “condition and financial position” of the mines was not responded to.

Halona reported the Wyoming mines they visited were doing “pretty well” and shipping out about six to seven “semi-loads” of coal a day.

“Right now, the prices are fairly decent,” he said. “The majority of it is going oversees through Vancouver ports to South Korea and Japan.”

Halona said he understood NTEC was providing $40 million per year to the Navajo Nation general fund from the three Wyoming/Montana mines.

“Those are the preliminary numbers that they gave us,” he said. “There weren’t really any financials.”

However, NTEC’s 2020 operational report stated, “Annual taxes and royalties paid by NTEC to the Navajo Nation from the operation of the Navajo Mine now exceed $40M,” which suggests Halona might have misunderstood where the $40 million was coming from.

NTEC is wholly owned by the Navajo Nation and owns and operates the Navajo Mine that has been supplying coal to the Four Corners Power Plant for half a century.

The purchase of the Cloud Peak was the tribe’s first entry into the coal business off reservation.

CEO ‘out of pocket’

Several attempts by Navajo Times to reach NTEC Chief Executive Officer Clark Mosely for clarification regarding the profitability of the Wyoming/Montana mines, forecasted revenues, and confirmation of the number of Navajo employees, was not responded to even though he hosted the tour along with NTEC’s Board Chairman Timothy McLaughlin and Vice-Chairman Peter Denetclaw, who also did not respond to this reporter.

Mosely’s secretary did, however, explain that Mosely was “out of pocket” on vacation after the tour.

A response on Tuesday from NTEC’s PR/Communications Director Erny Zah said NTEC was “honored” to host Lizer and the shareholder representatives.

“…NTEC was happy to finally have had the opportunity to welcome the VP and member representatives to the site, show the assets, and discuss mining and reclamation practices,” stated Zah.

The Antelope and Cordero Rojo mines tour allowed all the participants “to be on the ground, meet the employees, and to see and hear for themselves how these mines are performing,” he said.

Zah added that a detailed summary of NTEC 2020 operations was available on the website.

However, the report does not include what Navajo Times requested – detailed performance and financial information about the Wyoming/Montana mines.

The report does, however, confirm that the total amount of taxes and royalties paid to the Navajo Nation by NTEC in 2020 was $40.87 million.

No financial reports

Halona said he thought there are about 1,500 employees working in the mines, with approximately 5% being Navajo.

“There’s not a very big percentage of Navajo employees,” he said. “They did have a lot of Navajos come up there to work but then when the reclamation started at NGS, they all quit and went back to NGS to do the reclamation.”

Halona did say delegates met two Navajo employees on the tour.

Charles-Newton said she thought that there are only three Navajo employees working at all three mines.

“As far as employment, they did talk about how they’re trying to recruit Navajos to work there and that they did have some Navajos that went there, but a lot of them returned home because they didn’t really like being there in Gillette,” she said.

NTEC’s operational review report says there were a total of 33 Navajo employees working at the PRB mines in 2020.

Charles-Newton said there was no detailed financial report provided by NTEC as part of the tour.

“We did get a booklet that’s really general that talked about donations they’ve made, but nothing that’s like their budget or financial reports,” she said. “None of that.”

Charles-Newton said she had wanted to see a comparison between what the projected revenues had been at the time of the purchase of the mines in 2019 and what they actually are now.

“They said we’re going to be given between 30 and $40 million (to the Nation) in the next five to ten years,” she said. “I was like, wait, break it down for me. Tell me how much you’re talking about this next year and the year after that. I want to see a revenue projection for each year.”

Charles-Newton told NTEC that without seeing the hard numbers, there was no way to make sense of the viability of the coal mines.

“I said you guys are all talking in the abstract,” she said. “I need to see something in black and white.

“As a shareholder, that’s what is going to help me understand the arguments you’re making about how this is a viable company and how we need to keep moving forward with coal,” she said.

Charles-Newton said the NTEC team did indicate their coal consumption had decreased and they “basically blamed the federal government” and regulations as a reason for not being able to sell as much coal as they anticipated.

She made the point that the NGS and Kayenta Mine were closed mainly because coal consumption was down, so this was predictable.

“There was nobody in line to purchase the coal from NTEC,” she said. “That was really what the bottom line was.”

Charles-Newton said she told the NTEC leaders, “We said this was going to happen.

“You assured us that after the purchase of these three mines that wasn’t going to happen and you’re sitting here not being straightforward,” she said, “you’re not telling me the truth, you’re not saying how much money has been lost and how much money is going to continue to be lost.”

‘A nice, cheap price’

Regardless, Halona said that, in his opinion, it was worthwhile for the Nation to “branch out” with the Wyoming/Montana mine purchases.

He said Lizer was “impressed” with the operation as well.

“After we lost NGS, NTEC kind of stepped it up a little bit more,” said Halona. “The mines were available at a really nice, cheap price.

“I believe it was a decent purchase in terms of what we’re going to be getting out of those mines and keeping our Navajo Nation supplied with funds,” he said.

He said the way the “contracts and everything” are written, NTEC is a company “on its own” and they can make their own decisions in the best interest of the Navajo Nation.

Delegates Rickie Nez, Nathanial Brown and Paul Begay did not respond to requests for their take on Wyoming/Montana mine tour.

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