The Navajo Nation recently pulled its financial guarantee for the tribe’s coal enterprise, the Navajo Transitional Energy Company, saying the company had purchased three coal mines in Wyoming and Montana without informing the tribe.
This is Trahant Reports.
The tribe said that’s not all. It said the company is not providing adequate information about the business or even its finances.
So the Navajo Nation used its power as a government (and owner). It told the tribe it terminated the provisions of “general indemnity.” This means the company cannot use its ownership, and therefore tribal sovereignty, to gain an edge in the marketplace.
This is not a good time to be in the coal business. That’s why so many people wondered why Navajo Transitional Energy Company was expanding by purchasing mines far away from the Navajo Nation.
Navajo Nation President Jonathan Nez said in a news release: “Many experts question the viability of expanding our interests in a coal market that appears to be dwindling.
The Navajo Transitional Energy Company has been investing in coal at a time when the industry is collapsing. Just last month Murray Energy was the latest coal company to file for bankruptcy, the eighth coal company to do so this year.
Another of those bankrupt companies was Cloud Peak Energy — and assets that were acquired by Navajo Transitional Energy. That made it the third largest coal company in the country.
The business case for the Navajo Transitional Energy is in dispute.
One study prepared for the company said it was “purchasing these mines at a low cost. The purchased assets include almost 1 billion tons of leased coal reserve, almost 100,000 acres of owned surface lands, and a huge fleet of mining equipment (draglines, shovels, trucks and dozers).”
“Cloud Peak is a Prudent Investment for Navajo Transitional Energy Company and the Navajo Nation,” the report said.
The study did say it expected domestic coal demand to continue to decrease, but that demand would still exceed 250 million tons a year.
Clark Williams-Derry, writing for Sightline.Org in Seattle, said “anyone who buys Cloud Peak’s mines will take on significant financial risks. We here at Sightline have documented Cloud Peak’s financial struggles for years, including the tremendous losses on Asian exports, the operational challenges at Cloud Peak’s mines, plummeting demand for Cloud Peak coal, narrowing profit margins, and massive, value-destroying write-downs of the company’s assets.”
“It has become awfully difficult to make money mining coal,” Williams-Derry wrote. And if the venture fails … it will be the Navajo Nation with a “dismal investment return.”
I am Mark Trahant.