Please see below Benjamin H. Nuvamsa’s very informative PowerPoint presentation on the potential (negative) implications of S.B. 2109 for Hopi. Nuvamsa gave this presentation on March 12, 2012, out at First Mesa. Earlier today, two readers of my blog asked what they could do to help with Hopi attempts to prevent the passage of S.B. 2109. HELP SPREAD THE WORD. Let people know what’s going on. Also, many thanks to those readers who have already circulated my posts on S.B. 2109 via email, Facebook, Twitter, and other social networks. Every bit helps.
Enclosed is a copy of a presentation on Peabody Coal Leases that was presented at our recent “Water is Life” forum on November 12, 2011, held at the Hopi Veterans’ Memorial Center.
As you may know, the Hopi Tribe and Navajo Nation entered into three separate leases with Sentry Royalty Company (predecessor to Peabody Western Coal) beginning in the mid-1960’s. The Navajo Nation has a “Navajo Exclusive” lease (No. 8580) and shares another lease with the Hopi Tribe (No. 9910). Peabody pays 12.5% of monthly gross realization (royalty) on Lease 8580 to Navajo; and pays 6.25% monthly gross realization to both Hopi and Navajo under Lease 9910. The leases now provide for renegotiation every ten years, referred to as “Lease Reopener”. Lease 9910 has not been formally approved by Hopi although it was due for renewal in 2007. Navajo approved its portions in April 2011.
Coal from the Black Mesa Mine was dedicated to the Mohave Generating Station (MGS), but MGS shut its operations in 2005. Today, very little if any mining is occurring in the Black Mesa Mine area. Coal mined on the Kayenta Mine area is delivered to NGS and royalties are shared by the two tribes under Lease 9910 Lease; and Navajo receives all royalties under is lease, No. 8580.
Since the inception of the leases, Peabody Coal has not paid Hopi and Navajo at current fair market prices for the coal it mined and the water it pumped for mining operations. During its heyday, Peabody pumped over 3.3 million gallons each day from our precious Navajo Aquifer to slurry coal, over 275 miles from Black Mesa to MGS in Laughlin, Nevada. Since it began mining, Peabody mined over 400 million tons of coal from the Black Mesa and Kayenta mines.
If you review the leases, you will find the leases provided only for leasing of surface acres. No consideration was made on the value of the massive coal and water deposits that were the subject of the leases. No appraisals or valuation of the coal and water deposits were made to determine the fair market value of these resources. As a result, the tribes lost millions, if not billions, of revenues since the inception of the leases. Yet, by virtue of the leases, Peabody obtained exclusive subsurface rights to our vast deposits of coal and water without paying a dime for them. We (the tribes and the federal government) allowed Peabody to build a considerable company portfolio at our expense. This coal and water became an asset to Peabody that it would leverage for other business ventures. Tribal coal and water were “locked in” for the duration of the leases and tribes could not re-negotiate the terms of the leases, or could they leverage the resources. The leases effectively kept the tribes from diversifying their respective economies because the tribes lost control over the resources.
In a typical business scenario, a company would buy raw materials that it would use in manufacturing its products. Not so under the Peabody coal leases. The tribes received no upfront payments for the coal and water Peabody secured under the leases. Instead, tribes are compensated minimally (12.5% and 6.25% gross monthly realization) when Peabody sells the coal to NGS. Incidentally, the royalty rates were the subject of the Racketeering Influenced and Corrupt Organizations Act (RICO) which is a matter for later discussion.
Peabody and owners of NGS receive considerable benefits from the production and sale of electricity using our coal and water. Yet the tribes do not participate in the sharing of profits. See the Value Chain chart in the presentation. The chart depicts that owners of NGS (Arizona Public Service, Tucson Gas & Electric, Bureau of Reclamation, Salt River Project, Los Angeles Water & Power, and Nevada Power) are also “customers” of NGS.
Concerning tax revenues, while the Navajo Nation and the State of Arizona receive some tax revenues, the Hopi Tribe receives no tax revenues because it does not impose taxes on Peabody because of a reported covenant to not tax Peabody. In its 2005 report, Peabody reported that the Navajo Nation received over $82.9 million in various forms of taxes during the period 1986 to 2004, while the State of Arizona received over $67.5 million during the same period.
Payments made by Peabody are not commensurate with the profits they earn from our resources. Hopi only receives about $11.0 million to $13.0 million in royalties and other benefits each year from Peabody, very little, if any, of which goes to our people. But Peabody reported that its revenues rose 21% to a record $2.0 billion; and its operating profits rose 41% to $458 million for the Quarter ending June 2011. Peabody’s Chairman and Chief Executive Officer alone received a salary of $11.9 million in 2009; and its Executive Vice President and Chief Financial Officer earned $4.1 million. And the Salt River Project recently reported a profit of over 26% in 2011.
After almost 50 years of mining, we have nothing to show how the mining of our coal and the pumping of our precious Navajo Aquifer has benefited us. Simply look around. We have dilapidated infrastructure, dismal housing conditions, limited water supply, contaminated drinking water, limited scholarships, limited or no jobs, etc. Our socioeconomic conditions remain dismal while Peabody, NGS and their holding companies make significant profits from our resources. It is time to make a change in the structure of the coal leases so that our tribe, our villages, and our people can all benefit from sale of our resources:
Demand upfront payments for coal and water that will be the subject of the leases on an annual basis at fair market prices.
Increase the monthly royalties to reflect current fair market rates (instead of a minimum 12.5% and 6.25%).
Demand that Peabody complies with the leases and find alternative sources of water, other than using the Navajo Aquifer; and reclaim and repair the area including damages to the aquifers.
Limit the leases to coal and water, and exclude other “kindred” products.
Enact a tax ordinance and begin imposing possessory interest taxes, business activity taxes, sales taxes, fuel excise taxes, severance taxes, etc. on Peabody.
Hold Peabody accountable for damage done to our resources, including damages to our archaeological resources.
If Peabody refuses to amend its lease and agree to these conditions, seek competition to find a more responsible and accountable lessee.
Develop alternative uses of our resources and transition to use of alternative energy.
And impose on the Secretary of Interior Salazar to declare that Material Damage has occurred on Black Mesa and the Navajo Aquifer. There is clear evidence of damages done to our resources.
A message from The Inter-Tribal COALition Sponsers…
Hopi and Navajo coal and water are a precious commodity that are the envy of the State of Arizona, Southern California, Nevada, federal government, Peabody Coal Company, Salt River Project, owners of the Navajo Generating Station, cities and towns in the Southwest, and the southern Arizona Indian tribes, among others. These entities have competing and conflicting interests in our precious natural resources, yet they have not been willing to compensate our tribal nations for mining and pumping of our resources at fair market value. We are at a critical “Cross Roads” and time is ripe for us to exercise our sovereign rights to seek economic and environmental justice, yet our tribal councils have been agreeing to the demands of the federal government, Peabody Coal, Salt River Project, et. al., while compromising any leverage we may have to maximize economic benefits for our people, promote and require environmentally and culturally relevant operations in generating electricity.
Our resources make it possible for the federal government to meet its obligations with tribes in Southern Arizona under their water rights settlements. Our coal and water make it possible to generate electricity for lift stations along the massive Central Arizona Project water delivery systems so that the tribes and municipalities can receive their surface water needs. Our coal makes it possible for families in Arizona, Nevada and Southern California to enjoy the conveniences of having electric power in their homes.
Recently both Navajo and Hopi tribes agreed to settle the RICO lawsuits with the federal government, Southern Cal Edison and Peabody Coal (and hold them harmless for past violations) without consulting with tribal members. A huge proposed water rights settlement agreement is now before the tribes for consideration. There have been numerous lease violations at Black Mesa by the Peabody Coal Company which have gone unaddressed for years. Recently, President Obama withdrew EPA’s proposed air emissions standards that would have affected the Navajo Generating Station and other coal powered power plants. And while the federal government and Peabody Coal Company have been asserting that there are no damages to the N-Aquifer from Peabody’s excessive withdrawals of the N-Aquifer, there is a recent study that challenges these claims.
We invite you to come to this forum to learn about these issues and talk about what we, as tribal members and tribal nations, can do to address these issues. Knowledge is power. Learn about these complex issues so that you can hold your council members accountable for making informed decisions on your behalf. Special invitations go out to Hopi and Navajo tribal members (reservation and off-reservation), and council members/delegates from both tribes. Spread the word.