Navajo Nation Leadership Won't Back NTEC Bonds Citing Lack Of Transparency

Nov 13, 2019

Cloud Peak's Gillette-based Cordero Rojo mine.
Credit Cloud Peak Energy

The company taking over Cloud Peak Energy's three mines in Montana and Wyoming has hit a snag in securing its surety bonds that are used to guarantee reclamation. The Navajo Transitional Energy Company (NTEC) expected the Navajo Nation to back its reclamation costs through a pre-existing agreement.

Last month, NTEC paid the recently bankrupt coal company Cloud Peak in order to assume operations of three mines. It paid $15.7 million upfront, with $40 million expected down the line, and royalty payments for the next five years on coal produced. NTEC is also expected to tie financial loose-ends from the bankruptcy, assume all reclamation -or clean-up-costs, and tax liabilities.

This week, Navajo Nation President Jonathan Nez and Vice President Myron Lizer announced that wouldn't be the case, saying NTEC did not provide key financial information and that the bonding could put the tribe in a bad financial position.

"NTEC has not provided the Nation's leaders with detailed information regarding its financial performance and outlook, so we should not be placed in a position to provide financial backing for NTEC without that critical information," a joint press release read. "The Office of the President and Vice President 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."

Late last month, Navajo legislation looked at ensuring NTEC could not expand use of the 2013 general indemnity agreement meant only to secure bonding for the Navajo Mine. While the bill was tabled, it also shed light on the extent to which the Nation had been kept in the dark.

Steve Grey, director of governmental and external affairs for NTEC, said the company is working to improve its communication with the Nation, but that it was formed as an independent entity.

"When [the council] created NTEC, it really wanted to create [it] where it had an arms-length to the tribal government. It really wanted it to be sitting out there, just like a regular corporation," Grey explained.

He said it's unfortunate that NTEC will not be able to follow its Plan A, but the company is pursuing other bonding options.

"It's not the end of the world. Like any big major business transaction, you just have to work through these different issues that arise in the transaction. And so, we feel very good and confident about everything," Grey said.

He said NTEC is in the search process but doesn't have specific leads yet. For now, NTEC is using Cloud Peak's reclamation bonds, though it's unclear how long Wyoming regulators will allow that continue.

Clark Williams-Derry, energy finance analyst with the Institute for Energy Economics and Financial Analysis, said it makes sense that this decision doesn't end the whole deal. After all, it's not hard on state regulators, he explained, but the surety companies themselves.

"Then those sureties are on the hook, and they've got no deep pockets to paid it back," he said.

Williams-Derry added this could end up similar to Blackjewel, which never replaced Contura Energy's surety bonds.

NTEC's Grey said operations are going very well since being transferred in October. It now operates the Cordero Rojo and Antelope mines in Wyoming and Spring Creek mine in Montana.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.