Navajo shuts down Spring Creek coal mine over sovereign immunity dispute

Spring Creek mine. Image from Cloud Energy.

Navajo Transitional Energy Company (NTEC) announced Thursday the company has taken possession of the Spring Creek coal mine in Montana and the Cordero Rojo and Antelope coal mines in Wyoming.

While Cordero Rojo and Antelope will remain in operation, the Spring Creek mine will cease operations, NTEC said. The former owner, Cloud Peak Energy, was forced to sell the assets as a result of bankruptcy. 

NTEC agreed to assume pre and post-petition tax liabilities and federal and state coal royalty payments, all reclamation obligations, and up to $20 million in post-petition accounts payables

The terms of the takeover include a $15.7 million cash payment, a $40 million second lien promissory note and a 5-year term royalty on future tons produced. NTEC additionally agreed to the assumption of pre and post-petition tax liabilities and federal and state coal royalty payments, all reclamation obligations, and up to $20 million in post-petition accounts payables, Cloud Peak said in August during the Chapter 11 process.

Earlier this month, NTEC was summoned to defend the purchase, as Department of Justice attorney April Quinn gave a report on NTEC’s acquisitions of the mines, and lawmakers asked that NTEC representatives make a presentation to the committee, the Navajo Times reported.

NTEC maintained that Cloud Peak was forced into bankruptcy due to high debt levels incurred to finance acquisitions, but the mines themselves had “solid performance.”

After reviewing the purchase agreement, Quinn said the enterprise waived its sovereign immunity upon acquiring the bankrupt coal mines, and that all enterprises are expected to inform the Navajo Nation of their waiving of sovereign immunity. NTEC never gave notice, and now the Navajo Nation could be on the hook for up to $1 billion in clean up costs. 

While the Cloud Peak mine acquisitions make NTEC the third largest coal producer in the US, NTEC is a somewhat of a newcomer to the US coal industry. The company was formed in 2013 to buy the Navajo Mine, the chief supplier of coal to the nearby Four Corners Power Station. Both are within Navajo territory in New Mexico. But declining coal demand has slashed the Navajo Mine’s revenues: in 2009 the mine shipped 8.8 million tons of coal to Four Corners, but that fell to just 3.5 million tons last year, Sightline Institute reported.

In Thursday’s media release, the NTEC said “an impasse with Montana Department of Environmental Quality (DEQ) over sovereign immunity has resulted in the immediate and indefinite shuttering of operations at Spring Creek.”

The agency demanded a full and complete waiver of sovereign immunity from NTEC. As a wholly owned Navajo entity, NTEC has agreed to a partial waiver, allowing the company to be regulated by Montana under any and all state laws, the company said.

NTEC said will “continue to work with Montana DEQ to solve this issue.”

“We have done everything in our power to ensure the State that we will operate under their laws, but we simply cannot consent to a full waiver of the rights preserved in our Treaties — to do so would put the foundations of Indian Country at great risk.”

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