Manatt Partner Discusses Navajo Nation's Potential Purchase of Coal Mine
"BHP Purchase: Investment or Waste of Money?"
Gallup Independent
March 30, 2013 - Manatt's Craig Moyer, chair of the firm's Land, Environment & Natural Resources Division, spoke to Gallup Independent about why the Navajo Nation is considering purchasing the BHP Navajo Mine.
The New Mexico newspaper reports that the Navajo Nation Council approved funding for further due diligence on whether the Navajo Nation should purchase BHP Navajo Mine. Industry insiders told the publication that 2016 would be the cutoff date, due to the fuel agreement that still needs to be decided between Four Corners Power Plant and BHP, as well as who will deliver the coal to Four Corners. APS must also buy Southern California Edison's interest in the Four Corners plant by July 1, and that purchase is based on what the Nation decides regarding Navajo Mine.
The purchase would be paid out of Navajo Mine cash flow, using savings from taxes the Nation would not have to pay the state of New Mexico and the federal government. The Nation would continue receiving its taxes and royalties, and BHP would continue to operate the mine through 2016 under a mine agreement.
Moyer said the reason Navajo is looking at purchasing the mine is because BHP and APS were unable to come to closure on a fuel agreement.
The investment necessary to allow the power plant to continue into the future after purchasing Southern California Edison's share and installing hundreds of thousands of dollars in pollution control equipment made it a "marginally profitable operation for BHP." The Nation, however, could make it a profitable operation because it doesn't pay federal and state taxes. "It's like taking a dollar and getting back $1.35," he said.
"So why would we invest in this particular facility? The short answer is after APS and the other Four Corners participants invest that billion dollars in the acquisition of the Edison interest and pollution control equipment, they will wish to operate it for a long term, and they will not operate it unless they have a long-term coal supply agreement," Moyer said. The mine would become "a bridge to the future."