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Appeals court to hear Navajo Nation's Peabody suit
TUESDAY, APRIL 8, 2003

On the heels of a negative Supreme Court ruling, the Navajo Nation is gearing for another round in its fight over mining in northeastern Arizona.

This time, the battle isn't against the United States. The high court, in a 6-3 decision issued last month, has already relieved the Department of Interior of $600 million in liability for approving a coal lease with less than favorable terms for the tribe.

What the D.C. Circuit Court of Appeals will consider next week is the role of Peabody Energy, the largest coal company in the world, in the dispute. The tribe alleges Peabody representatives colluded with Reagan administration officials to deny the tribe a 20 percent royalty rate for one of the most valuable coal deposits in the country.

The price tag, based on federal racketeering law, is up to three times the $600 million that the tribe lost with the recent Supreme Court ruling.

Peabody, though reluctant to discuss strategy, is using the March 4 decision to bolster its defense. Lawyers for the company sent a letter to the appeals court a week after the ruling, pointing out what they felt were relevant points.

"The Interior Department did not breach any trust or fiduciary obligation owed to the Navajo Nation" by approving the lease, the letter stated, and former Secretary Don Hodel "did not breach any legal duty to the Navajo Nation" by meeting secretly with a personal friend who happened to be a Peabody lobbyist.

Navajo Nation attorney general Louis Denetsosie disputed the reach of the decision, which he and other Indian law experts have termed as "narrow." "It should not affect our lawsuit against Peabody and other parties," he said in a recent interview.

Peabody's appeal was prompted by a caustic ruling last June by U.S. District Judge Emmet G. Sullivan. Among other concerns, he blasted the company for trying to delay resolution of the suit pending talks with the Navajo Nation and the Hopi Tribe.

Peabody has been trying to force the tribes into arbitration in federal court in Arizona. But a judge dismissed that suit in January.

Peabody has mined the Black Mesa region of northeastern Arizona for more than 30 years, bringing millions of dollars in benefits and jobs but also environmental and other heartaches. Beth Sutton, a Peabody spokesperson, said the company and its partners are working with the tribes to come up with solutions that will satisfy everyone.

"All of the stakeholders have been working together with the common goal of ensuring the continued operation of the Black Mesa mine and the Mohave Generating Station," she said.

The Mohave station, in Nevada, is the beneficiary of Navajo coal transported via a 270-mile slurry pipeline. In a public disclosure document filed with federal regulators, Southern California Edison, one of the defendants in the suit, said the Navajo litigation, and other issues, could force its closure.

"SCE does not have reasonable assurance of an adequate coal supply for operating the Mohave plant after 2005," according to the March 31 filing with the Securities Exchange Commission (SEC).

Oral arguments in Navajo Nation v. Peabody, No. 02-7083, will be heard by a three-judge panel on Monday morning.

Relevant Links:
The Navajo Nation - http://www.navajo.org
Peabody Energy - http://www.peabodyenergy.com
Edison International, SEC filings (see "10K" filing for Navajo litigation discussion) - http://www.edison.com/investors/sec_filings.asp