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Question & Answer
- Navajo Nation
- Our History
- Q&A
- Our Position
- Resources
How much of your pipeline is on the Navajo Nation?
Approximately 900 miles.
Do you believe that pipelines should have the right to acquire ROW access on Native American lands?
EPNG prefers to negotiate with landowners to ensure that all stakeholders are treated fairly. Consumers of natural gas expect us to pay fair market value for right-of-way (ROW) access, and landowners expect to be fairly compensated for the use of their property. In the case of the Navajo, the right of way has been held by EPNG for more than 50 years, and we are simply negotiating an extension of the latest agreement that expires in October 2005.
We support the establishment of fair market-based compensation for rights-of-way payments.
What did El Paso pay the Navajo under the right-of-way agreement that expired October 17?
Under the agreement that expired on October 17, we paid the Navajo Nation $29 million over a 20-year period. This was well above market value at the time both parties entered into the agreement in 1985.
What are Navajo seeking in a new agreement?
They are demanding $440 million for the next 20 years, which is the equivalent of $50,000 per acre for a 20-year right-of-way renewal.
What are the prevailing values for right-of-way today in the area?
The market compensation for a right-of-way granted in perpetuity through privately owned land in the same area costs from $100 per acre to $500 per acre.
What was El Paso’s latest offer?
Our last offer to the Navajo was $138 million in cash, plus non-cash consideration totaling another $60 million. This is generous by any standard.
What comprises the non-cash portion of El Paso’s offer?
El Paso would initiate two projects that offer long-term value for the Nation. The first is a helium project designed to develop potentially significant reserves on the Nation. We would move a plant capable of producing 150 Mcf per day of helium on the Nation and give the Navajo a controlling interest in the project, which could involve two additional plants. Second, El Paso would convert some of the compression on the El Paso Natural Gas system to electricity and purchase power from the Nation.
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Representatives of the Navajo Nation have indicated that their demands will not have a noticeable impact on consumers. What is your reaction?
We do not subscribe to the idea that an unjustified cost is acceptable if it can be spread out over enough consumers. It is simply not acceptable to demand more than $50,000 per acre for a 20-year renewal of a pipeline right of way when private land owners in the same area receive $100 to $500 per acre as compensation for perpetual right of way. Consumers are already burdened with high energy costs and do not need to bear hundreds of millions of dollars of additional expenses attributable to right of way costs.
What does the interim extension agreement do, and what are the terms?
El Paso and the Navajo Nation have agreed to a temporary extension of El Paso's existing right-of-way easements on land held in trust by the United States government for the benefit of the Navajo Nation. The leases for these easements expired on October 17, 2005 and cover approximately 900 miles of El Paso pipelines and related equipment and facilities.
The interim extension lasts until the earlier of December 31 of this year or until the parties reach a final right-of-way renewal agreement and is retroactive to October 17, 2005. El Paso will make quarterly payments to the Navajo Nation in exchange for this interim extension.
Since the Navajo have not taken any action to resolve the long-term right-of-way dispute, why is El Paso entering into the interim extension agreement? What purpose does the interim extension serve?
The interim extension seeks to preserve the status quo between El Paso and the Navajo Nation, without prejudice to either party, until a final right-of-way renewal agreement is reached. The interim extension further reflects El Paso's continued willingness to negotiate in good faith with the Navajo Nation over a final agreement covering the company's FERC-certificated assets on the reservation.
How does the interim extension affect a final right-of-way renewal agreement, and does this interim arrangement reflect a change in El Paso's position?
Our position has not changed, and we remain far apart over what consitutes “fair value” when determining right of way on tribal lands.
The interim extension provides that both El Paso and the Navajo Nation "agree to disagree" on the merits of the underlying legal dispute over whether the Navajo Nation's tribal consent is required in order for El Paso's existing rights-of-way to be renewed by the United States Department of the Interior. Both parties expressly reserve their current legal positions in all governmental, judicial, and administrative proceedings that might bear on an ultimate resolution of the issue.
How much is El Paso paying the Navajo Nation for the interim extension?
The amount of cash consideration to be paid is confidential by mutual agreement of the parties, except as required by the Federal Energy Regulatory Commission.
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What happens if the parties settle for a different amount in the final agreement?
The interim agreement contains a "true-up" provision regarding the compensation to be paid by El Paso to the Navajo Nation if a final right-of-way agreement is reached between the parties on or before December 31. This means that if El Paso settles for a lower pro-rated cash compensation amount in the final right-of-way renewal agreement, that lower amount is retroactive to October 17, 2005. The same true-up concept provides if the Navajo Nation settles for a higher cash compensation amount in the final agreement; in that case, El Paso would pay the difference to the Navajo Nation on a pro-rated basis.
Has the interim extension already been approved?
Yes. The interim extension was negotiated by El Paso and Navajo Nation negotiators; approved unanimously by the Resources Committee of the Navajo Nation Council on January 4; and signed by Navajo Nation President Joe Shirley, Jr. and James J. Cleary, President of El Paso Western Pipelines, on January 13.
How long has El Paso been negotiating with the Navajo Nation?
El Paso sought to begin right-of-way renewal negotiations with the Navajo Nation in early 2004, more than a year and half prior to the expiration of its existing easements last October 17. At El Paso's urging, Navajo Nation President Joe Shirley, Jr. and James J. Cleary, President of El Paso Western Pipelines, officially commenced negotiations at a leadership summit in May 2005. El Paso then pressed for the start of formal negotiations, which officially began on September 23, 2004. El Paso has negotiated in good faith since that date and will continue to do so. El Paso also took the lead in seeking an interim extension with the Navajo Nation prior to the expiration of its right-of-way leases.
Are you still negotiating with the Navajo?
We continue to have dialogue with the Navajo Nation leadership. As we talk to certain members of the Nation, the overwhelming feedback is that El Paso's offer is not only acceptable, but fair and generous. We're hopeful that this sentiment is expressed to the Nation's negotiating team, so that we can move forward on this matter.
The Navajo have cited El Paso’s record in the Western Energy Crisis. What is your position?
First, the issue has nothing to do with the fairness of the Nation’s demand for our right of way renewal. El Paso entered into a $1.7 billion settlement with western states in order to eliminate litigation risk that could have placed the company in bankruptcy. It is important to point out that both the Federal Energy Regulatory Commission and the U.S. Court of Appeals for the District of Columbia Circuit determined that El Paso Natural Gas did not withhold capacity from the market during the 2001-2002 energy crisis. A FERC filing along with the court’s decision can be viewed under "resources" on this web site’s main page.
Do you have any potential remedies? Beyond moving the pipeline, aren’t you at the mercy of the Navajo Nation?
We do not believe that, in the end, the ROW compensation demands being made by the Nation’s negotiators will withstand the scrutiny of government officials, the courts, or the court of public opinion. One direct action we have taken to help ensure reasonable and fair natural gas transportation costs is to file an application with the Department of the Interior requesting that the agency renew our right of way without tribal consent. (See"'resources" for a copy of our filing.)
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Does El Paso's request that the Department of the Interior renew your right of way challenge the sovereignty of the Navajo Nation?
No, in fact quite the opposite. The Navajo Nation's sovereignty is grounded in the treaty it reached with the United States in 1868. The Treaty is the ultimate expression of Navajo sovereignty, and it has been repeatedly embraced by votes of the Navajo people as the Navajo Nation's organizing document. Our application with the Department of the Interior simply seeks clarification of the rights and obligations of the parties to that Treaty. Our application is, therefore, not only fully consistent with the sovereignty of the Navajo Nation – it rests on it.
Are other pipelines facing this problem?
Yes, although none have as many miles of pipeline and other facilities as EPNG.
Because this is a growing problem for pipeline companies and utilities, the Energy Policy Act of 2005 includes a provision (Section 1813) that calls for a joint study of rights of way on tribal lands. The study is to be conducted by the Department of Energy and the Department of the Interior by August 2006.
However, this is a growing problem for pipeline companies and utilities, the Energy Policy Act of 2005 includes a provision (Section 1813) that calls for a joint study of rights of way on tribal lands. The study is to be conducted by the Department of Energy and the Department of the Interior by August 2006.
Additionally, companies in other industries have faced excess demands from the Nation’s negotiators. For example, cell phone providers have faced a similar issue. An article in the Denver Post (January 9, 2005) described excessive rights-of-way prices being demanded of cell phone providers attempting to place cell towers on the Nation. The article reported that a right-of-way lease for 100 square feet of land costs up to $600 per month in other places but costs $2,000 on the reservation. As a result, the Nation has poor cell phone service. Transwestern paid the Nation a high rate for its ROW.
Why was Transwestern willing to pay, while you are not?
EPNG has approximately 900 miles of pipeline in the Navajo Nation—far more than other pipelines that have settled with the Nation’s negotiators. Settlements far above market rates would be harmful to our customers.
According to your numbers, you are already paying above market rates to the Nation. Why are you doing this if it is higher than market price?
El Paso has consistently sought to be a good neighbor to the Navajo Nation. As a result, we have been willing to pay higher rates for ROW access. Those historically higher rates, however, were still within the bounds of reason, unlike those currently proposed by the Nation’s negotiators.
There have been a number of articles written about Native Americans being underpaid for rights of way. Isn’t this a situation where the Nation just wants to be paid fairly?
No. For 50 years, EPNG has paid more for right-of-way access on the Navajo Nation than for comparable access outside the Nation. We cannot speak to situations that are not applicable to EPNG.
What has EPNG done to benefit the Navajo Nation?
EPNG prides itself on being a good neighbor and contributing financially to programs supporting local communities and is proud of its history with the Nation. In addition to being a significant private employer and taxpayer on the Nation for the last 50 years, EPNG has contributed substantial monetary support to The Navajo Museum Library and Visitor Center in an effort to preserve permanently the history of the Nation. The company continues to provide consistent support, both financially and academically, to the development of the Nation’s judicial system, including annual support of the Navajo Nation Bar Conference. While El Paso has supported the Navajo Nation Fair for many years, the company has contributed more than $15,000 to this endeavor alone in each of the past few years, and the company has committed to a $15,000 contribution for the 2005 Navajo Nation Fair. Furthermore, El Paso contributed $100,000 to support the Tribal Scholarship Fund, providing financial aid that allows the youth of the Nation to pursue higher education. In addition, the company has contributed numerous in-kind donations to the Nation, including buildings, vehicles, equipment to dig water wells, and other materials that improve the quality of life for Navajo people. In all, El Paso’s charitable contributions to the Navajo Nation exceed $450,000 just in the past 10 years.
Beyond charitable involvement, does EPNG have any plans to continue to invest capital on the Nation?
Yes. In addition to the ongoing operations and maintenance of our facilities on the Nation, EPNG has proposed innovative, collaborative approaches that would benefit the Nation.
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