Pipeline deal unlikely
El Paso Natural Gas, Navajo Nation in stalemate on lease as deadline nears

By Kathy Helms
Diné Bureau

WINDOW ROCK — A pipeline right-of-way agreement between the Navajo Nation and El Paso Natural Gas is set to expire at midnight with negotiators for both sides still hundreds of millions of dollars apart on the value of the 20-year lease.

Following an executive-session status briefing Thursday before the Resources Committee, Chairman George Arthur said El Paso has made an offer on a time extension; however, "We haven't talked with them in respect to any dollar value. In fact, we're not interested at this point in time to give them any extension."

El Paso attorneys Christopher Castillo of Colorado Springs and Troy Eid of Greenberg Traurig LLP in Denver attended Thursday's meeting in hopes of presenting their side but were booted out of the executive session for several hours along with the rest of the public. Chairman Arthur and Delegate Larry Noble voted against the executive session.

Castillo said El Paso attorneys have been working with Navajo Nation Attorney General Louis Denetsosie and the negotiating team for three years "and we've always been able to come to a resolution. This case is an interesting one. It's a case that has both parties kind of polarized."

El Paso's latest cash offer is basically three times what they're paying now just over $2.1 million per year, Castillo said.

"We've proposed to pay our current offer, which is roughly $6.7 million per year, and to do that on an interim basis to extend our easement on a temporary basis for one year to allow the parties to continue to negotiate without the looming expiration for an expired easement issue hanging over our heads," he said.

"We just simply got nowhere with the Nation, even with that proposal. The thought was that would put money in the Navajo coffers, available to the Navajo people. Then in the event that we come to a settled agreement in a year or six months down the line and we pay more, we will adjust that payment to the amount that we agree upon.

"If we pay less, there will be no adjustment in the payment. In other words, they'll be guaranteed $6.7 million a year for that first payment.

"We didn't really see how anyone lost on that proposal, but as our other proposals have been entertained on the negotiating team's side not necessarily the Navajo Nation's side the negotiating team's position was that they simply didn't think it had any merit in it at all," he said.

Eleventh hour
Attorney Eid said though the proposed extension was rejected, "we're always hopeful. We've got until midnight on Monday. You never know. That's the way these things sometimes work. But we have consistently enriched the offer that we've made up to this point and the negotiators' position has not changed at all since April.

"What happens at midnight (if no agreement) is we'll just escrow what we pay now," he said.

According to Castillo, the $6.7 million offer stays on the table and if an extension is granted, then "we negotiate without the cloud of an expired easement over us." If there is no time extension, El Paso could be held in trespass.

"If we end up settling for a cash amount that's more than $6.7 million, we'll give them the incremental amount. If it ends up being $7.7 million, we'll give them another million bucks. If it goes down below that, they can hang on to the $6.7," Castillo said. "In other words, the Nation gets that money into its budgetary coffers for this year."

"But you've got professional negotiators that just want exorbitant amounts of cash," he added. The main stumbling block in the negotiations is the $400 million the Nation is asking vs. the $200 million El Paso has proposed.

"We don't own the gas. We're just paid to ship it. That's all our company does," Eid said.

"It's very important to understand that there are people all over the United States right now that are affected by incremental price increases, even small, in natural gas. They tend to be poor and elderly. They tend to live in places like southern California where we serve a lot of people through this pipeline," he expalined.

Pass it on
"The response to us has always been from the negotiators, 'Oh, just pass it through. Take the higher amount and pass it through to those people and have them pay for it.'

"But you know, that's not responsible given what's happened to energy costs. We can't just pass this on to people who rely on natural gas in Arizona and California and Nevada," Eid said. "It's irresponsible for us to do that."

Arthur said Resources came out of executive session agreeing that negotiations should continue and should be pursued in a manner that is in the best interest of the Nation and the Navajo people the same concept the negotiating team is using.

He said the team recognizes the challenges on the national scale given the number of recent natural disasters. "However, the fact that there does exist some level of emergency at the national level shouldn't dictate to us or to any other companies how they negotiate their businesses," Arthur added.

"Companies that provide these type of services, yes, they may be driven by supply and demand. But this isn't a matter of supply and demand because El Paso is only providing a conduit to transport a product, in this case, natural gas.

"Most of the gas goes to California. If anybody is going to fret about the products being delivered, I would think it would be the people in California, the business people, because they're the ones that need it.

"So if there's a matter of increased rates, that would be because of other issues, not because the Navajo Nation is asking for a certain dollar value of the property right-of-way," Arthur said.

No surprises
El Paso will continue to negotiate in good faith, according to Eid. "There have been no surprises from our standpoint. We've been very clear about what our intentions are. Many Council members have expressed their concern to us and they've asked us to explain why their negotiators are insisting on this very unprecedented high-dollar amount.

"The response is, they can talk for themselves. All we can do is show you exactly what we have proposed. We've been up-front since we started this process officially with President Shirley in May of 2004," Eid said.

"We have the greatest respect for the Navajo Nation and certainly El Paso has the track record to show it. We've been here since 1951 continuously. This is a very important part of our business. We have a number of Navajo retirees, probably about 60 retirees, and about 30 enrolled members as employees."

Eid said El Paso pays its employees competitive wages and in terms of charity and monies for scholarships, has contributed $1 million in the last five years.

Castillo is a member of the Navajo Nation Bar Association and has been very active in taking pro bono case appointments from the Nation since he was admitted in the mid-1990s, according to Eid, who also recently passed the Navajo Bar and will be spending more time on Navajoland.

While the Nation historically has been underpaid for oil and gas leases, Eid said it was not ever by them.

"Number 1, El Paso has never paid the Navajo Nation less than fair market value from the get-go. So regardless of other issues with other companies, that's not us. We have a great track record and we stand by it and have documented it and will show it again and again.

"The second thing is, if you were to look at these rights of way and you were to look at them off-reservation on comparable land, for a permanent right of way we're talking between $1 million and $2 million for everything we've got here," or 900 miles of pipes and facilities.

He also expressed interest over remarks made prior to executive session by Resources' Executive Director Arvin Trujillo. "He told the committee that he's very busy because he's spending time on this process.

"I just want you to know, he's not spending time with us. He's never once called us back in terms of setting up a follow-up session or to do something to follow up on this. ... And now we're running out of time.

"We've proposed an extension. As Chris says, it's guaranteed for the Navajo Nation because we'll make a lump-sum payment. If we end up settling for more money, we'll pay the higher amount. They rejected that and they've said they would not discuss that issue. So, I don't know what else we're supposed to do," Eid said.