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Peabody takes coal lease dispute to high court
Wednesday, December 1, 2004

The long-running battle between the world's largest coal company and the country's largest tribe is once again headed to the U.S. Supreme Court.

For almost two decades, Peabody Coal and the Navajo Nation have been at odds over a controversial coal mining lease approved during the Reagan administration. The tribe says it was forced into accepting a low royalty rate for one of the most valuable coal deposits in the world.

The dispute has spawned a slew of lawsuits, with the tribe alleging it lost billions due to Peabody's behind-the-scenes lobbying of top Interior Department officials. The tribe has one case pending against the United States for breach of trust and a separate federal racketeering case against Peabody.

For its part, Peabody filed a lawsuit against the Navajo Nation in federal court in Arizona. The company wants to force the tribe into accepting the lower royalty rate, citing a settlement reached through an arbitration clause in the lease.

But the 9th Circuit Court of Appeals dismissed Peabody's case this past June. In a unanimous ruling, a three-judge panel said the company lacked standing to enforce the settlement because it was not approved by the federal government.

"Peabody seeks enforcement of the arbitration royalty award, not the lease," the court wrote, "[y]et the final arbitration award for which Peabody seeks enforcement was not federally approved."

On November 8, Peabody filed a petition with the Supreme Court, seeking to reinstate the lawsuit. The company says the courts have jurisdiction to resolve the dispute because the underlying lease, and an amendment laying out the arbitration procedures, were approved by the Interior Department.

The lease and the amendments were previously considered by the Supreme Court in the Navajo Nation's against the federal government. In a 5-4 ruling issued in March 2003, the justices said the tribe didn't prove a breach of trust under the Indian Mineral Leasing Act, which gives tribes greater control over their trust assets.

But the Federal Circuit Court of Appeals reopened the debate in October 2003 when it said the tribe could cite other laws to make its case.

Peabody has denied any wrongdoing for the handling of the lease. But internal documents showed that the company hired a lobbyist who was a personal friend of then-Interior Secretary Don Hodel to fight the tribe's request for a 20 percent royalty rate on the coal.

The tribe never knew about the secret meeting but it definitely had an impact on the matter. According to government memos, one of which was prepared by Peabody, Hodel suppressed a Bureau of Indian Affairs decision favoring the higher rate and told the tribe to continue negotiations.

As a result, the tribe -- "facing economic pressure" -- accepted a 12.5 percent royalty rate. The tribe says the decision cost $600 million. Any damages would be determined by the courts.

The lobbying prompted the tribe to bring a Racketeer Influenced and Corrupt Organizations (RICO) case against Peabody. The case is in the U.S. District Court in Washington, D.C. Peabody has tried numerous times to delay or dismiss the case but the attempts have been rejected.

Bush administration officials currently in charge of Indian trust have been closely involved. Deputy Secretary J. Steven Griles oversaw the now-defunct mining division that supported the tribe's stance on the scientific facts before it was rejected by political appointees. Special Trustee Ross Swimmer, as former head of the BIA, approved the lease without conducting an economic analysis.

The Navajo Nation has until December 10 to file a response to Peabody's Supreme Court petition.

Lower Court Decision:
Peabody v. Navajo Nation (June 15, 2004)

Relevant Links:
Navajo Nation - http://www.navajo.org
Peabody Energy - http://www.peabodyenergy.com