Office Of Public Relations
The Hopi Tribe
May 1, 2002 Tutuveni
17 April, 2002 by
Tanya Lee
On March 22, 2002, the Hopi Tribal Council passed a resolution approving a Joint Development Agreement with Reliant Energy to explore the possibility of developing an electric generating plant on Hopi land.
Richard Wheatley, Director of Corporate Communications for Reliant Energy and Reliant Resources, said in a telephone interview April 2 that the proposed 1200 MW dry-cooled coal-fired power plant would produce electricity to be sold on the power grid in Nevada.
Wheatley said that how much water the plant would use was still under discussion. Initially, he said, the water will come from the N-aquifer, but eventually it might come from a Lake Powell pipeline. He said that a "dry-cooled plant uses 85-90% less water than a water-cooled plant would. In a dry-cooled plant, water is recycled continuously with no run-off to pollute groundwater. Retention ponds would be built on the site."
Experts estimate that a 1200 MW dry-cooled coal-fired power plant would use approximately 2,500 acre feet of water a year, while a water-cooled power plant of the same size would use almost ten times that amount.
Wheatley said that the source of coal for the power was also under discussion.
Currently, Hopi coal on Black Mesa is mined by Peabody Energy. The company’s spokesperson, Beth Sutton, said in a telephone interview on April 2 that Peabody had no plans to sell coal to Reliant. "The coal does not belong to Peabody. It is owned by the Hopi Tribe," she said.
According to Wheatley, "It was a prerequisite of the Hopi Tribe that the proposed power plant be the cleanest that could be built.
"It will be one of the cleanest plants in the Southwest and region as a whole, a model for Indian Country and the nation. The plant will produce significantly lower emissions than other plants in the region in virtually all categories including SO2, NO2 and particulates. We believe it will be hailed as one of the most technologically advanced power plants ever built."
He also noted that the federal Clean Air and Clean Water Acts apply to Indian reservations.
The Resolution passed by the Hopi Tribal Council says that "a final decision concerning the siting of such a power plant project on Hopi land cannot be made until definitive studies and analysis have been conducted in order to determine project feasibility."
Wheatley said that "an optimum site for the plant has been identified," but he did not have the coordinates of the site and did not know local landmarks well enough to say where it might be. He did say that it was on a "parcel of land not used at present."
The final stipulation of the Resolution authorizes the Tribal Treasurer "to accept on behalf of the Hopi Tribe such reimbursement funds as are made available by Reliant Energy to assist the Hopi Tribe in pursuing the objectives of the joint development agreement." The Resolution does not say what percentage of the feasibility study costs would be borne by Reliant, nor does it stipulate what the total cost of executing the Resolution would be.
Who is Reliant Energy? Reliant Energy is a Houston, Texas company that provides power across the United States and in Europe.
According to Wheatley, Reliant Energy has assets in Nevada, Arizona, California, Mississippi, Illinois, Pennsylvania, New York State, Maryland, New Jersey, Ohio, Florida, and Texas. The company’s power generating capacity in operation or under construction is 21,000 MW.
Therefore, the 1200 MW plant on Hopi would add a significant 5% to its power-generating holdings.
In May of 2001, in preparation for the deregulation of the electric power industry in Texas, the company began to separate into two entities, Reliant Energy and Reliant Resources.
Reliant Energy transferred its nonregulated operations to Reliant Resources, of which Reliant Energy owns 80% of the stock. When the separation of the companies is complete, Reliant Energy, which handles the regulated part of the operation, will change its name to CenterPoint Energy, Inc. That move is expected within the next few months, and the new company will take on Reliant Energy’s $8 billion-plus debt.
In the same month, both Reliant Energy and Reliant Resources began trading on the New York Stock Exchange. The initial public offering of stock for Reliant Energy and Reliant Resources was handled by the Houston law firm Baker Botts.
The initial public offering of 59.8 million shares of Reliant Resources stock in May 2001 raised $1.7 billion, most of which was used to pay debt. Shares of Reliant Resources in mid April 2002 are trading on the New York Stock Exchange at roughly $15.50/share, down from a high of $37.50 a few days after the initial public offering.
On March 22, 2002 Moody’s Investor Services rates Reliant Resources stock Baa3, which means that in Moody’s opinion the stock offers "adequate financial security. However, certain protective elements may be lacking or may be unreliable over any great period of time."
Shares of Reliant Energy are trading in the mid $20s, at about half what they were worth in June of 2001.
Reliant Energy and the California Energy Crisis
Reliant supplies 5% of California’s total energy needs. It is one of the five companies against which California filed suit in May of last year, alleging unlawful business practices during the California energy crisis that began in the summer of 2000 and lasted well into 2001.
California owes Reliant $337 million for power sold to Pacific Gas and Electric and Southern California Edison. Wheatley, in a telephone interview on April 9, said that about 60% of the money is owed for power that Reliant supplied to PG&E, which filed for bankruptcy in April 2001, and the rest is owed for power supplied to SoCalEd.
One of the issues that has received a lot of press is that Reliant charged the state $1,900 a megawatt hour for electricity produced by a "peaking plant" in the Santa Barbara area, one of five power plants that Reliant purchased from Southern California Edison in 1998. Wheatley explained that because the plant’s is so inefficient, it is allowed to run only eight days (200 hours) a year, and the company had to pay for emission credits in order to run the plant at all. Given what it cost Reliant to produce energy at the 56 MW Goleta power plant, the $1900 per megawatt hour charge was reasonable, he said. He further explained that Reliant learned a few months after this plant was put into temporary operation that energy was available to California at that time for $200-$300 per megawatt hour, but the state nonetheless accepted the $1900 bid for energy produced by the 50 MW Goleta plant.
According to a report prepared by the U.S. Congressional Budget Office, and released in September 2001, the California energy crisis was created by a combination of state deregulation of the industry, increased demand for electricity, California’s inability to supply its own power needs, and price caps.
Nonetheless, in March of this year, California’s attorney general sued four companies, including Reliant, alleging unfair business practices and at the end of the month Reliant admitted overscheduling, but the company says it profited only slightly from doing so.
Baker Botts is among the law firms that are representing Reliant Energy in the suits and investigations to which Reliant has been subject as a result of the California energy crisis.
Other Houston companies involved in the California crisis are now-bankrupt; Enron and Dynergy. According to the non-profit watchdog organization Public Citizen, Enron posted a 42% increase in profits in 2001, Reliant profits rose 55% and Dynergy increased its profits by 210%.
Again according to Public Citizen, the Houston companies benefited in part because the Bush administration declined to get involved in the California energy crisis, which it could have done by having the Federal Energy Regulatory Commission cap wholesale energy prices. Wheatley pointed out that many utility companies, both in and out of California, made a lot of money during the crisis. "There was a lot of money to be made," he said.
The Bush-Cheney Energy Plan
The Bush-Cheney Energy Plan was released on May 16, 2001 in the wake of the California energy crisis. Reliant Energy and Reliant Resources started trading on the New York Stock Exchange on May 1, and Peabody Energy went public on May 21.
According to the Natural Resources Defense Council, which along with Judicial Watch sued the government to release documents relating to the task force meetings that led to the energy plan, describes the plan as a "pro-industry energy agenda."
This outcome, NRDC says "may be explained by the fact that the president, vice president, national security advisor, two cabinet secretaries and at least six top officials came from the ranks of the energy industry."
It may also be explained by the fact that the energy industry was a major contributor to Republicans during the last presidential election cycle. Reliant Energy donated a total of $918,000 in soft money, PAC money , and individual contributions during the 1999-2002 campaign cycle, according to the Center for Responsive Government, which based its figures on those released by the Federal Election Commission in March of this year. Reliant was the fifteenth highest contributor from the energy sector. Reliant CEO Steve Letbetter was himself a major contributor, raising $100,000 for the Bush effort.
Enron was the largest single energy contributor, giving almost $2.5 million to the Republican effort. Other energy companies in the top 15 include Peabody Energy and Lehman Brothers, the major stockholder in Peabody Energy. Dynergy, another Houston-based energy producer, donated $340,000.
Wheatley said on April 9 that Reliant did not have a representative "at the table" during the task force meetings that were held as the Bush-Cheney energy plan was being developed, but that some Reliant representatives met with White House and Department of Energy staffers in advance of the task force meetings.
Who do you know?
The law firm that represented Reliant Energy during its initial public offering of stock on the New York Stock Exchange and in some of its difficulties resulting from the California energy crisis is Baker Botts, which was founded by James A. Baker III’s great-grandfather.
James Baker III, a partner in the firm, is a director of Reliant Resources. Baker served as Secretary of the Treasury from 1985 to 1988 under President Ronald Reagan. During this period he was Chairman of the President’s Economic Policy Council. From 1981 to 1985, Baker was President Reagan’s White House Chief of Staff. He was Secretary of State from 1989 through August 1992 under President George Bush. Baker is also a Senior Counselor for The Carlyle Group, a banking firm in Washington, D.C. with strong ties to the U.S. defense industry.
Two lawyers from Baker Botts were on the legal team that successfully defended Governor Bush and Secretary Cheney in the contest over Florida electoral votes after the 2000 Presidential election.
In July, 2001, four months after Baker Botts announced it would open an office in Saudi Arabia, President Bush nominated Robert W. Jordan, a partner in the Baker Botts Dallas office, to be Ambassador to Saudi Arabia.
Why Reliant?
Hopi Tribal leaders and people have been asking several question about the Resolution passed by the Council on March 22. Some of them are: Why did the Hopi Tribe select Reliant as the company with whom to enter into such an agreement? If Reliant pays for part of the feasibility study, will the results be biased? What will Reliant expect in return? What effect will pumping an additional 2,500 acre feet a year of water from the N-aquifer have on the health of the aquifer and on springs, seeps and washes fed by the aquifer?
The Hopi Tribe had not returned phone calls at press time.
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