REVIEW-JOURNAL
By JOHN G. EDWARDS
Sep. 29, 2005

Southern Nevada natural gas customers will pick up the tab for higher transportation costs if the Navajo Nation secures a tenfold increase in right-of-way fees on a natural gas pipeline, Southwest Gas Corp. says.

The local gas-distribution company gets a large portion of its gas from the El Paso Natural Gas Pipeline, which crosses 900 miles on the Navajo Nation. The company said it gets all of its gas from the El Paso line during the summer. But during the winter, when gas consumption increases, the company said, it draws additional gas from other pipelines.

Southwest Gas relies on the pipeline to deliver gas from wells in the San Juan Basin of New Mexico. Southwest ties into the pipeline near Bullhead City, Ariz.

El Paso wants to raise its rates if the right-of-way fees are increased through a pending federal rate case; Southwest Gas would bear part of the burden if rates are raised.

However, Southwest Gas would seek to recover any increase in its transportation costs for the gas by increasing rates for retail customers by an undetermined amount, a utility spokesman said.

Navajo Nation spokesman George Hardeen referred a call for comment to another official who didn't respond.

El Paso pays the Navajos $2 million yearly for real estate right of way and related property under an existing contract. But the contract expires in October.

The pipeline will keep operating even if the right-of-way issue isn't resolved when the contract expires, said Bruce Connery, vice president of El Paso Corp., the pipeline company's parent.

Connery said the Navajos' asking price far exceeds the right-of-way land's fair-market value.

"The basic issue here is one of fairness," Connery said.

Navajo officials are insisting on a fee equivalent to $50,000 an acre on land over 20 years, he said. Connery contrasted that with prices of $50 to $1,500 per acre to buy similar land outright, he said.

El Paso offered to move a helium-processing plant to the Navajo reservation as a noncash consideration for lower right-of-way fees, he said. Indian officials, though, haven't budged from their position, he added.

Greg Patterson, a spokesman for the Fair Access to Energy Coalition and a former director of Arizona's Residential Utility Consumer Office, said: "It's clear at the moment that (the Navajos) have all the cards."

El Paso has two options, analysts say. They can meet the Navajos' demand or they can abandon the pipeline. However, abandoning the pipeline appears far more costly than paying the new fees, because building a new pipeline could cost hundreds of millions of dollars.

State and local governments cannot use eminent domain to condemn land on Indian reservations. If they could, a court would determine the land's fair-market value.

Negotiations with Indian tribes are governed by the General Right of Way Act of 1948, which "provides no system for the fair determination of renewals or right-of-way valuation," reports the coalition, a nonpartisan group aiming ensure reliable and cost-effective energy delivery to consumers and businesses.

Right-of-way value disputes with Indian reservations are popping up across the country, the group said.

"We would hope that there would be fair and equitable resolution absent the need for additional legislation," Patterson said.

The Arizona Corporation Commission, which regulates utilities, sent a letter this month to Secretary of Energy Samuel Bodman and Interior Secretary Gale Norton to express concern over the Navajos' proposed fees.

The state regulators urged the cabinet officers to study of Indian right-of-way issues a top priority under the Energy Policy Act that President Bush signed in August.

The study, one of 38 required under the Energy Policy Act, would review ways to fairly value rights of way on Indian reservations, said Dean Miller, policy adviser to Jeff Hatch-Miller, the corporation commission's chairman.