Flagstaff, Ariz. — Of all the elections held in the United States last November, few got as little attention as the race for chairman of the Navajo Indian tribe. Yet the election of Peterson Zah, who was inaugurated recently as the first new Navajo chairman in 12 years, is seen here as an event that could affect not only the lives of the 165,000 Navajos, but the future of American Indian sovereignty, regional politics of the Southwest, and the domestic energy policy of the US.
The energy-rich Navajo nation is both a growing political force and a potential key player in US resource strategy. The sprawling Navajo reservation in Arizona and parts of New Mexico and Utah - its 24,000 square miles make it larger than West Virginia - contains more than 20 billion tons of coal, plus large deposits of uranium, oil and natural gas.
The challenge facing Mr. Zah is to assert Navajo control over the price and rate of resource development while tackling other problems - an estimated 80 percent unemployment rate, severe cuts in federal aid, and controversial remarks about tribal sovereignty by Interior Secretary James Watt.
Zah defeated Peter MacDonald, the three-term tribal chairman who was known off the reservation as ''the most powerful Indian in America.'' On the reservation, though, that power was termed ''corruption'' by Mr. MacDonald's critics, who called the former chairman a ''dictator.''
Zah's soft-spoken, optimistic style - and his promises to decentralize and reform tribal government, create permanent employment programs, and establish a friendly but firm posture with the non-Indian world - has created hope for change on the reservation.
Critics of Zah wonder if the former legal-aid administrator has enough insight and toughness to handle threats to his tribe's survival. But when Interior Secretary Watt criticized Indian reservations recently as ''examples of failed socialism,'' Zah countered by saying, ''reservations were created by act of Congress. This (Reagan) administration has been shying away from the whole notion of the fact that the US government has a trust relationship over the Indian people in this country. It was not the Indian people who came forth and said, 'we want to have a treaty with you.' It was the US government who did that.''
Zah and other Indian leaders believe Watt's comments may have really been pro-development statements disguised as attacks on socialism. Several days after Watt's statements, President Reagan announced a new policy to promote ''self-government'' on the reservations, narrowing the federal ''surrogate role'' in Indian affairs. The plan would discourage reliance on government funds and encourage ''prudent development'' of natural resources on Indian territory.
Addressing the National Congress of American Indians Jan. 25, Watt said he was sorry if his comments ''caused hurt,'' but added: ''I don't apologize for the message. The Indian people have been abused by the US government for too many years and we have got to bring about change.''
Presidential hopeful Gary Hart has cautioned against ''trading American lives for someone's oil.'' The energy-rich Navajo reservation is in the middle of what the National Academy of Sciences proposed in 1974 - one year after the Arab oil embargo - as a ''National Sacrifice Area'' in its energy policy report to the Ford Foundation.
If the Navajos are to play a key role in this national resource strategy, it may be difficult for Zah to inform the Congress, the Bureau of Indian Affairs (BIA) and large energy companies - Exxon, Peabody Coal, and Utah International, for example - just how much energy development he will allow, when and where he will allow it, and how much his tribe plans to charge.
But Zah nevertheless insists it will be the Navajos, not the government or energy companies, who will assert control over Navajo resources. During his inaugural address, Zah told the governors, senators, tribal leaders, BIA officials, and 15,000 of his fellow Navajos, ''minerals must be utilized with all due respect for our Mother Earth'' - which he specified later was a preference for smaller development projects in which local Navajos are consulted.
''It is a dilemma,'' said Zah, ''between those Navajo people that don't like to see [resources] developed, and the fact that we need employment and we need jobs on the reservation.''
Zah's call for smaller-scale development is in contrast to the huge coal strip-mine operations of Peabody Coal and Utah International, and the coal-fired Four Corners power plant near Farmington, N.M., which churns out more pollution every day than all of New York City.
The preference for smaller energy projects has raised questions about Navajo membership in the Council of Energy Resource Tribes (CERT), a 37-member cartel cofounded by former Navajo Chairman MacDonald, that pushes for higher payments for Indian energy development. (The Navajos currently get as low as 16 to 25 cents a ton for coal leases.)
Zah cast new doubts on CERT membership last week when he criticized it as a group ''which claims to be quasi-independent but receives 100 percent of its funding from the federal government.'' CERT staff members denied this, but one member acknowledged the organization receives more than half its budget from federal funds, including money from the Department of Energy.
Critics of Navajo withdrawal from CERT say the move would leave the tribe vulnerable to outside exploitation. Others support such a move, saying CERT is too pro-development.
One of Zah's biggest challenges now is to fight off attacks on tribal sovereignty while working to strengthen it. He says one way to strengthen sovereignty is to cut deeply into the reservation's estimated 80 percent unemployment rate with loan incentives for agricultural growth and for Navajo-owned businesses. But despite continuing federal payments for land the tribe gave up in 1868, federal cutbacks will make it hard for Zah to move quickly with these programs.