NEWS

Arch Coal suspends Montana coal mine plans

Karl Puckett
kpuckett@greatfallstribune.com

Arch Coal Inc. has suspended its permit application with the state of Montana for a $600 million coal mine in southeastern Montana.

The proposed Otter Creek Coal Mine was planned about five miles southeast of Ashland, and Otter Creek Coal, a wholly-owned subsidiary of Arch Coal filed an application for a surface coal mining permit in 2012.

It would have produced about 20 million tons annually over 20 years, according to the state Department of Environmental Quality.

St. Louis-based Arch Coal announced Thursday morning that it was suspending its efforts to secure a mining permit for the Otter Creek coal reserves from the DEQ due to capital constraints, near-term weakness in coal markets and an extended and uncertain permitting outlook.

Arch Coal filed for bankruptcy in January.

Gov. Steve Bullock said he had been meeting personally with representatives of Arch Coal over the last few years, and that the state had been waiting over a year for the company to submit necessary data to move the permit process forward.

“The international challenges facing coal markets reinforce our need to develop a responsible approach to Montana’s energy future that includes all of our energy resources,” Bullock said in a statement.

Bozeman businessman and tech entrepreneur Greg Gianforte, the Republican candidate for governor, said the Otter Creek mine would have meant 4,400 jobs and almost $100 million in new revenue for the state.

“This is money that could have powered our schools, re-built our roads, or put money back into the pockets of Montana taxpayers and job creators,” Gianforte said in a statement. “And yet, our own governor and his administration sat on their hands and would not issue a permit. This is exactly why Montanans want new leadership in Helena.”

Tom Livers, director of the state Department of Environmental Quality, said the state met all of its statutory deadlines in reviewing the project, noting it was Otter Creek Coal that did not respond in a timely manner to major permit deficiencies identified by the DEQ.

“The permit process has been in Otter Creek’s court for the last year,” Livers said.

The deficiencies were not trivial, Livers said.

They included incomplete hydrological information and analysis. The company’s own data and analysis, he said, showed the mine would have had significant hydrological impacts that would have affected agricultural operations, he said.

“We’ve essentially been on hold for the last year waiting for them to respond,” Livers said.

Kristi Ponozzo, public policy director DEQ, said Otter Creek Coal was behind $67,000 in fees it owes the state for work on a draft environmental impact statement.

The state hired a consultant to prepare the EIS, and Arch Coal Inc. had to pay the state for that work.

The state couldn’t move forward on the environmental impact statement until the bill was brought current, so work was suspended, she said.

The DEQ and state Department of Natural Resources and Conservation had been jointly preparing the draft EIS for the mine.

Arch Coal controls about 1.5 billion tons of coal in Montana’s Otter Creek area, including coal leases secured in November 2009 through Great Northern Properties.

Since securing the 8,300 acres of state-owned minerals, Arch Coal engaged state regulators through the permitting process to get approval of the mine.

Arch Coal said that process took longer than anticipated, and further deterioration in coal markets led to the decision to suspend the permit.

The Powder River Basin remains an important coal supply region for domestic and international power generators, the company said.

“However, given current conditions, Arch can no longer devote the time, capital and resources required to develop a coal mine on the Otter Creek reserve block,” the company said.

Dropping the Otter Creek mine will allow it to intensify its focus on operating low-cost mines, it said.

It was unclear to Shawn Thomas, administrator of the DNRC’s Trust Land Management Division, whether the announcement means the project is dead.

“Nobody knows exactly what suspending the coal permit means,” Thomas said.

In 2010, the State Land Board voted 3-2 to approve the lease of the 8,300 acres of state-owned minerals in the Otter Creek area Ark Land Co., a subsidiary of Arch Coal, for $85.9 million.

That payment gave Arch Coal the right pursue the mine; it was not a payment for the coal, Thomas said. The payment was made and became “distributable revenue” that was distributed to schools.

Arch Coal is up to date on its $24,790 annual rent for its leases, Thomas said.

“We haven’t been contacted by Arch Coal or Otter Creek Coal Co.,” he said. “Their leases are still in good standing their leases are valid until 2022.”

The leases are also “assignable” meaning somebody else could pick up the leases held by Arch Coal, he said.

The mine was dependent on construction of a proposed 42-mile Tongue River Railroad between Ashland and Colstrip.

In November 2015, Tongue River Railroad Co. petitioned the board to put the railroad project on hold pending a final decision from the DEQ on on the Otter Creek Mine permit application.

“Unless and until Otter Creek Coal obtains a final, judicially-affirmed permit from the state of Montana allowing it to develop a mine, and that mine is then developed, any TRRC rail line will have no coal to transport and therefore no reason to be constructed,” Tongue River Railroad Co. wrote in its petition.

Dennis Watson, a spokesman for the Surface Transportation Board, said the environmental review for the railroad project is on hold.

Ranchers living along the proposed railroad line opposed the mine and the railroad arguing both would lead to the industrialization of the agricultural Tongue River Valley and threaten their water. They also opposed the idea of a for-profit company using condemnation in order to ship coal to overseas markets.

They expressed relief that Arch Coal was suspending plans to pursue the coal mine permit.

“It was only a matter of time before this project collapsed,” Dawson Dunning, whose family has ranched on Otter Creek for more than a century, said in a news release issued by the Northern Plains Resource Council in Billings. “All of us in Montana are fortunate that it collapsed before this gigantic mine opened up and a productive ranching valley was destroyed.”

Clint McRae, whose ranch would have been condemned as part of the railroad, called the mine speculative from the beginning.

“The Tongue River Railroad would have crossed several miles of our place, and has forced us to live under the threat of federal condemnation of our land for over 30 years,” McRae said.

The proposed mine area owned or controlled by the Otter Creek Coal encompasses about 7,640 acres, and about 4,100 acres would have been disturbed under the proposed mine plan.

The primary drainage in the area is Otter Creek, a northward flowing tributary of the Tongue River.

Arch Coal announced it was suspending efforts to secure the permit in a statement on its web site.

The DEQ’s Livers said the state wasn’t officially notified. The DEQ won’t do any additional work on the project until it hears directly from the company.

An analysis of the Otter Creek coal development by the Bureau of Business and Economic Research at the University of Montana estimated the mine’s equipment expenditures at $400 million and facilities expenditures at $200 million.

Payments overdue

• Otter Creek Coal has paid the state $401,556 to date for work associated with the Otter Creek coal mine environmental impact statement.

• DEQ invoiced Otter Creek Coal $42,000 in November. It was due Dec. 4. It is past due.

• DEQ has a pending invoice to Otter Creek Coal of about $25,000 that was sent Jan. 13. It has not been paid.

Reaction

“The promising economic impact of the mine would have benefitted the surrounding community and the state. Generated revenues would help fund rural schools and infrastructure. A new railroad would have opened up enormous opportunities for agriculture and oil and gas development. The fact that this project languished and state officials were more concerned with following Barack Obama’s lead than Montana's is incredibly troubling.”

— Congressman Ryan Zinke, R-Mont.

“Today’s announcement is a victory for protecting wildlife and their habitat. It’s a key step in moving past harmful, climate-disrupting fossil fuel projects moving towards more responsible energy development. The Otter Creek Mine was a bad idea from the start. It’s in an area that has some of the best wildlife habitat in Montana, is ecologically fragile, and should never be strip mined. This is a decision that will be welcomed by everyone who cares about wildlife.”

Tom France, National Wildlife Federation regional executive director, Northern Rockies and Pacific Northwest.

“Arch Coal’s suspension of its pursuit of a permit for the Otter Creek Mine is a devastating loss for Montana's economy and schools — for jobs, tax revenues and made-in-Montana energy. This decision is an unfortunate repercussion of President Obama’s all-fronts assault on domestic energy production.

— U.S. Sen. Steve Daines, R-Mont.

“Otter Creek is a unique opportunity for Montana because that coal is owned by us, the people of Montana. If it’s not developed, we all lose out. It’s devastating that permitting delays and the War on Coal being waged by environmental groups and politicians have resulted in a developer pulling out of a project that would have brought Montana so many benefits.”

— Shelby DeMars, Count on Coal spokeswoman