Coal Mines Leases Could Mean Riches for Montana

By Beacon Staff

BILLINGS – A new appraisal of vast state-owned coal in southeastern Montana finds the state would reap $1.4 billion in royalty payments over the next four decades if it leased the property for mining.

Development of the Otter Creek tracts — more than a billion tons of coal co-owned by the state and Great Northern Properties — could open the door to a dramatic expansion of the region’s coal industry. It also could facilitate construction of a long-delayed rail line, the Tongue River Railroad.

Both projects are fiercely contested by environmentalists and some Montana property owners, including billionaire Forrest Mars Jr. of the Mars candy business.

Developing the tracts has been pushed by private industry and the Montana Rural Education Association, which wants the royalty payments for public schools.

The Otter Creek appraisal prepared for the state by Norwest Corp., a Salt Lake City consultant to the mining and energy industries, will be heard April 20 by the Montana Land Board. It consists of Montana’s top five elected officials and ultimately will decide whether the state will lease the tracts. About 9,000 acres cover the state’s share of the coal.

The appraisal estimates that developing a coal mine at Otter Creek and building the Tongue River Railroad would cost $1 billion. In addition to annual royalty costs, a developer would have to pay an upfront bonus of at least $37 million.

Great Northern President Charles Kerr said his company is “highly motivated to make it work” by finding a company willing to invest in a mine. But he added the state’s involvement could significantly complicate the leasing process.

“It’s going to be a polarized process. There’s major politics,” said Kerr, whose office is in Houston. “The Northern Cheyenne are going to have to weigh in on the process” and the outcome of political debate in the state capital of Helena is “a coin toss,” he said.

The Northern Cheyenne Indian Reservation lies due west of the Otter Creek coal tracts and historically has opposed the Tongue River Railroad. After the state got its tracts from the federal government in 2002, the Northern Cheyenne and the state agreed that the tribe will receive job training benefits if development proceeds.

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