BILLINGS – Musselshell County commissioners on Monday turned down a coal mine’s request for a tax break that would have cost the county millions of dollars over the next five years.
The unanimous action by commissioners denied a 50 percent abatement on the coal proceeds tax sought by executives from Signal Peak Energy.
Signal Peak, which is jointly owned by two Ohio companies, bought the struggling Bull Mountain mine south of Roundup two years ago.
Almost a half-billion dollars have since been invested into a major mine expansion that the company said created more than 280 jobs. But Signal Peak has struggled to turn a profit after encountering mining equipment failures and other setbacks.
Commissioner Larry Lekse said that Musselshell residents support the mine, but his cash-strapped county could not afford to give up potential tax revenues of up to $10 million by 2015.
The county’s annual budget totals about $6 million.
“All our services have been pretty much cut to the bone because of budget constraints,” Lekse said. “Fifty percent is a lot to ask for.”
Questions also were raised about Signal Peak’s eligibility for the abatement program. Musselshell County Attorney Ken Sipe said ambiguous language in a 2009 state law left it unclear how to calculate the tax break for the coal company.
Signal Peak president John DeMichiei said ambiguity in the law was the only reason cited to his company for the commissioners’ denial.
“It’s apparently based on legal advice that (approval of the tax break) would have subjected them to a lot of concerns from a lawsuit standpoint,” DeMichiei said, adding that there was “no mention” of revenue concerns.
Signal Peak likely will ask for the tax break again next year, DeMichiei added.
Total 2010 coal production at the mine was about 5 million tons — about half of original projections. That figure was expected to increase to 8.5 million tons in 2011, DeMichiei said.
Gov. Brian Schweitzer had supported the tax break, dispatching his economic development chief, Evan Barrett, to Musselshell County several times to promote its adoption.
Barrett on Monday expressed disappointment with the commissioners’ action, saying it could dent Montana’s image as a place open for business to the coal industry.
Barrett said the tax break would have amounted to just $7.5 million, and added that there was little chance the outcome would cause Signal Peak to scale back operations. But he said other companies could take notice.
“Anytime you can help an enterprise get through those first difficult years, the better off you are as a community and the better off we are as a state in terms of people looking at Montana and wanting to do business here,” he said.
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