BILLINGS – A top Interior Department official on Wednesday questioned a proposal to transfer 232 million tons of publicly owned coal to a private company under an exchange touted as benefiting Montana’s Northern Cheyenne tribe.
Houston-based Great Northern Properties stands to get almost twice as much coal as it would give the tribe in the proposed deal, although not all the fuel the company received could be mined. The company and tribe also would share tens of millions of dollars in future coal royalties.
Interior Department Deputy Assistant Secretary Jodi Gillette said an appraisal is needed to ensure the two sides get equal value out of the swap. Even if it’s done fairly, the state and federal government stand to lose any royalties, Gillette said.
The exchange previously was described by Great Northern and others involved as roughly an even swap because not all the coal the company gets could be mined.
The deal is backed by leaders of the impoverished tribe, Montana’s congressional delegation and Signal Peak Energy, a 2-year-old underground mine near Roundup owned by Ohio-based Boich Group and power company FirstEnergy Corp..
Great Northern would receive coal reserves sitting in the path of the Roundup mine and additional reserves near Ashland.
The tribe would receive 130 million tons of coal that Great Northern controls beneath the southeastern Montana reservation, according to the Interior Department. It would receive 40 percent of royalties on future sales of the coal acquired by Great Northern, with the company getting the remaining 60 percent.
House and Senate bills have been introduced to enact the swap.
Montana Rep. Denny Rehberg warned Wednesday that opposition from Interior “could blow up the deal” and threaten the future of Signal Peak.
Great Northern acquired rights to the coal beneath the reservation from Burlington Northern Railroad in 1992. Tribal leaders say those rights should have been turned over to the Northern Cheyenne in 1900, when the reservation was expanded to include the land above the underground reserves but not the coal itself.
“The United States is now in a position to remedy that continuing federal omission,” Northern Cheyenne Vice President Joe Fox, Jr. said Wednesday. “The Northern Cheyenne have waited many years for this opportunity.”
Despite an unemployment rate topping 60 percent on the rural reservation, the Northern Cheyenne historically have shied away from exploiting coal tracts estimated to contain 1.9 billion tons of the fuel. Development pressures have increased since the nearby Otter Creek reserves were leased to mining giant Arch Coal Inc. by the state Land Board.
Tribal President Leroy Spang, a retired coal mine worker, wants the tribe to develop its coal reserves. He has pledged to put a referendum to tribal members to gauge if they favor mining.
Backers of the coal swap are rushing to get a bill passed before some of the coal reserves are offered at public auction.
Signal Peak wants to begin mining the Roundup reserves within the next two to three years. Separate from the Northern Cheyenne Deal, the company has been attempting to lease those reserves through the Bureau of Land Management.
Conservation groups last month challenged a planned lease sale. If the exchange goes through, the challenge would become meaningless.
A hearing on Rep. Rehberg’s bill to enact the exchange was held Wednesday before the House Subcommittee on Indian and Alaska Native Affairs. Gillette testified that the Department of Interior supports the goals of the legislation but was concerned about the value of the coal involved.
“We would like to work with the sponsor and the subcommittee to ensure that the exchanges of mineral interests are of equal value,” she said.
Great Northern president Chuck Kerr said the agency incorrectly based its coal estimates on total reserves — not the amount that could feasibly be recovered through mining.
Kerr said when unrecoverable coal was subtracted, his company would end up with 146 million tons of recoverable coal, versus 110 million tons for the tribe plus the royalty share.
He that an appraisal of the swap would drag out the process too long: “If we’ve got to do an appraisal, I think it will kill the deal,” he said. “This is not typical value for value land exchange. There’s way more to this.”
But Kay Blehm with the Bull Mountain Land Alliance, an advocacy group for landowners near the Signal Peak mine, said it was a matter of fairness that an appraisal be done.
“If it kills the deal it kills the deal,” Blehm said. “There’s just too much money involved and too much of the public value there. We just can’t let our government resources just go for a song.”
Legislation to return the coal beneath the reservation to tribal control was first promised a decade ago, after the tribe sued the federal government over another coal transfer just outside the reservation’s boundaries.
At the time, the state’s congressional delegation offered $70 million in coal development “impact fees” to the tribe. That provision was stripped from the pending legislation before it was introduced because of concerns the high price tag could derail the Great Northern exchange, tribal officials said.