BILLINGS – The U.S. government approved plans by a Montana Indian tribe to lease an estimated 1.4 billion tons of coal to a Wyoming company that’s moving aggressively to increase coal exports to Asia, the company and tribe announced Thursday.
The deal between Cloud Peak Energy Inc. and the Crow Tribe involves more coal than the U.S. consumes annually.
The Bureau of Indian Affairs’ approval allows Cloud Peak to begin exploration work on the Crow reservation.
Cloud Peak has pending agreements to ship more than 20 million tons of coal annually through two proposed ports on the West Coast. Officials in Washington and Oregon oppose those and other port proposals on environmental grounds, but federal officials said earlier this week they plan only limited environmental reviews of the projects.
Cloud Peak CEO Colin Marshall said preliminary work in Montana on the so-called Big Metal coal mining project — named after a legendary Crow figure — has begun. The company says it could take five years to develop a mine that would produce up to 10 million tons of coal annually, and other mines are possible in the leased areas.
The Crow Tribe’s coal reserves are within the Powder River Basin, which accounts for about 40 percent of U.S. coal production. Cloud Peak paid the tribe $1.5 million upon Thursday’s BIA approval, bringing its total payments to the tribe so far to $3.75 million.
Future payments during an initial five-year option period could total up to $10 million. Cloud Peak would pay royalties on any coal extracted and has agreed to give tribal members hiring preference for mining jobs. The company also will provide $75,000 a year in scholarships for the tribe.
Crow Chairman Darrin Old Coyote said in a statement that the project is a high priority for the impoverished tribe’s 13,000 members. It revives longstanding efforts by the Crow to expand coal mining. A $7 billion coal-to-liquids plant proposed in 2008 by an Australian company never came to fruition.
A Cloud Peak mine would be the second on the Crow reservation. The Absaloka mine opened in 1974 and is owned by Westmoreland Resources Inc. It produces about 6 million tons of coal a year and employs about 80 people.
The three members of Montana’s congressional delegation — Democratic U.S. Sens. Jon Tester and Max Baucus, and Republican Rep. Steve Daines — issued statements supporting the new agreement. They said it offers a chance to increase job opportunities on the 2.2-million-acre reservation along the Montana-Wyoming border.
Cloud Peak’s 2012 coal exports totaled 4.4 million tons, extracted from the Spring Creek mine located just east of the reservation.
The company is pursuing a second new mine at another nearby site known as Youngs Creek after closing a $300 million deal on that property last year.
Beyond the export market, the company has said the coal from the Crow reservation could serve new domestic customers. But U.S. demand for coal has fallen sharply from its historic levels, making prospects for new domestic contracts uncertain.
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