BILLINGS – Montana officials will keep studying the potential effects of a major coal mine near the Wyoming border, despite a bankruptcy filing by its sponsor Arch Coal and the recent cancellation of a key lease held by the company, a state official said Thursday.
Regulators want to determine to what extent streambeds need to be protected from mining at the site near Ashland, said Kristi Ponozzo, public policy director for the state Department of Environmental Quality.
The work would prove valuable if the Otter Creek Mine is revived or another proposal takes its place, she said. The mine as originally proposed would have produced up to 20 million tons of coal a year.
“We didn’t want to completely drop it because we are so far along in the process and we have all the information we needed to finish it,” Ponozzo said. The agency hopes to complete the work by the end of the year.
Meanwhile, filings in Arch’s federal bankruptcy case reveal the company lost a private coal lease for Otter Creek more than three months before the St. Louis-based company announced it was suspending its application.
That runs counter to claims from Arch and attorneys for the Tongue River Railroad, a proposed 42-mile line that would serve the mine. They said Otter Creek remains a viable proposal.
Otter Creek lease owner Great Northern Properties sent a letter to Arch dated Nov. 30 informing the mining company that its lease for Otter Creek had been terminated. Arch had missed two payments to Great Northern totaling $4.5 million earlier in November, the letter said.
Great Northern President Charles Kerr declined comment citing the pending bankruptcy case.
Arch spokeswoman Logan Bonacorsi said the company still has significant coal reserves in the area and could re-initiate its efforts “at some point in the future” if depressed coal markets improve.
Ponozzo said the state cannot issue a permit for a company unless it has a valid legal right to mine.
For mine opponents, the lease cancellation underscores their view that the mine and railroad will never be built. They want government officials to halt any further consideration of the projects.
“If the DEQ thinks any company is capable of moving into the Otter Creek valley and constructing the infrastructure needed to build a coal mine, they haven’t been reading the news, which universally points to a dying industry with no market,” said Jenny Harbine of Earthjustice, an environmental law firm that has worked against Otter Creek.
The Great Northern lease includes roughly half of a 1.5 billion-ton coal reserve along Otter Creek that Arch acquired in 2010.
The Montana Land Board sold the public mineral leases involved for $86 million. Arch had agreed to pay $73 million for an adjacent lease from Great Northern, a Houston-based company that holds coal reserves throughout the Western U.S.
Arch announced it was suspending its Otter Creek proposal in March, citing weak coal markets, a shortage of cash and an uncertain outlook for permitting.
The Tongue River Railroad is co-owned by Arch, BNSF Railway and TRRC Financing. Approval for the project is pending before the U.S. Surface Transportation Board.
BNSF spokesman Matt Jones said the railroad proposal is targeted at future demand for coal from southeastern Montana.
He said the railroad “remains confident that over the long term potential domestic and foreign market opportunities will exist for coal from this region.”