Montana’s governor Brian Schweitzer loves coal. He once described the state as the Saudi Arabia of coal and, while half heartedly championing wind power, continues to push coal forward in Montana. I know there’s been
a lot of focus on the incredibly destructive mountain top removal practices in Appalachia, but I wanted to remind folks that Montana (and Wyoming) coal is also a huge player in the national coal scene.
Just yesterday, Arch coal, a St Louis company with mines in Appalachia, Wyoming and elsewhere, bid $86 million for 572 million tons of state-owned coal in southeastern Montana’s Otter Creek Valley. (Arch coal already bought up a privately owned piece of Otter Creek, bringing the new total to 1.3 billion tons of coal). Back in December, after years of speculation, the Montana land board voted to open up the public land to mining, but set a high price on the coal at 25 cents/ton, roughly twice what Arch coal was willing to pay. The decision was seen as a minor victory…for about a month, until Arch coal complained and no other companies bid on the coal and the board simply reduced the cost to 15 cents/ton which Arch coal promptly agreed to pay.
The decision was hotly contested by environmental groups, including a high school group from Big Sky high school in Missoula who protested at the hearing and staged a walk out from school. Hoping to placate students, the land board directed the money from the Arch coal’s bonus bid towards school funding, but admitted that, “The directive is not binding on the Legislature.”
Besides the hugely destructive mining process itself, Arch Coal will likely build a railroad to ship the coal out, eating up more Montana ranch land in the process as well as benefiting their mining operation in Wyoming.
The new, lower deal is likely to pass, especially in a an economically depressed climate. As Governor Schweitzer so elegantly put it, “I can tell you that 49 other states in America would pull out their front teeth with vice grips to have this kind of deal.”
Two summers ago I was at the Climate Ground Zero camp in Helena, Montana, training with Greenpeace and RAN activists to help build a network to save Montana from endless coal and tar sand production. Climate Ground Zero has since taken root in Appalachia, but the need for continued resistance is still startlingly clear in Montana, where coal has little opposition.
As I understand it, the $86 million is just a “bonus” payment that gives Arch the right for 10 years to develop the coal. If the development occurs, the state and local govt will not just benefit from the jobs, but there will be significant taxes paid and there will be royalties for the state-owned coal that is mined. Total will be in the billions over time.
If Arch does not develop the coal into a mining operation in 10 years, they lose all rights, but the state keeps the $86 million binus payment.
Looks like the state drove a very good bargain. The state had the coal appraised and the appraiser said the coal should garner 6 cents per ton bonus payment. Arch paid 10 cents a ton bonus payment to Great Northern Properties, which owns the private coal that has to be co-develioped with the state coal. However, this 10 cents was spread over 5 years of payments. The net present value of the 10 cent bonus payment was between 8 and 9 cents. So, when the state got 15 cents (all to be paid immediately), it was almost 3 times the amount projected by the appraiser and nearly twice as much as the private coal company got in bonus payment. Pretty good negotiating by the state. And then there is the long-term benefit (see above).
I fully understand the economic benefits of the deal and the desire by the MT gov to cash in, especially in tough economic times. But it’s time to start thinking ahead. Either we can keep cashing in on digging up and polluting the beautiful big sky state for relatively short term gain, or we can look forward to the inevitable future of carbon regulation, coal depletion and increased effects from climate change. MT could be a leader in wind power if we had the kind of leadership not afraid to stick out their neck to do what’s right for our future.
Who said students are disconnected. The real riches in Montana are what nature created over thousands of years. If Appalachia had the internet and awareness a hundred years ago, they wouldn’t have let the fat cats swindle them and rape their mountains.