Montana mine project tangled in coal company bankruptcy – Billings Gazette, Jan. 13, 2016

January 13, 2016

Categories: Coal, Courts, News

By Tom Lutey

Montana officials are proceeding cautiously with the $86 million Otter Creek Mine project now that developer Arch Coal has filed for bankruptcy.

At issue is whether the St. Louis-based coal company has the wherewithal to complete the environmental research necessary to open the mine. Facing $5 billion in debt and a sour coal economy, Arch Coal filed for bankruptcy Monday. An estimated 1.4 billion tons of minable coal are in the Otter Creek area.

State officials said they weren’t notified by Arch that the bankruptcy was coming, but the move wasn’t surprising. U.S. coal production has fallen to a 30-year low as cheap natural gas lures domestic customers away from coal, and export sales are crashing.

Tuesday, the Department of Environmental Quality began discussions about how to proceed with Otter Creek Mine’s environmental impact statement in light of the bankruptcy filing and Arch’s debt to DEQ for work done on the mine’s environmental impact statement.

An environmental impact statement is a required report describing a major project’s effects on people and the environment. The reports aren’t cheap. Arch coal has paid $422,000 for the Otter Creek environmental study thus far, and the document isn’t complete. Another $42,000 payment is past due, and another $25,000 invoice is pending.

“We will not be able to move forward on the EIS until their bill is brought current and we have assurances from them that they will be able to pay for future EIS work,” said Kristi Ponozzo, DEQ public policy director. “They will have to pay all permit fees and will be required to post a bond before they can receive their final permit.”

DEQ estimates it would take another $170,000 to complete the environmental review of Otter Creek.

The mine has been in the works since 2010, when Arch Coal agreed to pay Montana $85.84 million for the development rights to 14 state-owned coal parcels in Otter Creek Valley in southeast Montana. At the time, Arch Coal representatives told The Gazette that they would break ground at the mine in 5 years and be in full production in six. Arch’s lease on the Otter Creek tracts calls for development within 10 years or the agreement expires.

The Gazette phoned and emailed Arch Coal on Tuesday inquiring about how the company’s bankruptcy would impact Otter Creek development. Arch didn’t respond.

It seems unlikely that Arch Coal would let Otter Creek collapse, given the company’s investment to date, said John Tubbs, Montana Department of Natural Resources and Conservation director. DNRC manages the state’s lease interests.

“If I were the court, I probably wouldn’t let them abandon it,” Tubbs said. There’s value to the Otter Creek development that for the sake of its shareholders and creditors Arch Coal shouldn’t walk away from, he said.

However, it’s been nearly a year since Arch has made progress on getting the mine approved. Permitting work on the Otter Creek mining project stalled in spring 2015 when the state asked the coal company to correct more than a hundred deficiencies in the Otter Creek permit application. Questions about water quality and quantity coming from the proposed mine have not been answered, said Ponozzo. Soil and wildlife issues at the mine site also need to be addressed.

Arch Coal told the Gazette last November that it planned to resubmit its application before the end of 2015 with all of DEQ’s questions answered. However, the resubmission never occurred, DEQ confirmed Tuesday.

The lack of progress on the environmental impact statement derailed permit plans for a $405 million railroad to service the proposed mine. Two months ago, Arch collaborators asked the federal government to suspend the permitting process for the would-be Tongue River Railroad until Otter Creek Mine’s permits were approved. Arch is a partner in Tongue River Railroad Co. with BNSF Railway and TRRC Financing, a limited liability company.

BNSF spokesman Matt Jones said Tuesday that request to the U.S. Surface and Transportation Board to delay permitting for the 42-mile railroad still stands.

“We are awaiting a ruling from the STB on the request to suspend the rail permitting process until the issuance of a final, judicially affirmed Otter Creek mining permit,” Jones said.

The railroad was running into stiff opposition not only from environmentalists objecting to coal development, but also from the Northern Cheyenne Indians, who last fall cited concerns about damage to tribal culture and the environment when asking STB to reject the railroad.

The Northern Cheyenne’s objections continue, said Conrad Fisher, tribal council member.

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