I Can (Not) See for Miles and Miles

Roy Brown and, to a lesser apparent extent, our Governor want to develop the Otter Creek tracts located in southeastern Montana just east of the Northern Cheyenne Indian Reservation. These huge coal-rich deposits were acquired by the State of Montana in exchange for agreeing not to tear the top off a gold-laden mountain just outside of Yellowstone National Park. The state took these tracts, seventeen in all, instead of $10.0 million in cash.

Sorting fact from fiction

"When the Otter Creek tracts were first accepted by the Racicot administration, Jim Mockler, the long-standing executive director of the Montana Coal Council, told the Land Board that "the state should have taken the money." Mockler then went on to add that the federal coal had "been there forever" and "if it was economical to develop it, it would have already been developed."
Undeterred by advice they didn't want to hear from the state's most pro-development representative of the coal industry, both the Racicot administration and that of his successor, Judy Martz, forged ahead in their attempts to develop Otter Creek. The 2003 legislature even went so far as to appropriate and spend $300,000 of public money to perform initial studies on the tracts.
Faced with the prospect of massive coal development on its border, the Northern Cheyenne Tribe sued the state and eventually reached an agreement (see Focus on Montana State Lands, Summer 2002 and May 2005) in which cultural, social, environmental, educational, and hiring issues were addressed. In the meantime, ranchers were fighting the proposed Miles City to Otter Creek Tongue River Railroad to prevent it from transecting their ranches.
And then politics reared its ugly head when Secretary of State Brad Johnson, the lone Republican on the Land Board, called Governor Schweitzer's plans to build a coal-to-liquids plant a "pipe dream" at the Republican state convention in 2006 and chided him for failing to push development of the Otter Creek tracts.
Schweitzer struck back hard three days later at the June Land Board meeting with an hour-long presentation which had not been on the agenda, detailing the administration's efforts to develop Montana's coal resources and peppering Johnson with questions about what he thought the state should be doing.
At the July 2006 Land Board meeting, DNRC made another presentation of the administration's coal development efforts, this time with special emphasis on the Otter Creek Tracts. Significantly, Chuck Kerr, the president of Great Northern Properties (GNP), which owns the private land checker boarded with the state land in the Otter Creek Tracts, gave a long presentation and cautioned the Land Board against rushing into leasing the coal properties until necessary infrastructure was in place. Although he called the estimated 1.2 billion tons of Otter Creek coal "a wonderful resource," Kerr said because of its high sodium content it was not suitable for use in today's thermal generation plants -- but would be suitable for coal gasification or coal-to-liquids. Kerr estimated the current high-sodium coal market at only 20 million tons per year compared to the 400 million tons per year mined for coal burning plants. Likewise, until a railroad, transmission lines, and/or pipelines were built to the tracts, Kerr felt that both the state and GNP would receive far less than the coal was actually worth and perhaps even face the prospect of the leases being purchased by Wyoming coal producers who would simply sit on them to eliminate any competition from Montana coal. Kerr estimated the time frame for getting the necessary infrastructure in place would probably be 6- 8 years and take $600-700 million.
In a surprising bit of news, state representative Jim Keane (D-Butte), gave a presentation and told the Land Board discussions were underway to build a much shorter rail line that would access the tracts from the south. As a union representative of the Operating Engineers, Keane said they have always opposed the Tongue River Railroad and still do because all it would accomplish would be allowing Wyoming coal to be shipped up to the northern tier — which Keane said would cost Montana 200 coal miner jobs in the first year alone. Keane estimated a 41-mile railroad could be built for $73.5 million to move the Otter Creek coal down to the existing Decker-area mines and generators where it could access Midwest markets, be blended with other coal, or used for gasification or liquefaction.
In the end, it was clear that not much is likely to happen with the Otter Creek coal tracts in the near future. As GNP’s president Chuck Kerr noted when he testified before the Board: “Otter Creek is obviously a remote area...a geopolitically sensitive area...an extremely rugged area...a pristine area” – which are all good reasons for conservationists to be happy that development of this low-grade coal is not imminent."

http://www.mtvoters.org/land_board_article/article/2006/otter_creek_coal_not_ready_to_be_developed



One name is synonymous with Otter Creek coal: Mark Gustafson, President of Wesco Resources in Billings, a tireless promoter whose picture likely appears next to the definition of ‘perseverance’ in some dictionaries. He has championed the cause for decades.

He has made a little headway with the State Land Board, comprised of the Governor, Secretary of State, Attorney General, Auditor and Superintendent of Public Instruction. The Board holds the power to determine when and how the tracts will be offered for lease and developed.

With one exception, the Democrats on the Board have been generally more circumspect and cautious about proceeding. Linda McCulloch is the exception. For what it is worth, here is the rationale (admittedly dated).

http://www.opi.state.mt.us/Supt/NewsStories/024D670427.nclk

With Carl Venne, leading the way, the Crow Nation is ready to make-a-deal-at-any-cost for coal development, be it mining or mine mouth electrical generation. Their hated neighbors, the Northern Cheyenne, are another matter. It is more concerned about weighing the long-term impacts v. benefits of coal development. The Council has made it clear that it will demand job training and job opportunities for Northern Cheyenne tribal members, protection of Cheyenne cultural sites and resources, offering contract opportunities for Indian-owned businesses, and a strict environmental monitoring program.

As a central player in the Otter Creek tracts, the Northern Cheyenne will similarly demand any coal-burning plants meet pristine air quality standards (carbon dioxide and mercury). It, along with ranchers in this arid setting, remains concerned about the likely adverse impacts of extensive strip mining on the aquifers that traverse the coal seams.

It will be fascinating to see whether, in the face of increased political and economic pressure to develop Otter Creek, the Land Board and the Northern Cheyenne buckle. Elect Tim Fox and Duane Grimes and that baby is a done deal.

Chicken or Egg? Or, just plain Boondoggle?

Coal mining and industrial interest are also chomping at the bit to construct the Tongue River Railroad from just north of the Wyoming border through the Tongue River Valley to Miles City. Earlier this summer, the United States Surface Transportation Board issued a permit for the right-of-way for the railroad.

In 2005, the estimated to cost was $200.0 million. You could probably ‘super-size’ the cost at $400.0 million and still be short. At the time, coal barons made it clear that the railroad was viable only if coal mine capable of producing 12 million tons of coal annually in the Otter Creek tracts was permitted. Bear in mind that privately-owned tracts are interspersed with those owned by the state. In 2005 dollars, the cost of developing the mine of that capacity: $80.0 million. With fries.

The pitch is for the state to cowboy up with mining and industrial corporations to produce coal from Otter Creek at rock-bottom prices. The coal is sold with a higher margin to provide capital (read: “subsidy”) to build and operate the railroad. Sounds simple: Build a railroad and haul the Otter Creek coal to market.

There is only one problem: When (or if) the Tongue River Railroad is built, it will cut 320 miles off the route for Wyoming coal to markets in the Midwest. Wyoming coal is of a higher quality than Treasure State coal and less costly to mine (less over-burden and thicker coal seams), making it both more attractive and more cost competitive. Estimates in 2005 were that between 12-16 million tons a year of Wyoming coal would find its way to market over this line.

Do you want to bet on it?

By in any way subsidizing the construction of the Tongue River Railroad, Montana would be (1) subsidizing Wyoming coal and (2) compounding the competitive disadvantage it now faces. Reduced miles to market for Wyoming coal means lower transportation costs.

Gustafson says we need the railroad to make the Otter Creek viable. Build the railroad while we develop the mine. Once construction is completed, a torrent of Wyoming coal floods the Midwestern markets, Montana coal continues at a trickle. Oh, and in the process, Montana coal miners lose their jobs.

And, who is the real beneficiary? Same as always: The robber barons in the suits.

The question is whether we want to turn the Tongue River Valley upside down and convert it into an industrial corridor. If you haven’t ever done so, you should drive out and visit Birney. Cast a fly in the Tongue. Talk to weather- and saddle-worn ranchers who descend from homesteaders. Their choked-up tears and sad tales about the land, livestock, wildlife and an increasingly threatened way of life are real.

There are other options than laying a pristine ranching and farming area to waste.

And, for what?

To fuel coal-fired electrical production across the eastern two-thirds of the United States. While their plumes are visible from space, the CO 2 emissions, measured in millions of tons annually, are not. Hell. We can’t even see them here on earth.

What we can see is the thousand-fold effects from a warming climate and burgeoning corporate bottom lines.