State lowers bonus bid for Otter Creek coal

The state Land Board voted 3-2 Tuesday to reduce the asking price for development rights to a vast reserve of publicly owned coal near the Wyoming border after not receiving any bids on an earlier offer. The board in December set the bonus bid at 25 cents a ton, or about $143 million. But by the Feb. 8 deadline received only a letter from St. Louisbased Arch Coal Inc. stating that the price for the coal near Ashland was too high. On Tuesday, the board lowered the bonus bid to 15 cents a ton, or about $86 million, and gave companies four weeks to respond. The bonus bid gives a company the right to develop the coal, pending environmental studies and permitting. "If we are able to lease these lands, and that is not a given, we will only give a company the right to propose a mining plan," said Secretary of State Linda McCulloch, who made the motion to reduce the bonus bid. State Auditor Monica Lindeen seconded the motion, adding that she has been "incredibly conflicted" over the issue, acknowledging the need for jobs and money for schools as well as the environmental risks. G o v. B r i a n Schweitzer also supported the r e d u c e d price, argui n g t h a t Arch Coal is going to mine in the a r e a regardless of whether it gets the Montana coal leases. Arch Coal agreed to a 10 cent per ton bonus bid to be paid over five years to lease coal tracts owned by Great Northern Properties of Houston, Texas. The tracts contain 732 million tons of coal in one-square-mile parcels that are arranged in a checkerboard pattern with stateowned coal tracts. "If this board votes not to lease coal at any price, there will still be development at Otter Creek," Schweitzer said. "I'm a realist and I understand that we have a fiduciary responsibility to strike a price that is as good as we can get and get the development to go forward." Schweitzer noted the 15 cent price is still almost triple what an appraiser hired by the state suggested for the bonus bid on the state's 572 million tons, and effectively double what Arch Coal is paying on the Great Northern property. The greatest profits would come if the state-owned coal was mined, Schweitzer said. The 12.5 percent royalty payment would generate about $1 billion, as would the 15 percent coal severance tax, he said. Several dozen people testified for and against lowering the bonus bid. Representatives of environmental groups and students who were opposed said they were concerned about the long-term environmental effects of mining and burning the coal, while eastern Montana lawmakers and union representatives argued the project would mean jobs and money for the state school trust fund. Superintendent of Public Instruction Denise Juneau had voted against putting the tracts up for lease in December and voted against reducing the bonus bid Tuesday. Attorney General Steve Bullock switched his vote to no, arguing the state should hold out for the higher price. Mark Fix, a rancher from Miles City and member of the Northern Plains Resource Council, said the board should wait until someone is willing to pay the higher price. "For the Land Board to lease the economic future of Montana's students at the low ebb of an economic cycle is not economically responsible," he said in a statement after the vote.