Deal would give Montana coal tracts to Texas company

By Matthew Brown
Lame Deer, Montana (AP) April 2011

The federal government would give an estimated 145 million tons of publicly owned coal to a Texas company under an exchange backed by members of Congress that calls for future royalties and other coal reserves to go to the Northern Cheyenne Tribe.

The exchange is meant to address a longstanding claim by the southeastern Montana Indian tribe that its mineral rights were mistakenly given to a private company more than a century ago.

Supporters say enacting the deal could accelerate coal mining in Montana and deliver much-needed revenue to the impoverished tribe. Coal development is backed by many elected officials in Montana but not by environmentalists, who warn mining could damage local communities and ultimately contribute to climate change when the fuel is burned.

The deal could prove lucrative for Great Northern Properties of Houston, which would acquire publicly owned coal beneath about 5,000 acres near Roundup and Ashland.

Great Northern President Charles Kerr said last week that his company would retain 60 percent of royalties from future leasing of that coal. The rest would go to the tribe.

Mining company Signal Peak Energy already has plans to mine some of the federal coal – about 30 million tons near Roundup – beginning in the next several years.

Under pending legislation, Great Northern also would transfer about 147 million tons of coal to the tribe. That would allow the tribe to consolidate control of a vast reserve near Ashland that is estimated to hold 1.9 billion tons of the fuel.

“Everybody is highly motivated to make this work,” Kerr said. “It gives the Northern Cheyenne the chance to develop some of its resources as a unified block, and it helps allow Great Northern Properties to use some of its resources for accelerated development.”

Signal Peak CEO John DeMichiei said the mining company originally planned to buy the Roundup-area coal leases from the federal government. That process was well under way when Montana Sen. Max Baucus, a Democrat, and Rep. Denny Rehberg, a Republican, introduced identical measures last week calling for the Great Northern swap.

In separate meetings with tribal leaders this week, Rehberg and Baucus said they would move their bills through Congress as quickly as possible. The lawmakers said they foresaw no opposition but also had no timetable for action on the bills.

Baucus said the fact that the bills do not call for any money from Congress would make passage easier, although the government stands to lose tens of millions of dollars in potential royalties.

Rehberg said he would coordinate a strategy to pass the measure with Republican House Speaker John Boehner of Ohio. Signal Peak is jointly owned by two Ohio companies – Boich Group and FirstEnergy Corp.

Representatives of environmental groups that have criticized coal development in Montana said they were troubled by aspects of the proposed swap but would not object because it was an issue of tribal sovereignty.

“I can understand the desire of the tribe to get those minerals back, but the corporation (Great Northern) is getting public minerals basically for something they should have done a long time ago because it’s the right thing to do,” said Alexis Bonogofsky, tribal lands coordinator for the National Wildlife Federation.

Great Northern acquired rights to the coal beneath the reservation from Burlington Northern Railroad in 1992. Tribal leaders say those rights should have been turned over to the Northern Cheyenne in 1900, when the reservation was expanded to include the land above the underground reserves.

Legislation to return the Northern Cheyenne’s coal to tribal control was first promised a decade ago, after the tribe sued the federal government over another coal transfer just outside the reservation’s boundaries.

At the time, the state’s congressional delegation offered $70 million in coal development “impact fees” to the tribe. That provision was stripped from the pending legislation before it was introduced because of concerns the high price tag could derail the Great Northern exchange, tribal officials said.

Nevertheless, Northern Cheyenne President Leroy Spang said the swap was in the tribe’s best interest and fits in with his plans to promote economic development on the rural reservation.

Roughly 5,000 Northern Cheyenne live on the reservation, which suffers from an unemployment rate topping 60 percent, tribal officials said.

Spang said the Great Northern deal could bring in tens of millions of dollars over the next decade – compared with the tribe’s general fund budget of less than $2 million annually.

The tribe plans to start discussions with major mining companies within the next few weeks about future coal development opportunities, Spang and other officials said.

The Northern Cheyenne historically have shied away from exploiting their abundant coal and natural gas supplies. Development pressures have increased since a nearby reserve of 1.2 billion tons of coal was leased to mining giant Arch Coal Inc.

Coal from those leases, in an area known as Otter Creek, would be shipped out of the region on the Tongue River Railroad, a long-stalled project that has been approved by federal officials. A section of the railroad would run within a mile of the tribe’s coal reserve along Logging Creek.

Spang said a mine on the reservation is still at least a decade away. And he pledged to take the issue to members of the tribe through a referendum in coming months to gauge their support.

“We want to make sure it’s done right. We’ve got to have a plan where the people can see it,” he said.




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