Many Hurdles to Montana Coal Development

Land Board Is Told There Are Many Hurdles to Otter Creek Coal Development in Montana

The company that has an ownership interest with the state in Montana’s Otter Creek coal tracts told the state Land Board on Monday that there are sizable hurdles to developing the resource.

Great Northern Properties owns coal tracts in Otter Creek that are interspersed with coal owned by the state. The company has been working with the state on possible lease plans, a proposed coal mine and power project west of Circle, which is 150 miles north of Otter Creek.

The state Land Board has been holding hearings since the issue became politically charged this spring. Republican Secretary of State Brad Johnson accused the governor of ignoring traditional development at Otter Creek in favor of a “pipe dream” of building a plant that converts coal to liquid fuels.

Schweitzer contends plans are well under way to develop Otter Creek, and inferred Johnson was not informed on the issue.

Both sit on the state Land Board that met Monday, although Johnson was out sick, the governor said. Johnson had originally requested that the Otter Creek issue be placed on the Land Board agenda.

Chuck Kerr, president of Houston-based Great Northern Properties, said the company’s interests are aligned with the state since most of the company’s coal is owned in Montana.

He said the lack of infrastructure around the Otter Creek coal reserves and the high sodium content of the coal are the two biggest issues blocking development. Kerr said the state and Great Northern need to take their time solving both issues before leasing out the asset at bargain rates.

The sodium issue could be solved with technology advances now under way that would allow conventional plants to burn the coal. Once a market for high-sodium coal is found, it will be feasible to build a railroad to the area, Kerr said.

“It’s not necessarily ready for prime time. It will come,” Kerr told the board.

He pegged the cost of developing the coal tracts, including a mine and a rail line, at more than $600 million.

He warned that the only companies interested in buying leases to develop the coal might be Wyoming coal companies that would buy the leases and sit on them — so the coal would not compete with the Wyoming product. Such an arrangement would do little to help his company or the state, which could lose out on sizable royalty checks, he said.

The state owns the rights to about 700 million tons of the coal, gained a few years ago in an exchange with the federal government. Great Northern Properties owns about the same amount.

(AP)