Mont. considering loan to Australian coal exporter

BILLINGS, Mont. (AP) -- An Australian company seeking to take control of a Montana coal mine and boost exports to Asia is in discussions with state officials about a potential $10 million loan from an economic development trust, representatives of the state and Ambre Energy said Friday.

The loan would be paired with $10 million from a private bank and used to buy and refurbish mining equipment, said Herb Kulow with the Montana Board of Investments. Both sides said the talks have been preliminary and stressed that the amount of any loan could change.

The possibility of state assistance for Ambre Energy comes as the company's attempt to take over the Decker coal mine near the Wyoming border was delayed in early May for unspecified reasons. Ambre co-owns the mine with Cloud Peak Energy but is seeking full control in a deal worth up to $64 million.

A low-interest loan from the Montana's Coal Tax Trust to help the company realize its ambitions would likely further aggravate rising tensions over coal exports. Those reached record levels last year with 126 million tons of the fuel sent abroad.

A related effort by Ambre to build ports in Oregon and Washington so it can start shipping coal to Asia faces determined opposition from environmentalists and some West Coast elected officials. The company cleared a significant hurdle Friday, as Oregon regulators issued draft permits for the company's Port of Morrow export terminal along the Columbia river.

The Decker mine was once among the largest in the U.S., producing more than 10 million tons of coal a year. It was on track through April to extract just 1.5 million tons this year, after laying off more than one-third of its workers in recent months, according to U.S. Department of Labor data.

Ambre has said it could ramp up mining once it completes the deal with Cloud Peak. Ambre also co-owns a second mine, in Wyoming, and last year announced a deal to supply up to 5.5 million tons of coal annually to utilities in South Korea.

Coal companies are counting on greater export volumes in coming years to make up for declines in domestic consumption after many utilities switched to cheap natural gas. Trains would carry the fuel from the Powder River Basin of Montana and Wyoming across the northwestern U.S. and also down to the Gulf Coast.

That's a scenario the industry's detractors contend could tie up rail lines and pollute communities with coal dust. Export critics also say burning the fuel in Asian power plants would cancel out efforts to reduce greenhouse gas emissions in the U.S.

A different view predominates in Montana. Coal mining provides substantial revenues for state government and offers lucrative jobs in rural areas otherwise dependent on agriculture.

Kulow said that for the state Board of Investments, a loan to Ambre is about keeping the Decker mine operational and bringing back some of the jobs it's lost.

"This is an investment that the state of Montana would be making in this company," he said, adding that the state would not have a direct ownership stake. "The reward is increased employment, increased salaries, more tax revenue coming into the state of Montana."

Kulow added that no loan will be made until Ambre's deal with Cloud Peak is completed and state officials can be assured that contracts are in place to keep the Decker mine operational.

A loan also would be dependent on Ambre putting up adequate collateral to ensure the state could recoup its investment if the company cannot repay the money.

Ambre spokeswoman Liz Fuller said the loan program offers a good incentive for the company to work with the state. But she added that it was uncertain at this point what will come of the company's dealings with the Board of Investments.

"There's no proposal yet, just discussions about general terms," she said. She added that a $10 million state loan was "in the neighborhood" of what the company would need to finance the equipment it wants to buy and refurbish.

A pending application before the federal Bureau of Land Management would expand Ambre's lease at the Decker mine to include an additional 40 million tons of coal.

Conservation groups including the Northern Plains Resource Council and WildEarth Guardians on Friday urged the BLM to not grant approval for the expansion until detailed environmental studies are conducted. They also questioned the potential state loan.

"It's way too fast," said WildEarth Guardians' Jeremy Nichols. "They're pushing for money from the state, they're pushing for a lease extension from BLM. Is this really where Montana taxpayers want their money to go, to help an Australian coal company ship coal to Asia?"