Mont. tribe to sign coal deal with Wyo. company

Matthew Brown, Associated Press
Associated Press

BILLINGS, Mont. (AP) -- The Crow Tribe was expected to sign an agreement Thursday giving a Wyoming mining company options to lease an estimated 1.4 billion tons of coal beneath the tribe's southeastern Montana reservation.

The deal with Cloud Peak Energy involves more coal than the U.S. consumes annually and revives stalled efforts to expand mining on the impoverished, 2.2 million-acre reservation. It appears aimed at tapping into coal export markets that have become increasingly attractive to mining companies as the domestic demand for the fuel falters due to competition from cheap natural gas and other factors.

Cloud Peak would pay the tribe $2.25 million up front and additional payments in coming years, up to a total of $10 million for leasing and exploration rights. Approval from the Department of Interior is required before the deal can go into effect.

The tribe's coal reserves are within the Powder River Basin, which accounts for about 40 percent of U.S. coal production.

Cloud Peak and other companies have been seeking to boost exports of the region's coal through West Coast ports. They face determined resistance from environmentalists.

Cloud Peak has included the reservation's coal as part of its "export strategy" in recent presentations to company investors.

The Crow tribal legislature authorized approval of the Cloud Peak leasing arrangement on Jan. 15, paving the way for Thursday's signing of the agreement by Crow Chairman Darrin Old Coyote.

Negotiations with Cloud Peak to lease and mine reserves on the reservation began as early as 2011. The resulting agreement calls for Cloud Peak to lease three coal deposits in the southeast corner of the reservation near the Wyoming border for an initial five-year term.

That lease could be extended to 2035 if certain conditions are met, the tribe and Cloud peak said. If the company exercises the lease options, it would pay the tribe between 8 cents and 15 cents per ton, plus royalties and production taxes.

If Cloud Peak builds a mine, it would be the second on the reservation.

The Absaloka mine, which opened in 1974 and is owned by Westmoreland Resources Inc., produces about 6 million tons annually and employs about 80 people, according to data from the Mine Health and Safety Administration.

Another attempt in recent years to expand coal mining on the reservation called for building a $7 billion coal-to-liquids plant in partnership with an Australian company.

Tribal leaders hoped that plant would give an economic boost to the Crow's 13,000 enrolled members. But more than four years after the Many Stars coal-to-liquids project was announced, its prospects are uncertain at best due to financing difficulties and other problems.