An appraisal requested by the Montana Land Board estimates the State of Montana would earn $1.4 billion in royalty payments over the next 40 years if it leases the Otter Creek coal tracts, containing more than a billion tons of coal.
Montana Gov. Brian Schweitzer told the news media he wants a mine developed, adding that any environmental concerns are superseded by the state's obligation to bring in revenues from the land.
We can only sell it one time, Schweitzer said. We have a fiduciary responsibility to maximize the value of school trust land.
The Otter Creek tracts are the end product of the controversy of the Crown Butte gold mine project that was to be located near Yellowstone Park in the 1980s. Because of the controversy, the administration of then-President William Clinton bought the mining rights in order to prevent Battle Mountain Gold and its joint venture partner from obtaining a mining permit from the Montana Department of Environmental Quality.
The state argued the decision to ban the mine cost Montana jobs and taxes. The Federal Government then responded with legislation that would either give the state $10 million in cash, the Otter Creek tracts, or other mineral rights agreed to by the state and the federal government. The State of Montana chose the Otter Creek tracts, located 10 miles southeast of Ashland, Montana, in Powder River County.
Salt Lake City consultants Norwest Corp. estimated that state recoverable coal in the Otter Creek tracts total 616 million tons or about half of the total 1.3 billion ton coal reserve. Of that 572.3 million tons is not leased. Norwest estimated the initial capex to develop the property at $1 billion. Total capital expenditures over mine life are estimated at $1.71 billion.
A possibility exists that a coal-fired electrical generating plant specifically designed to burn Otter Creek coal could be constructed near the tracts. However, the state's ownership is in a checkerboard pattern with Great Northern Properties-the successor to the original railroad grant to Great Northern Railroad (GNP), which owns the other half. If a mine is developed, it would have to include both state and GNP coal lands.
The appraisal estimates Montana's school trust could receive as much as $1.4 billion in royalty payments over a 40-year period.
The Montana Land Board is comprised of the state's top five officials, the governor, the attorney general, the state auditor, the secretary of state and the superintendent of public instruction. The board oversees the management of 5.2 million acres of school trust land in Montana. It is responsible for deciding how to best generate revenue for the trust from school trust lands through several alternatives including leases for oil, gas and mining operations.