Coal profit projection disputed

Coal profit projection disputed

Retired economist says Norwest’s assumptions are not likely
August 01, 2009 12:00 am  •  TOM LUTEY Of The Gazette Staff

Montana’s State Land Board is being misled about $1.4 billion in potential profits from state-owned coal reserves in southeastern Montana, said mine critics who offered an alternative economic study Friday.

Working with the Northern Plains Resource Council, neighbors of the Otter Creek coal tracts near the Northern Cheyenne Indian Reservation released a counter appraisal Friday, which suggested that an earlier study prepared for the state by Norwest Corp. overstated Montana’s would-be royalties.


Royalties estimated


Norwest, a Salt Lake City-based consulting firm, estimated royalties of $1.4 billion over coming decades based on 33 million tons of coal being mined annually.

But Thomas Power, a retired University of Montana economist hired by NPRC, said Norwest’s assumptions aren’t likely.

The market for Montana’s low-sulfur, high-sodium coal is already fulfilled by existing coal mines in the state, Power said. Mining on the Otter Creek tracts would compete with those existing coal sources.

The Otter Creek tracts were given to the state by the federal government in 2002 as part of a federally brokered deal to shut down the New World gold mine proposed near Yellowstone National Park in the 1990s.


Revenue compensation


The tracts were intended as compensation for revenues the state would have received from the gold mine.

The Land Board is expected to seek bids to mine the coal later this year or early next year.

Gov. Brian Schweitzer, a Land Board member, said Friday that the state would set a minimum price for bids and that proposed leases below that amount wouldn’t be accepted.