(Reuters) - Underneath Montana lies an estimated $1.5 trillion of coal, but with uncertainty about future environmental rules, investors are wary about opening new mines in the rugged Western U.S. state.
Many say a big boost to Montana coal production can only follow November’s national election, when a new president could lead the way in clarifying environmental laws and encouraging cleaner coal technology.
I don’t understand the economics of mining coal in underground mines in Montana, when the Powder River Basin to the south has a lot of coal near the surface. You would think underground mines in the area would be at a disadvantage.
Additional coal produced near Billings would likely ship east on the BNSF line(former Milwaukee Road PCE), or ship west on…BNSF, perhaps to export markets?
Its a lower sulfer content coal. I worked at North Antelpoe/Rochelle Complex Mine (near Gillette, Wyoming) and our high walls were 150 feet. And out at Spring Creek (Decker, Montana) out high walls are around 200 feet. But the coal is a little bit cleaner and energy producers like that.
“That output is just a tenth of that in neighboring Wyoming, where coal is generally easier to extract and transport.”
This is not quite accurate. Montana and Wyoming each produced just about the same forty years ago. At that time, Montana enacted very strict mining and reclamation laws, and a coal severance tax of 30% compared to Wyoming’s 7%. I was involved in a direct way in supporting both those laws and that tax, as I was very much opposed to wide-open, unrestrained coal mining. At the time, Montana probably had the better overall railroad access though both the MILW and the BN – MILW ran right over the top some of the best coal in the state – no need for long, troublesome “joint” lines. Rather, Montana had two fast transcontinental mainlines in both directions virtually on top of its coal, something Wyoming did not have.
The upshot of the reclamation laws and that very high tax was that infrastructure development continued apace in Wyoming, whereas Montana lost the Milwaukee, for instance, and infrastructure for transportation of coal went in exactly the opposite direction in the two states. The message for coal companies as a result of Montana’s reclamation laws and the very high tax was: “don’t mine coal here”. Wyoming’s message was: “Here we are!”
Montana has since gradually reduced its tax to 15%; but that is still double Wyoming’s tax rate.
The Governor’s party led the way on those issues and so the Governor, even though he favors mining, is not so obtuse as to blame the Democrats – “oops, hey that’s US!” – and instead blames “infrastructure”. Well, that mistakes cause for effect, but as he will find, it is hard to reverse a history set fully in motion. Montana will continue to pay for the loss of the Milwaukee and it will take generations to replace it.
What exactly is the 15% coal “severence” tax? Is it a 15% tax on the sale or value of the coal?
Is this typical for all mineral rights? I am not aware of it on oil or at least havent paid taxes on oil since the windfall profits tax in the 80’s.
A 30% tax compared to neighboring 7% would certainly put the brakes on mining the coal. Was that basically done to keep the coal companies out? Or was it tied to actual costs involved in state infrastructure, etc?
Montanans were keenly aware that its coal resource was 1) huge and 2) finite. There was a sense that if the coal was mined, Montana did not want to be left as a West Virginia of the Rocky Mountain West. There was a strong element of this conversation in Montana politics dating from Anaconda Copper Mining Co. days, and the publication of Bernard De Voto’s historic essay: “The West: a Plundered Province”.
In Montana, Coal has Constitutional status. Montana’s Constitution is probably one of the few constitutions on the planet that specifically mentions coal.
Constitution of Montana – Article IX – ENVIRONMENT AND NATURAL RESOURCES
Section 5. Severance tax on coal – trust fund. The legislature shall dedicate not less than one-fourth (1/4) of the coal severance tax to a trust fund, the interest and income from which may be appropriated. The principal of the trust shall forever remain inviolate unless appropriated by vote of three-fourths (3/4) of the members of each house of the legislature. After December 31, 1979, at least fifty percent (50%) of the severance tax shall be dedicated to the trust fund.
Interesting, what is the purpose of the trust fund?
Natural resources are definately finite and it is interesting that such a tax was levied. Kinda reminds me of all the water rights issues out west…and starting to develope here in the Midwest.
The trust fund is permanent for ongoing investment and continues to grow. Annual interest income funds pet boondoggles. The current ones are funding the “Treasure State Endowment Fund,” the “Regional Water System Fund”, and “the Big Sky Economic Development Fund”. 99.9% of Montanans have no idea what those “funds” are, including me.
Your link is to the Northern Plains Resource Council. I was one of the early members of the Northern Plains Resource Council, and unlike the pompous gasbags that merely complain about coal, I was actually out there doing something about the problems of coal mining. I organized a local Audubon Society to gather together local expertise on environmental issues, served as the first president, from there organized a State Council for lobbying on these issues – particularly coal, and helped set up the first statewide Audubon Society office, which has grown to a full-time staff of seven. K. Ross Toole, my major professor who had guided my Milwaukee Road work for the Milwaukee and for my own History thesis, was at the time writing a book, “The Rape of the Great Plains” which probably suggests his perspective on the matter.
He was not only an eminent historian, holding an endowed Chair, but was a descendent of two important Anaconda Copper Mining Co. managers, and a former rancher himself. I was pleased to moderate a published debate between him and Dr. Mel Morrris, at the time the recognized national authority on rangeland reclamation, and who argued that modern coal reclamation was far advanced from previous times. Toole argued it could not be done.
All of this was part of a personal process of acquiring an understanding of coal mining and reclamation concerns, as well as developing an understanding of both the social and economic consequences of unrestricted coal mining
I guess one way around the Coal Severance Trust Fund is to mine coal on Reservation land, but that is near the Wyoming border and away from the former Milwaukee Road line.
Isn’t that down where they’ve been trying to get approval to run in new rail lines? They’d still only be able to ship by one railroad-BNSF.
As I read the information on this thread, it appears that the state of Montana, through taxation and regulation, pushed coal development to Wyoming. Since BN already had lines there, they hit the jackpot, trafficwise. The Milwaukee, on the other hand, had no big coal traffic to buoy it, during hard times, and it went under. Montana seems to have killed the Milwaukee Road.
Perhaps we could say Montana took the Milwaukee’s life preserver away.
If it was copper mining that brought the CMSP&P to Montana, that same copper mining played a role in the denial of coal mining to keep the CMSP&P in the state.
One could infer, just from the information on this thread, that regulation and taxation of Montana coal resources, as pushed by the Northern Plains Resource Council, starved the Milwaukee Road of traffic on the PCE when it needed it most. Recall, that Milwaukee was hauling some coal, through S.D. to the Big Stone power plant. As has been pointed out on this forum before, in the early 70’s, both BN and Milwaukee were struggling a bit. Wyoming, by it’s actions, helped give BN the coal traffic boost. Montana, by it’s actions, put Milwaukee at a disadvantage it never recovered from. The irony is, that according to information on this thread, Montana was a direct contributing factor in there no longer being 2 transcons to compete for business in Montana.