Monday, July 2, 2012

Signal Peak Energy -- Coal in the Bull Mountains

It's Monday, and time for more on old-fashioned energy development in Montana.

Signal Peak Energy has submitted their bid to lease state land for coal development in the Bull Mountains near Roundup. Their bid of $3.5 million essentially meets the minimum bid that the state said it would accept -- 30 cents per ton, which was the same bonus payment Signal Peak had agreed on with the BLM for its land in the area.

This is, of course, just an upfront bonus. The state will also receive additional money in the form of royalties (set by Montana law at a minimum 10%) on all coal actually produced.

We are a long way from coal actually being mined, though. The state Land Board (made up of our 5 statewide officeholders -- currently all Democrats) must approve the lease, and then all of those agencies have to go to work on their studies and reviews and analyses and inquiries. One or more agencies can be predicted to make things difficult -- we'll see down the road -- and we'll see whether any objections are solid or simply obstructionist.

There is a time for public comment on the bid, but one would expect that the Land Board will approve the lease, this being an election year and all.

One thing worth noting -- Signal Peak is the only bidder and was probably willing to make the bid because it already has operations and infrastructure in the area. If Montana's government were going out of its way to encourage developing what the governor calls the "Saudi Arabia of coal" we have in this state, wouldn't we have a business climate that would encourage more players to be in on the action?

In the long run, having multiple competing coal developers actively working in Montana would not only increase the amount of coal being produced, with attendant state revenue, jobs, and economic development -- it would also eventually lead to bids actually being part of a... yes!... bidding process -- as in competition -- which generally leads to higher bonuses and royalties.

We should, however, perhaps consider ourselves fortunate that we have at least one company willing to meet the minimum bids set by the state. We could, after all, have thrown a coal party where no guests ever arrived.

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