The Montana Land Board voted 3-2 Tuesday to reduce the asking price for the 572 million ton Otter Creek coal tracts near Ashland after receiving no bids on an earlier offer.
The 25 cents a tone bonus set by the board in December has been reduced to 15 cents a ton, which will bring in $86 million in bonuses against the $143 million under the terms of the original plan. The bonus bid the right to develop the coal, pending environmental permits.
State Governor Brian Schweitzer supported the reduced price, arguing that Arch Coal is going to be mining in the area regardless of whether it gets the Montana coal leases. Arch Coal agreed to a 10 cent per ton bonus bid to be paid over five years to lease a 732 million tons tracts owned by Great Northern Properties of Houston, Texas.
"If this board votes not to lease coal at any price, there will still be development at Otter Creek," Schweitzer said. "I'm a realist and I understand that we have a fiduciary responsibility to strike a price that is as good as we can get and get the development to go forward."
Governor Schweitzer said that the 15 cent bonus is still almost triple that suggested by an appraiser hired by the stat and that the greatest profits would come if the state-owned coal was mined. A 12.5 percent royalty payment would generate about $1 billion, as would the 15 percent coal severance tax.
Arch Coal was the only company to respond to the original offer, but their written response stated only that the bonus payment the state was asking for was too high.
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