By Tom Lutey

March 31, 2020 - Montana has approved the 977-acre expansion of the state’s largest coal mine.

Spring Creek Mine was on Monday granted the expansion, which could yield an additional 72 million tons of coal, in a decision by Montana’s Department of Environmental Quality. The approval should extend the life of the mine to 2031, four years longer than current conditions allow. The extra coal supply should keep production at about 18 million tons a year during the extension.

The expansion should produce from $42 million to $59.5 million in taxes for the state, and keep mine employment at about 281 to 340 workers, Environmental Quality officials said in its record of decision and written findings.

The decision sets a $107,727 fee for 615 acres of lost habitat for sage grouse, an endangered species. The money would be given to the Montana Sage Grouse Oversight Team’s Stewardship Fund.

The approved expansion is the latest of several steps aiding the future of Montana’s largest coal mine. Former mine owner Cloud Peak Energy went bankrupt in 2019. The mine was then sold through bankruptcy auction to the tribally owned Navajo Transitional Energy Company, or NTEC.

The ownership transition has been complicated because of the sovereign immunity NTEC is granted as a wholly-owned subsidiary of Navajo Nation. DEQ briefly shut down the mine last October out of concern that NTEC’s immunity would prevent Montana from suing the company, if necessary, to enforce state environmental law. The state wouldn’t transfer the mine’s permit to NTEC without a sovereign immunity waiver and the sufficient bonding.

The sovereign immunity waiver provided by NTEC on March 12, cleared the way for the permitting process to advance. NTEC noted that Montana Gov. Steve Bullock had written that he was “satisfied the limited waiver protects the rights of Montanans” and directed “all agencies of the State of Montana to accept the waiver.”

Issues remain, however. The surety bonds for the mine are still being put up by Cloud Peak affiliate, Spring Creek Coal LLC. And, Cloud Peak bankruptcy documents show that the companies holding the Spring Creek Mine reclamation bonds are concerned about getting their money, should the NTEC transition falter. In a move to assure Cloud Peak can still satisfy surety commitments, bond holders have asked that all other creditors not be allowed to collect administrative fees.

“The NTEC sale may collapse, which would lead to the forfeiture of the surety bonds and the allowance of the suretie’s administrative expense requests in an amount of up to $280 million,” attorneys for the bond holders said in Bankruptcy Court.

Montana remains confident the Spring Creek Coal LLC bonds are sound, said Moira Davin, a DEQ spokesperson. NTEC remains the operator of the mine, but not the permit holder.

The mine expansion approved Monday has been years in the making. Cloud Peak first applied for the expansion in 2013, the first year of Democrat Steve Bullock’s eight years as governor. At the time, coal was the largest source for electricity generation in the United States, with a 40% energy share. There were 860 million tons of coal burned in the United States for electricity generation in 2013, according to the U.S. Energy Information Administration.

But the oil and gas shale revolution was just ramping up in 2013. The following year, cheap natural gas was replacing coal as the cheapest fossil fuel for power plants. U.S. power plants burned 107 million fewer tons of coal for electricity generation in 2014 than it did the year before. The trend has continued uninterrupted ever since. In 2019, U.S. power plants burned 538 million tons of coal, according to EIA.

The approval of the mine expansion comes as national demand is contracting.