British investment bank eyes Montana coal

The leasing of the Otter Creek coal tracts, located in southeastern Montana near Ashland, could open the door to a dramatic expansion of the state's coal industry. Mining the tracts also could facilitate construction of a proposed $341 million rail line into the coal-rich Powder River Basin, ensuring a steady coal supply for the long-stalled Tongue River Railroad.

An adviser to Gov. Brian Schweitzer said the state was reviewing the request by the investment bank, Rothschild, but was unsure if it could meet the bank's timeline.

Montana has some of the largest coal fields in the world, accounting for more than a quarter of the United State's total reserves. Yet its five active mines produce only about 40 million tons of coal annually -- less than 4 percent of the nation's 1.1 billion tons.

Neighboring Wyoming produces more than 400 million tons annually.

If Otter Creek were developed, it would become Montana's first new mine in three decades, said Bud Clinch with the Montana Coal Council.

However, prospects for both a mine and the Tongue River Railroad have been fiercely opposed by some southeastern Montana landowners and several conservation groups. They argue the industrialization of the region's rural landscape would harm water supplies used by farmers for irrigation.

"If this makes it more likely the Tongue River Railroad will be built, that concerns me," said Jeanie Alderson, whose family owns the Bone Brothers Ranch along the Tongue River near Birney. "That really would tear up the Tongue River valley."

The request for a lease sale was made by Rothschild on behalf of a corporate client with substantial mining experience, said Evan Barrett, Schweitzer's chief economic development adviser. Barrett declined to name the company.

A representative of Rothschild -- a major financial player in the mining industry -- met with Barrett and other state officials earlier this month to pitch its development plan for the tracts, Barrett said.

The banking firm's client wanted coal leases in place by September. That would mean the leases would have to go out for bid possibly months ahead of time, in part to attract competing offers.