If the Otter Creek coal leases are finalized next month according to the offer made by the State Land Board and the bid submitted by Arch Coal, Montana’s checking account will get an $85.8 million cash infusion.
This windfall couldn’t come at a better time for the state financially. In the global financial downturn, state revenues have fallen far short of projections made during the 2009 Legislature, thus reducing projections for the state’s general fund at the end of the biennium in June 2011. To keep the fund balance in the black, Gov. Brian Schweitzer asked state department heads to propose budget cuts. He has been considering $40 million in cuts, including about $17 million to health and human services.
Schweitzer has said that the receipt of Otter Creek bonus money would be a factor in his budget-cutting decisions. The coal bonus may stave off reductions in budgeted Medicaid spending in the health department and in budgeted rehabilitation programs within the Department of Corrections.
“I can tell you 49 other states in America would pull out their front teeth with vise grips to have this kind of deal,” Schweitzer told The Gazette State Bureau last week after Arch submitted the sole bid on Otter Creek coal.
Many questions remain about actually mining this coal. Under Montana law, concerns about mining impacts to the environment and local communities are addressed after leasing in permits issued by the Montana Department of Environmental Quality. The mine developers will need transportation to get their coal from new mines to markets. Whether that transportation route will be the controversial Tongue River Railroad remains to be seen.
State Superintendent of Schools Denise Juneau, who voted against leasing the Otter Creek tracts, urged school superintendents who supported the leasing to appeal to the Legislature to direct Otter Creek money to public education.
Juneau obviously understands that the money won’t increase or even stabilize school funding — unless a majority of lawmakers vote for it. This year, the state school trust provided only 2.5 percent of the money spent on state schools. The public school budget for next year was set by the 2009 Legislature and the bonus payment won’t increase it.
The immediate benefit of Otter Creek would be to help the state through the current economic downtown. If the mine is developed, future returns would be much greater: potentially several billion dollars over the life of the mine in royalties and in severance taxes on the state and private coal. In addition, the mine would create jobs for Montanans and higher property tax receipts for Powder River County. The short-term gain is a sure thing, the long term return will depend on many factors — markets, business and regulatory decisions.