After an investment of $408 million and a year of rapid construction, the first coal train will leave the Signal Peak Energy Mine near Roundup next week, carrying the first load of low-sulfur Montana coal east to an Ohio utility.
A new railroad junction near Broadview and the mine site south of Roundup were officially dedicated Wednesday by top executives from BNSF Railway; FirstEnergy, an Ohio utility; the Boich Group of Ohio; Signal Peak Energy; and a corral of Montana politicians, including Gov. Brian Schweitzer.
In the early 1990s, efforts began anew to reopen the mine, then owned by the Bull Mountain Coal Co. But the attempts were unsuccessful and a string of lawsuits followed.
BNSF Chairman and Chief Executive Matt Rose, who traveled to Montana for Wednesday's ribbon-cutting ceremonies, said that after many years of talk, "nothing ever happened."
But in the spring of 2008, when the Boich Group of Ohio and an Ohio utility, FirstEnergy, teamed up to buy the mine, Rose said he became convinced they were going to be successful. And other key players are taking a fresh look at this Montana mine as well, he said.
"It really does make people start to reconsider how the quality coal can be used in their portfolio," Rose said. "Coal will remain a very large piece of our energy future."
Coal currently produces 52 percent of the electricity consumed in the U.S.
The rail spur ties into the BNSF main line three miles south of Broadview at a crossing that was named "Walter" on Wednesday in honor of the world's oldest man, 112-year-old Walter Breuning of Great Falls. For half a century, the Montanan worked for BNSF's predecessor, the Great Northern Railway.
The Boich Group and FirstEnergy are 50/50 owners in the Signal Peak project. The 36-mile rail spur cost $105 million.
In one year, the mine site progressed from a few older buildings and little external infrastructure to a large industrial complex.
The mine site has a new office, warehouse and shop; a wash plant capable of cleaning 2,000 tons of coal an hour; two giant storage silos; an extensive conveyor system; and the railroad spur.
"It's not just the rail, there was a whole infrastructure built," said Signal Peak Energy President John DeMichiei.
A six-car VIP train with plush silver Pullman coaches from the 1940s and '50s carried the delegation from the Walter junction to the mine. As the silos and mine came into sight, the crowd cheered.
"Governor, this is a different place from a year ago," Wayne M. Boich, chief executive of the Boich Group, said to Schweitzer.
The Bull Mountain mine is going to be the most productive underground mine of its kind in the country, he said.
"We've never owned mines in the West, so this is a new spot for us, and it should be a big one," he said.
The mine employs 190 people and, along with the railroad, is expected to pay $28 million per year in federal and state taxes.
The first 120- to-140-car train is expected to leave the mine for Ohio on Sept. 9.
Boich said the coal will be marketed across the United States and to the Pacific Rim countries.
Bad time for coal
But the U.S. coal market is depressed right now, largely due to a mild summer and a slowdown in manufacturing.
In its most recent quarterly financial report, BNSF said its overall freight revenues dropped 26 percent from the previous year. Rose called this "an extremely difficult economic environment."
But on the train ride to the mine, Rose pointed out that U.S. manufacturing is growing for the first time in 18 months. The country's 100 million tons of surplus coal will be used up when the manufacturing sector is healthy again and the climate returns to more normal temperatures, he said.
FirstEnergy Chief Executive Tony Alexander said that in a good year his utility burns about 20 million tons of coal. The Signal Peak mine is expected to supply 7 million tons, or about one-third, of FirstEnergy's needs when it is running at full capacity next year.
Alexander said his utility signed a long-term contract with BNSF and a contract of up to 20 years with Signal Peak.
"This is one of the best resources we've seen," he said.
The Montana coal has more heat per ton than Powder River coal: 10,300 British thermal units compared to 8,000 Btus. That means FirstEnergy can ship less coal to produce the same energy, which helps make up for railroad shipping costs, Alexander said.
"The combination of those allows this coal to compete in Ohio with alternative fuels," he said.
At maximum capacity, the Signal Peak mine can load seven trains per day of 120 to 150 cars.
Schweitzer, Rose and Alexander all agreed that the proposed cap-and-trade legislation to curtail greenhouse gas emissions, especially from coal, lacks enough votes to clear Congress.
As an alternative, Schweitzer said he would tax producers $12 per ton of carbon dioxide and use the money exclusively to develop better technology to sequester the gas. When that is accomplished, the U.S. could sell that technology to the world, he said.
"We're behind the Chinese in coal gasification. We're behind the Chinese developing other energy resources. How the hell did that happen?" he said.
Montana State Sen. Kelly Gephardt of Roundup put the mine's opening in perspective by pointing out that the last commercial coal mine in Musselshell County closed nearly a half century ago.
"In 1991, I was county commissioner when we had an announcement at the end of Main Street that the mine project was going to go. Now 18 years later, we're seeing the ribbon cutting," he said. "Forty six years we've been waiting for a mine to get going in Musselshell County again."
Contact Jan Falstad at email@example.com or 657-1306.