A Wyoming mining company has reached tentative option agreements to lease and mine an estimated 1.4 billion tons of coal on southeastern Montana's Crow Indian Reservation, in a deal that appears aimed at tapping into the growing export market for a fuel that's in decline domestically.
The amount of fuel involved in the deal is more than the U.S. consumes annually.
Cloud Peak Energy said it would pay the tribe up to $10 million during an initial option period if the deal is approved by the Crow Tribal Legislature and federal officials with the Department of Interior.
The deal covers three coal deposits near Cloud Peak's existing Spring Creek mine near the Wyoming border. The tribe's reserves are within the Powder River Basin coal fields, which account for about 40 percent of the nation's coal production.
Crow Chairman Cedric Black Eagle has said in past interviews that the coal could be exported to Asian markets, although it's uncertain when mining could begin.
"Partnering with the Cloud Peak Energy will help diversify the tribe's long-term coal revenue, provide good jobs and potential access to export markets for tribal coal," Black Eagle said in a statement.
The announcement follows a stalled partnership between the Crow and an Australian company that hoped to build a $7 billion coal-to-liquids plant on the rural and impoverished reservation.
Tribal leaders hoped that plant would give an economic boost to the Crow's 13,000 enrolled members. But four years after the Many Stars coal-to-liquids project was announced, its prospects remain uncertain due to financing difficulties and other problems.
Negotiations with Cloud Peak to lease and mine reserves on the eastern side of the 2.2 million-acre reservation have been going on since at least last fall. The agreements provide for exploration and options for Cloud Peak to lease the three deposits for an initial five-year term.
That lease could be extended to 2035 if certain conditions are met, the tribe and Cloud peak said. If the company exercises the lease options, it would pay the tribe up to 15 cents per ton, royalties and production taxes.
The company also would offer preferential hiring to American Indians and $50,000 annually in scholarships for Crow members.
Cloud Peak already has three surface mines in the Powder River Basin — the Antelope and Cordero Rojo mines in Wyoming and Spring Creek, near Decker, Mont. The company recently acquired the Youngs Creek coal deposit in Wyoming and nearby lands in Montana known as the CX Ranch.
Cloud Peak President Colin Marshall said in a statement that the location of the Crow coal next to Spring Creek, Youngs Creek and the CX Ranch would allow the company to "optimize" mine development. It was unclear if Cloud Peak intends to develop those other properties and company officials did not return immediate calls for comment.
Black Eagle said coal would be shipped through existing train loading facilities at Spring Creek.
Since the 1970s the tribe has leased coal on the northern end of the reservation to Westmoreland Resources. The company's Absaloka Mine produced 5.5 million tons of fuel in 2011.