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In its heyday, the Montana Coal Board could afford to distribute $7 million or $8 million a year to help local communities deal with the impacts of mining.

The state collected a 30 percent severance tax on all coal mined in the state, and it allocated 8.75 percent of that to the Coal Board. In the early 1980s, Colstrip asked for and got nearly $3.34 million for a school. Yellowstone County got $2.1 million for a new jail.

When Hardin needed new water lines, the Coal Board was happy to oblige, and new classrooms were added all over Rosebud and Big Horn counties, where enormous new strip mines produced millions of tons of coal.

Today, as Musselshell County and the town of Roundup prepare for a coal boom, the Coal Board is a shadow of its former self. The severance tax itself has been slashed, and just 2.9 percent of the revenue is now allocated to an oil, gas and coal natural resources account that includes the Coal Board.

During the 2007-2008 biennium, the Coal Board had about $2 million to distribute, according to Chad Fenner, a Big Horn County commissioner and a member of the Coal Board. It's already gone, and no new money will be available until the next biennium.

"There may not be enough money to help Musselshell County much," Fenner said.

Musselshell County, Roundup and the Roundup school district have $1.9 million in applications before the Coal Board waiting for a decision. Those requests will be considered at the board's March meeting, Ellen Hanpa of the Coal Board staff said. Funding, if granted, won't be accessible until July, the start of the new biennium.

How much money will be available during the next two years is largely in the hands of the Legislature, Fenner said. He's said he hopes the amount will be substantially increased.

Fenner and the coal counties that benefit from impact grants are keeping a close eye on Senate Bill 100, which would raise the portion of the severance tax that goes to the Coal Board from 2.9 percent to 10 percent. That would increase the amount available for grants by more than $3 million a year. The state general fund would be decreased by the same amount.

Bob Gilbert, a lobbyist representing Musselshell County, Roundup and the school district, said Senate Bill 100 is intended to restore the Coal Board to its original purpose. Since its inception in 1975, money collected from the coal severance tax has been whittled away for other uses, from library federations to the Montana Growth Through Agriculture Act, he said.

"We're funding entities that are not coal-driven at all, while coal impact money is woefully short," the Musselshell County native said. "They get three times as much money as the Coal Board gets for impacts."

Over the long term, the state will collect enormous amounts of severance tax from the Signal Peak Mine south of Roundup, and it's only fair that the areas where the coal impacts fall receive funds in the short term to cover their needs, Gilbert argues.

He testified in favor of the bill this month at a hearing in the Senate Natural Resources Committee. While the bill is still in committee, he expects some negotiation on the percentage increase.

"I don't think we'll get the 10 percent," he said. "But politics is the art of the possible, and we're going to do whatever is possible."

In the 2007 Legislature, an increase to more than 5 percent was proposed but did not succeed, Gilbert said. He would like to see at least that much approved this session.

He said the outcome may not come until later in the session, when state revenues and expenditures are clearer.

Evan Barrett, the chief business officer for Gov. Brian Schweitzer's Office of Economic Opportunity, said the administration is taking a long view of energy development. While the Coal Board was established to deal with the development impacts of mines, the administration may want to go in a different direction for new major energy-generating facilities, which he said have greater impacts both in construction and operating phases.

Barrett said a bill that would model impact aid to a similar law used in hard-rock mining has been drafted, but he hasn't had a chance to vet it yet.

The Hard-rock Mining Impact Act, approved in 1981, required each new large-scale hard-rock mineral development to draw up a local impact plan in cooperation with affected local governments - cities, towns, counties and school districts.

Developers agree to pay for any increased capital and operating costs that result from mineral development in the form of pre-paid taxes. The advantage is that while Coal Board funding is subject to appropriation, the hard-rock model delivers the money up front.

Contact Lorna Thackeray at lthackeray@billingsgazette.com or 657-1314.

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