Bringing coal to China ignites battles along rail routes

A billionaire, Montana's Democratic governor, and the Northern Cheyenne all appear to be lining up to find ways to supply China's coal market. Ranchers and environmentalists struggle on.

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A billionaire, Montana's Democratic governor, and the Northern Cheyenne all appear to be lining up to find ways to supply China's coal market. Ranchers and environmentalists struggle on.

Part 2 of a two-part on the Montana aspects of plans for shipping coal from Montana and Wyoming to China through Washington state ports. Part 1 is here. Reprinted and adapted from the Missoula Independent with permission.

At dusk, south of Miles City, Montana, Mark Fix takes a visitor around his ranch on his red side-by-side four-wheeler, kicking up an occasional northern flicker or pheasant from the high grass. As he talks with me, we keep our hands over our mouths to keep any more gnats from entering. His feisty Pomeranian, its torso shaved for the summer, runs behind, trying to keep up. The north-flowing Tongue River, with cottonwoods along its banks, winds through his 9,700-acre property. The soft-spoken Fix keeps a couple hundred head of cattle here, and grows, this year, alfalfa and barley.

Fix drives on a wooden bridge over the Tongue, through a floodplain that earned its name this spring, and up onto the backside of a butte overlooking the Tongue River and his house and barns. This butte is part of the proposed path of the Tongue River Railroad, which would be crucial to some of the plans for shipping coal to China.  Fix says it would come over the butte and continue along his land to the south and then follow the river in the same direction. About 60 miles from here the spur line would connect to the Otter Creek tracts.

“When it goes across the place, it would just form a wall for the cattle,” says Fix, his tanned face shaded by a tattered cap. “Right now the cattle come to water to drink, but they’d have that wall, and if there’s a road there, too, it’ll have to be a fenced corridor. I’ll have to figure out how to move cattle back and forth across it. ... It’s kind of ridiculous.”

Fix is still getting his head around how the railroad would change his land. He hasn’t quite made sense of how the Asian coal market could be responsible for bringing it here. Months ago he read about Arch Coal investing in coal export terminals, “and I’m saying, ‘What the hell? They’re going to take this coal to China?’ How can that be cost effective, to take the coal from Otter Creek, go across all those mountain passes, and put it on a boat and ship it? That doesn’t make any sense at all.”

Here’s Montana Gov. Brian Schweitzer’s rough math on why the coal shipments to China are a good idea: Coal plants in China are paying about $115 a ton, delivered, for sub-bituminous coal, the kind under the Otter Creek Valley. That coal is worth about $15 a ton in Montana. The freight cost on the rails would run about $35 or $40 a ton, and across the Pacific about $50 to $70. “So the way it stacks right now, it works,” Schweitzer says. “It would compare economically with the coal they’re bringing in from Australia and Indonesia.”

The other part of the equation is that the coal China imports is cleaner than the coal they mine in the south and east of their territory. Their higher-quality coal lies in Inner Mongolia and other provinces to the north and west, but there’s no railroad connecting those coal reserves to where the huge demand is along China’s coasts.

The math in Montana doesn’t pencil out without the Tongue River Railroad. It was first proposed in the early 1980s, when it was intended to connect to the Montco coal mine near Ashland and mines to the south in Wyoming. Montco was permitted but never developed. Meanwhile, the effort to build the railroad has quietly proceeded. The first stretch was approved in 1986, the second in 1996 and the third in 2007. Together the three sections make up today’s proposed coal route.

Fix bought his property in 1991. A year or two later, he says, land men from the railroad came to him and said they had the power to take part of his ranch under eminent domain. He’s been fending off the railroad ever since. The battle intensified last year when the land board leased the Otter Creek tracts. A few months later, the Northern Plains Resource Council and Fix, who serves on the organization’s board of directors, petitioned the federal Surface Transportation Board to re-open the environmental impact statement process, claiming that it didn’t consider the cumulative impacts of the railroad and Otter Creek coal development.

The panel rejected the petition in June. In July, Northern Plains filed a motion for the STB to reconsider that decision. A 9th U.S. Circuit Court of Appeals panel heard oral arguments in Portland, Ore., recently on a separate legal challenge to the railroad dating back to 1997.

The Tongue River Railroad’s counsel, Betty Jo Christian, used to serve as a commissioner on the defunct Interstate Commerce Commission, whose functions were transferred, in 1995, to the STB — which bespeaks “the incredibly cozy relationship between the regulated community and the regulators,” says Northern Plains attorney and University of Montana law professor Jack Tuholske.

The railroad needs a total of 2,675 acres of right-of-way. Mike Gustafson, owner of Billings-based Wesco Resources, and of the railroad permit before Arch and BNSF acquired the Tongue River Railroad Company, says of the effect on private landowners: “That is what it is.”

“What we’ve attempted to do from the Tongue River Railroad’s point of view, over those years that we were involved, is follow the guidelines that were set forth by the STB,” Gustafson says.

He says the full length of the railroad would cross the property of 55 private landowners. He adamantly refutes the allegation that his company has ever threatened to take land by eminent domain. “In fact, we haven’t even started negotiations with the private landowners down there,” he says. “That’s the facts.” He adds that he believes the railroad will be able to “negotiate a resolution” with most of the affected landowners.

Fix can’t imagine any agreeable resolution that involves a train barreling through his property. “When you’re out here you forget that the rest of the world exists,” he says. “Not with a railroad running through.”

Those railcars would head west on the state’s northern or southern rail routes, or both. University of Montana economist Tom Power calculates that if the coal export terminals on the West Coast realize an export capacity of 140 million tons per year, as some estimate, it would require about 30 loaded coal trains, 125 cars long, to cross the state every day. Then they’d come back. That’s 60 trains a day. If the trains were split evenly between the northern and southern routes, the coal trains would pass through Missoula — and every other town along the routes — about once every hour.

“We do have opponents out there,” Gustafson says of landowners like Fix. “On the other hand, I can introduce you to a lot of people in Otter Creek, introduce you to a lot of people between Ashland and Birney, who would tell you they’re very supportive of it. And so it’s a mix.”

I went to Birney, also along the Tongue River, and talked with rancher Terry Punt, who confirmed that sentiments surrounding Otter Creek and the Tongue River Railroad vary.

“Everybody’s got their reasons,” said Punt, sitting at his kitchen table. “They think they’re going to get a job, or their son or daughter will. I hate to argue with anyone on those kinds of issues because if I needed a job, I might be more open to having Otter Creek; or if my kids were starving and needed a job, I might change my tune.”

The Tongue River Railroad was slated to run through Punt and his wife Jeanie Alderson’s 8,000-acre Bones Brothers Ranch, which Alderson’s family homesteaded in the 1880s. Punt also lamented that the railroad would bring more people and forever change their rural way of life. But it appears their ranch will be spared.

In July, news broke that Forrest E. Mars Jr., the candy bar and pet food mogul who owns an 82,000-acre ranch in the area, was the private investor who teamed with Arch and BNSF earlier this month to buy the Tongue River Railroad Company. Mars had been an opponent of the railroad, helping Northern Plains fund litigation. Buying a share of the railroad allows him to nix the southern portion of the railroad that would have crossed his land. That section is about 50 miles, between Decker and O’Dell Creek Road, about six miles northeast of Birney. The rest of the project would move forward with Mars’s full backing. “I will not be helping you fund the current appeal or any future litigation on these issues,” Mars wrote in a letter, dated July 18, to Northern Plains Resource Council.

“For us on the lower end of the river,” Fix says, “we’re still in their gunsights.”

In the debate over Otter Creek, the way of life, and property rights of ranchers along the Tongue River and in the Otter Creek Valley, damage to the landscape, and the implications of increased carbon dioxide emissions are weighed against an economic windfall for the state and job opportunities for eastern Montanans. But there’s another important consideration: the Northern Cheyenne Tribe.

The Otter Creek coal tracts lie to the east of the Tongue River. To the west, on the Northern Cheyenne Reservation, lies a coal deposit called Logging Creek that’s nearly as large, containing about 1.2 billion tons. It represents a much-needed economic opportunity to the tribe, which has an unemployment rate of over 60 percent.

But the tribe doesn’t own all of the mineral rights to the deposit. Houston, Texas-based Great Northern Properties owns about 5,000 acres’ worth. It acquired the rights in 1992 from Burlington Northern Railroad, which had inherited them from the Northern Pacific Railway. The mineral rights should have been turned over from Northern Pacific to the tribe in 1900, when the reservation was expanded, but they weren’t, due to, in the words of U.S. Rep. Denny Rehberg of Montana, “the federal government’s surveying errors.”

To correct this century-old mistake, Rehberg and Montana Sen. Max Baucus introduced legislation in March to give those mineral rights to the tribe. In exchange, Great Northern Properties would receive rights to about 232 million tons of federal coal near Ashland and Roundup. That’s almost twice as much coal as the tribe would receive in the deal, although not all of it could be mined.

Northern Cheyenne President Leroy Spang says the swap is in the tribe’s economic best interest. “We have to bring some money into this tribe and I think responsible coal development is one of our best bets,” Spang wrote in a recent tribal newsletter. During a hearing on Rehberg’s Montana Mineral Conveyance Act before the House Subcommittee on Indian and Alaska Native Affairs, on June 22, Interior Department Deputy Assistant Secretary Jodi Gillette said an appraisal is needed to ensure the two sides receive equal value.

Even if the tonnage doesn’t match, the tribe stands to receive 40 percent of royalties on sales of the coal acquired by Great Northern, which creates an incentive for the tribe to support off-reservation coal development, whereas the Northern Cheyenne have historically been reluctant to tap even their own vast coal reserves.

Says Punt: “The thing I don’t like about it, and the thing Northern Plains Resource Council doesn’t like about it as a group, is that it pits the Cheyenne, who have always been our allies, against us in a way they’ve never been pitted against us before.”

That would appear to make two former allies in the fight against coal development in eastern Montana — the other being the billionaire Forrest Mars — who are shifting sides.

A small hurdle was cleared in July, when the House subcommittee unanimously passed the Montana Mineral Conveyance Act. “We’ll finally give the Northern Cheyenne control of their own resources and the associated revenue while creating good jobs for the people of Montana,” Rehberg said.

The biggest hurdle remains the approval of Arch Coal’s Otter Creek Mine permit. If that succeeds, the Tongue River Railroad would be next, and the mining of the Northern Cheyenne’s Logging Creek could follow.


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