Feds reject $5.3M offer for Montana coal lease

Associated Press Modified: November 17, 2011 at 7:45 pm •  Published: November 17, 2011

BILLINGS, Mont. (AP) — Federal officials on Thursday rejected a $5.3 million offer from a company seeking a lease to mine 35.5 million tons of coal that is in the path of a major underground mine in Montana.

The Bureau of Land Management said the coal was worth more than the 15 cents per ton that Signal Peak Energy offered. The agency did not say how much it thinks the coal is worth.

The federal coal leases are in the path of the company's 300-employee Bull Mountain mine near Roundup. No other bids were submitted during a public auction of the leases that ended Wednesday.

Signal Peak had anticipated mining the coal as early as 2013, but it was uncertain how that date could be affected by Thursday's action. The mine's owners have plans to increase production in coming years and ship large volumes of coal to Asian and South American markets.

"We're going to review the BLM decision and decide how to proceed going forward," said mine spokesman Mike Dawson.

Signal Peak is jointly owned by Boich Co. and FirstEnergy of Ohio and the Gunvor Group, an international commodities broker. Gunvor paid $400 million for a one-third stake in the mine last month.

Coal production in recent months at Bull Mountain translates into about 12 million tons annually.

The state of Montana had stood to receive about half of the initial bid on the lease and a share in future royalties.

Gov. Brian Schweitzer said he was concerned Thursday's rejection could have a "chilling effect" on Signal Peak's willingness to invest more money in the mine.

"What is the price, BLM? Can you tell us? It makes it tough to bid when there's no competitive bid and the people that sell it won't tell you how much they want," he said.

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