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BLM to re-offer lease on coal near Roundup

By Matthew Brown

Associated Press

Published: Wednesday, Dec. 21 2011 7:05 p.m. MST

In this 2009 photo, coal is loaded on to a nearly mile-long BNSF train at Signal Peak Energy's Bull Mountain mine south of Roundup, Mont. Another lease sale is planned for 35.5 million tons of publicly-owned coal near Roundup after an earlier bid on the fuel was rejected as insufficient, a federal official said Wednesday, Dec. 21, 2011.

The Billings Gazette, Larry Mayer, Associated Press

Enlarge photo»

BILLINGS, Mont. — Another lease sale is planned for 35.5 million tons of publicly-owned coal near Roundup after an earlier bid on the fuel was rejected as insufficient, a federal official said Wednesday.

The Bureau of Land Management said the coal's market value was more than the $5.3 million initially offered by Signal Peak Energy last month.

The company asked for another sale to be held because acquiring the leases is a key component of its mining plan. The federal coal tracts are in the path of Signal Peak's 300-employee Bull Mountain mine.

No date for the sale has been set, said BLM spokeswoman Mary Apple.

"It has to go through some reviews in our Washington office," she said. "The soonest would be 30 days after it's published in Federal Register."

Mining of the federal coal tentatively was slated to begin in 2013. Signal Peak mine is jointly owned by two Ohio companies, Boich Co. and FirstEnergy, and the Gunvor Group of Europe.

The company was the sole bidder in the November lease sale, with an offer that equaled 15 cents per ton of fuel. The BLM has not disclosed how much it thinks the coal is worth.

The same tracts have been included in a proposed three-way exchange of coal involving Montana's Northern Cheyenne Indian Tribe and Houston-based Great Northern Properties. Legislation to enact that swap is pending before Congress, but backers said it could still take place if the lease sale goes through.

Conservation groups have opposed leasing the coal, saying mining could damage water supplies and cause excessive subsidence on ranchland above the mine. An attempt to block the initial sale was denied by a review board within the U.S. Department of Interior.

An appeal of that decision by the Bull Mountain Land Alliance and the Northern Plains Resource Council is pending.

Meanwhile, mining has been suspended at Signal Peak since Dec. 1, when high levels of a dangerous gas, carbon monoxide, were discovered in a portion of the underground mine.

Workers have been pumping nitrogen into the area with high levels of carbon monoxide in an attempt to lower concentrations of the gas.

The Mine Safety and Health Administration will decide when gas levels are safe enough to allow miners to return.

Agency spokesman Jesse Lawder said Wednesday that conditions had improved enough to allow some underground maintenance activities by Signal Peak. He said there were no projections for when full operations would resume.

Mike Dawson with Boich Co. said that about two dozen employees were involved in the maintenance work. Work on the surface has continued and no layoffs were expected, Dawson said.

Signal Peak's owners said in November that they intended to ramp up production to begin shipping large volumes of coal to markets in Asia and South America.

That came after Gunvor, an international commodities trading company, paid $400 million for a one-third stake in the mine.

Prior to the suspension of mining, coal production in recent months at Bull Mountain translated into about 12 million tons annually.

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