Cloud Peak Energy and Crow Tribe reach tentative agreement for up to 1.4B tons of in-place coal in Montana
27 July 2012
Cloud Peak Energy Inc., one of the largest US coal producers, and the Crow Tribe of Indians reached tentative agreements regarding exploration rights and exclusive options to lease and develop up to an estimated 1.4 billion tons of in-place Northern Powder River Basin coal on the Crow Indian Reservation in southeast Montana. An earlier Crow Tribe project with Australian-American Energy Co. to build a coal-to-liquids plant (earlier post) had foundered.
The agreements are being submitted to the Crow Tribal Legislature for review, which is anticipated during August. If approved by the Legislature, the agreements would be executed by the Tribal Chairman and Cloud Peak Energy and then submitted to the US Department of the Interior for review and requested approval.
Cloud Peak Energy would pay the Tribe $2.25 million upon Tribal approval and execution of the agreements, $1.5 million upon approval by the Department of the Interior, and additional annual payments thereafter through the initial option period, to a cumulative total of up to $10 million. Additional option payments would be made through any extension periods. If the agreements are approved, Cloud Peak Energy anticipates conducting exploration during the initial option period to complete delineation of the potentially economic coal tonnages subject to the options.
The tentative agreements provide for exploration and three exclusive options to lease three separate coal deposits on the Crow Indian Reservation over an initial five-year term, with two extension periods through 2035 if certain conditions are met. Upon exercise of an option(s) to lease, Cloud Peak Energy would pay the Tribe an amount equal to $0.08 per ton to $0.15 per ton, depending on the lease and coal deposit and subject to adjustment for inflation.
The proposed agreements also set forth adjustable royalty rates, ranging from 7.5% to 15%, and contain standard coal production taxes amounting to a nominal 20% of FOB mine gross proceeds to be paid to the Tribe. Cloud Peak Energy would also provide preferential hiring, training, and promotion for qualified Indians, funding of $50,000 per year for scholarships for qualified Crow Tribal members, and support for Indian-certified contractors, among other things.
The Cloud Peak Energy agreements we are presenting to the Tribal Legislature for approval are the result of extensive negotiations, and we believe that they offer the best potential for developing the Crow Tribe’s coal resources in the southeastern part of the Reservation. Partnering with 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, and Cloud Peak Energy’s recent acquisition of the CX Ranch lands provides surface access for mining and shipping Crow coal through the existing Spring Creek mine train load-out facilities.—Cedric Black Eagle, Chairman of the Crow Tribal Executive Branch
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