Photos taken May 19, 2014. Otter Creek and Tongue River Valleys in southeastern Montana. DSC_4797 Read More
In 2013, the Southeastern Montana Economic Development Council (SMEDC) held seven community meetings in Ashland, Colstrip, Hysham, Miles City, Broadus, Lame Deer and Forsyth to get community input on developing a comprehensive economic development plan and assess the state of those communities. They also developed an online survey to reach people that wanted to contribute but couldn't attend an in-person meeting. Each meeting was based on a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis and a brainstorming session for proposed projects. In a total of seven community meetings they had 113 people attend. Total.  This was more than they had ever had in seven years of community meetings. Six people filled out their online survey.  A total of 119 people out of a total population of 22,000 gave them feedback on their economic strategy and plan. That is .005% of the total population.  From what I can tell from their meeting reports, it seems like about three people came to the Lame Deer meeting. Read More
On February 13-14, representatives from the Surface Transportation Board (STB), the Tongue River Railroad Company (BNSF & Arch Coal) and their contractors from ICF International came to Billings to host the second in-person Section 106 tribal consultation meeting for the proposed Tongue River Railroad.  Much was said those two days and I don't think anyone would disagree with my assessment that the tribal historic preservation officers and most other tribal representatives who were present do not want a coal railroad to disturb the Tongue River Valley. The folks that stand to make money from this project don't understand it when people say to them that, "hey, we may be monetarily poor but we have this land."  They don't understand the value we place on our wildlife. They don't understand emotional or cultural ties to the water, to the plants and to the animals. Emotions and culture don't have a monetary value and therefore they dismiss it. How much money is a deer worth that feeds your family for winter? How much money is it worth to walk into the Otter Creek valley and hear only birds singing?  How much money are petroglyphs worth that are thousands of years old? But wait, they say, we'll save the rock and put it in a glass case for you before we blow everything else up. Tell me, how much that is all worth, I want to know.
There is a message that is being sent over and over again to the people that live there, both explicitly and implicitly: Your only value is the minerals underneath your feet.
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I woke up this morning to a phone call from a friend in southeastern Montana. "Did you read the Billings Gazette this morning?" "Not yet, why?" "Arch Coal just lost their ass." What he was referring to was today's headline in the Billings Gazette, Arch Coal writes DKRW Advanced Fuels’ coal gasification project as a $57.7 million loss. The coal to liquids project they proposed in Medicine Bow, Wyoming was a speculative venture (at best) that would have bilked taxpayers out of billions of dollars in public loan guarantees. Arch Coal invested $25 million dollars in 2006 for a 24% stake in the company. Taxpayers for Common Sense (TCS) found that there was no real high point for the project backers. DKRW started losing money the same year that Arch Coal began investing in the project. TCS found they lost $400,000 in 2006,  $6.7 million in 2007 and $17.5 million in 2012. Arch Coal loaned DKRW a total of $44 million between 2006 and 2013, none of which has been recovered.

How this relates to the proposed Otter Creek coal mine and Tongue River Railroad

Arch Coal is a company in dire straits. When they leased the Otter Creek coal tracts in 2010 their stock prices hovered around $35/share. Today it's at $4.47/share. Yesterday, they posted a bigger than expected quarterly loss due to lower coal prices and weak demand. If you are under the impression that this is a company capable of opening a new greenfield mine and building a new 43-mile rail line to haul their coal, you're wrong. If you think that this is a company who has the resources to successfully reclaim the Otter Creek valley back to anything even close to the original condition, you're wrong. So the real question we should be asking is what is Arch Coal's plan for the Otter Creek and Tongue River Valleys? Arch Coal is trying to secure the necessary permits from the state of Montana in order to sell the permitted but unbuilt mine to another company. Coal tracts with a permit are a lot more valuable than coal tracts without a permit. They spent a combined $159 million dollars to lease the coal tracts in the Otter Creek valley from the state of Montana and Great Northern Properties. $159 million is a bit harder to walk away from than $57 million.

The ever-changing Otter Creek coal mine timeline

The hole Arch Coal isn't digging just keeps getting bigger and bigger. Not only does Arch Coal not have enough money to open a new mine, they are also faced with the stipulations of the lease which gives them a 10-year window to develop the mine. It has been almost exactly four years since they leased the coal from the state of Montana. They still do not have a permit.  Just a couple days ago, Mike Rowlands, Arch Coal's only employee in Montana, signed a new agreement with Montana Department of Environmental Quality extending, yet again, the timeline for the Draft Environmental Impact Statement. The new release date has been pushed back to January 2015 instead of September of 2014. The new Record of Decision and Final Environmental Impact Statement is now not expected until September of 2015. Unfortunately, the new expected dates for public hearings are in February of 2015 which, as you know, is not the easiest time to be traveling in southeastern Montana. But, at least it's not during hunting season! Stay tuned though. I'm pretty sure by fall of 2014, I'll be writing another piece about yet another change in the Otter Creek timeline. Revised Tentative Otter Creek Schedule Arch Coal and DEQ new timeline        
  This is the Little Dude. He was a quadruplet. His mom died and we raised him as a bottle baby. Needless to say, he is a permanent addition to the farm.
The Little Goat Dude

The Little Dude

The Little Dude and my nephew Liam have grown up together. Here they are when they were both just little.
Liam and the Little Dude (2011)

Liam and the Little Dude (2011)

Every time I see them together I think of a poem by Robert William Service called The Goat and I.  And since spring is upon us and my goats help me forget about the world's worries, I thought it would be appropriate to share the poem with all of you. Enjoy.

The Goat and I

Each sunny day upon my way A goat I pass; He has a beard of silver grey, A bell of brass. And all the while I am in sight He seems to muse, And stares at me with all his might And chews and chews.

Upon the hill so thymy sweet With joy of Spring, He hails me with a tiny bleat Of welcoming. Though half the globe is drenched with blood And cities flare, Contentedly he chews the cud And does not care.

Oh gentle friend, I know not what Your age may be, But of my years I'd give the lot Yet left to me, To chew a thistle and not choke, But bright of eye Gaze at the old world-weary bloke Who hobbles by.

Alas! though bards make verse sublime, And lines to quote, It takes a fool like me to rhyme About a goat.

Robert William Service
Liam and the Little Dude (2014)

Liam and the Little Dude (2014)

ICF International, the third party contractor who is completing the environmental impact statement (EIS) for the Tongue River Railroad is also the third party contractor hired to complete the EIS for the Longview coal port terminal in Longview, Washington. Arch Coal, who is proposing to develop a large coal mine in the Otter Creek Valley of southeastern Montana, is invested in both projects. (ICF is also involved in the Keystone XL project and had financial ties to TransCanada) On February 27, 2014, ICF International released a white paper optimistically stating that both the global and domestic markets for coal will rebound. They call it a white paper, I call it seven pages of statements based on unsubstantiated assumptions. Maybe it's just a regional difference.  Never once do they mention the limited rail capacity in the northwest or southern rail lines, the massive public opposition to proposed coal ports or new coal mines, the changing market conditions in southeast Asia or the thick air pollution in China which is causing the country to retool their energy portfolio. Not only do they fail to provide a good argument for their conclusions, one has to wonder if the authors even did a cursory google search about the topic before they began.  The conclusions of the authors are counter to almost every other recent analysis done by investment firms and market experts. When reading through the document, I was expecting to find some new information or at least a compelling argument for the rebound of the coal market. But I found nothing but vague statements and simple tables and graphs. One of my favorite report features was the header photo they used on every page of wind turbines in front of a farm house.  A coal report with the only photos used being of wind turbines. So weird. ICFPhotoofWind Banks, investment firms and market experts recognize coal is a risky business and is beginning an inevitable decline because of cheap natural gas, an oversupply of thermal coal from Australia and Indonesia, and new policies by China to cut coal demand. Thanks to the great work of the Sightline Institute and Clark Williams-Derry, we have a great list of recent reports and statements by banks and investment firms about coal markets.
  • November 2012, Bank of America Merrill Lynch, 2013 Energy Outlook“We see a downward path for global coal prices…Seaborne thermal coal continues to battle with heavy physical oversupply as producers still export too much into a weak seaborne market …Inventories are bloated as demand just cannot keep up.”
  • February 2013. IHS CERA, Coal Rush: The Future of China’s Coal Market. “[I]nternational suppliers may find themselves in a much tougher market as they face competitors that previously did not exist. The major Indonesian suppliers will always compete effectively in southern China…but mines elsewhere in the world will struggle to find a competitive edge.”
  • May 2013Deutsche Bank, Commodities Special Report, Thermal Coal: Coal At A Crossroads. (No URL, but summarized here.) “[N]ew demand preferences in the largest consuming nations will result in much lower demand growth going forward, pushing prices lower in real terms through 2020.”
  • June 2013. BernsteinResearch, Asian Coal & Power: Less, Less, Less…The Beginning of the End of Coal. (No URL, but summarized here.) “Regional miners will see almost zero demand in China from 2015…Once Chinese coal demand starts to fall, there is no robust growth market for seaborne thermal coal anywhere.”
  • July 2013. Goldman Sachs Rocks & Ores, The window for thermal coal investment is closing. ”Earning a return on incremental investment in thermal coal mining and infrastructure capacity is becoming increasingly difficult…[T]hermal coal is a geologically abundant resource in an industry with relatively low barriers to entry. As coal demand becomes increasingly constrained, the competition among suppliers is likely to intensify.”
  • September 2013Citi, The Unimaginable: Peak Coal in China. ”[S]ignificant shifts in China’s economy and power sector are now under way that demand a reassessment of Chinese coal’s perpetual climb…The same macro forces that are driving the economic transition and lowering power demand should also sharply decelerate coal’s use."
  • April 2014. Morningstar, Inc. Morningstar predicts a halt in China's growth in coal use. Analysts say growth in China will come from less energy-intensive arenas. The air pollution in China is a huge problem and the report predicts that they will  shift their energy supply to nuclear, wind and hydroelectric. Although coal will be an important part of their energy portfolio, Morningstar believes that domestic minion will increase and they will increasingly be tapping their own natural gas reserves. "In our analysis, coal-fired generation peaks by 2014, then declines through 2020. Neither an economic rebalancing nor a political shift alone is sufficient to halt China's runaway coal demand growth. But together, they herald its end." Morningstar analyst Daniel Rohr said U.S. coal producers wanting to export more fuel abroad should be "very worried."

How this relates to the Tongue River Railroad

ICF is a very large corporation who makes a lot of money consulting for government and industry and developing EISs for energy and infrastructure projects, among other things. ICF is responsible for developing a market analysis for coal in the EIS for the Tongue River Railroad and the Longview coal port terminal. They will making a recommendation to the government agency about whether or not the project is economically feasible. So, ICF has a couple of options. The first one is that ICF could state in the EIS what most banking and investment firms agree on, that there is oversupply of coal in many regions, that China is moving on to different energy sources and that investing in new coal ports and coal mines is risky business. They could come to the logical conclusion that there is no public need or demand for a new coal railroad or new coal ports. However, ICF will most likely not write that because if they did they would lose business. How would they lose business? Well, the applicant, in this case the Tongue River Railroad Company, gets to pick which contractor is chosen to complete the EIS from a list of approved contractors provided by the government. Here is the description of the process directly from the Surface Transportation Board.
Once an applicant decides to use a third-party contractor to assist in the preparation of the environmental document, the next step in the process is to select a third-party contractor. SEA maintains a list of approved third-party contractors, comprised of individuals and firms with expertise and experience in environmental review of rail or transportation projects. (10) When an applicant expresses an interest in using a third-party contractor, SEA furnishes the applicant a copy of the third-party contractor list. The applicant indicates which contractor from the list it would prefer to use by formally requesting in writing SEA's approval of that contractor. (11) (SEA means Section of Environmental Analysis)
So, in the first scenario, ICF writes something that Arch Coal and Burlington Northern Santa Fe (BNSF) don't like. Then, the next time Arch Coal and BNSF see ICF International on the list of potential contractors to pick for the development of the EIS for an energy project, they will probably pick a different one. End of story. ICF would lose large industry contracts. The second scenario is that ICF International will say exactly what they state in their white paper. They will say that the global and domestic market for coal is rebounding and will be strong in the future and so the building of the coal ports and the Tongue River Railroad makes sense from a market standpoint. At that point, our agency staff will have to decide if they agree with that analysis. But, as we all know, agencies are underfunded, understaffed and definitely are not experts on global coal markets. So, they will most likely accept the conclusions of ICF. My hope is that the really nice and thoughtful people that I have met from ICF International who are working on the EIS for the Tongue River Railroad take the time and do their research on coal and coal markets and not rely on this 7-page white paper completed by their colleagues. Because if this is the level of analysis that we can expect to get in our EIS, we're all screwed.          
Wally McRae packed The Roxy and brought a little EOB to Missoula, Montana last week for a fundraiser for Rosebud Protective Association. It was spectacular show. DSC_4555 DSC_4567 DSC_4554 DSC_4566 DSC_4562 DSC_4603 DSC_4591 DSC_4578