Tongue River Railroad Co. Inc. (TRRC) on Nov. 25 petitioned the U.S. Surface Transportation Board to hold a proceeding in abeyance pending a final decision from the Montana Department of Environmental Quality (MDEQ) on the Otter Creek Mine permit application, and judicial affirmance of any decision granting that permit.
The TRRC has been working at the board since 2012 on approval for a realignment of a planned rail line originating at two points in the Montana end of the Powder River Basin, including an origination at the planned Otter Creek surface mine of Arch Coal (NYSE: ACI), with the line extending 42 miles to an interconnect with the BNSF Railway. The line would serve, as its initial customer, a large coal mine to be developed by Arch Coal’s Otter Creek Coal LLC subsidiary.
Arch, together with the BNSF and TRR Financing LLC, owns Tongue River Holding Co. LLC, the parent of TRRC.
In July 2012, Otter Creek Coal filed an application with MDEQ for a permit that would allow it to develop the Otter Creek mine under Montana’s Surface and Underground Mine Reclamation Act. This permit application remains pending.
Under the Montana Environmental Policy Act, MDEQ is required to prepare an environmental impact statement before a mine permit can be issued. While the environmental impact statement scoping process has been completed, a draft environmental impact statement has not yet been issued by MDEQ. TRRC said it understands that once the draft environmental impact statement is issued, the public will be provided an opportunity to comment. The MDEQ will then review and respond to the comments and issue a final environmental impact statement. Following the issuance of a final environmental impact statement, MDEQ will decide whether or not to grant the mine permit.
That entire process is likely to take months, likely pushing a decision granting or denying the permit off until the latter half of 2016, at the earliest. Further, any judicial review of the Otter Creek mine permit would push the timeline for any final determination of whether and when the mine might be developed out further, perhaps for another year or more after the permit is granted, the railroad pointed out.
“Unless and until Otter Creek Coal obtains a final, judicially-affirmed permit from the State of Montana allowing it to develop a mine, and that mine is then developed, any TRRC rail line will have no coal to transport and therefore no reason to be constructed,” the company added.
TRRC sought to minimize the time between when it believed the mine would be ready to begin production and when the rail line would be operational on the basis that doing so would be optimal for TRRC, coal shippers, and the public. TRRC also filed its application with the board in light of a more compressed project development timeline that was based on the proposition that concurrent rail and mine permitting were needed at the time. However, given the delays related to the mine permitting process and near-term market weakness, TRRC and Otter Creek Coal have recently revisited the timelines for the permitting and development of their respective projects. Based on that review, they have determined that there is now sufficient time to accommodate sequential as opposed to concurrent permitting of the mine and rail projects, the railroad told the board.
The availability of that additional time gives rise to the opportunity to delay the rail construction permitting until there is more clarity related to the timing of the mine permitting process. The advantage of doing so is to avoid any further expenditure, and potential waste, of resources by TRRC and the board in the event that mine permitting is further delayed or that MDEQ decides to deny the mine permit.
The TRRC noted that its line could potentially serve other yet to be developed mines in the Ashland, Montana, area but no such mines have initiated the permitting process.