Ohio cos. buy Montana mine, plan to up production
BILLINGS, Mont. ” Two Ohio companies plan to sink $450 million into a central Montana coal project, in a bid to dramatically increase production from an underground mine that has struggled for years.
Under terms of a deal announced Thursday, Boich Companies, a Columbus coal firm, and FirstEnergy, an Akron utility, jointly acquired 80 percent of the Bull Mountain mine near Roundup. They also bought the rights of way needed for a planned railroad that would serve the mine.
The companies plan a more than 50-fold increase in coal production within the next several years, to at least 13 million tons annually, said Boich spokesman Mike Dawson.
That would offer a significant boost to Montana’s coal industry, which sits atop the largest reserves in the nation but lags neighboring Wyoming in terms of production. It also underscores the continued attractiveness of coal as a fuel source, despite environmental pressures over its role as a top contributor of greenhouse gas emissions.
“The market for coal is there. This is the right time to be in the business,” Dawson said.
The Ohio companies would build a 35-mile rail spur to move the coal to eastern markets, where FirstEnergy operates a dozen coal-fueled power plants. A coal preparation plant will be built at the mine site, and the operation will also get a new name ” Signal Peak Energy.
Largely idle since last year, the mine is Montana’s only underground coal operation, with recoverable reserves estimated at 340 million tons. Bull Mountain has gone through numerous ownership changes over the last two decades and been hobbled in recent years by financial difficulties.
Bull Mountain Coal Mining Inc. retains a 20 percent stake in the mine under the deal announced Thursday. The company is controlled by the Airlie Group, a Greenwich, Conn., investment fund.
Boich and FirstEnergy have the option to acquire the 20 percent stake after 18 months.
Bull Mountain Coal controller Darrell Roland said the mine’s historical peak production was about 250,000 tons, in 2006. He referred additional questions to the other companies involved in Thursday’s announcement.
Boich CEO Wayne Boich credited Montana Gov. Brian Schweitzer with making the deal possible, through stressing to company executives the mine’s potential importance in the state.
Schweitzer, a Democrat, said the mine expansion would be the first of its kind in Montana in 30 years and could increase the state’s coal production by 35 percent.
“I am pleased to see this important project come to fruition with such quality investors,” he said.
Conspicuously absent from Thursday’s announcement was any discussion of a coal-to-liquids plant the mine’s prior owners had pursued. That $1.5 billion project got a strong push from Schweitzer when it was announced in 2006, but faded when Bull Mountain ran into financial troubles.
FirstEnergy has no plans to revive the plant proposal, said spokeswoman Tricia Ingraham.
“There has not been any talk of a plant there. We invested in a coal mine,” she said.
Boich’s Dawson said a coal-to-liquids plant was “not part of the deal.”
At Wall Street’s close, shares in FirstEnergy (FE) had dropped 2.5 percent on news of the acquisition, to $76.99. The company’s investment in the project includes a $125 million equity stake.
Boich is a privately held company. It declined to provide further details of its share in the deal.
The acquisition is a vindication of sorts for former mine owner John Baugues Jr., who endured lawsuits from disgruntled investors and harsh criticism from the local community after the mine was shuttered last year.
Baugues, who came to Montana in the mid-1990s after starting and folding a string of mines in his native Tennessee, declined to say Thursday whether he would retain a role in the project.
“Let’s just let it go the way it is. It will be successful,” he said.
Larry Lekse, county commission chairman in Musselshell County, where the mine is located, said Baugues “was the one that kept this thing going.”
Although he didn’t always agree with Baugues’ management tactics, Lekse said his refusal to give up on the project finally paid off.
“He had the dream that this could be a reality, and he kept after it,” Lekse said.
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