Tribe's $7B coal project stalls, draws suit

BILLINGS — A Montana tribe's plan to build a $7 billion coal-to-liquids project has stalled after it failed to attract sufficient financing, leading to a courtroom dispute between the tribe and its partner in the proposal.

A federal judge in Delaware has scheduled a hearing next week on a request by a Texas-based investment group that accuses the Crow tribe of backing out of their 2009 development agreement.

According to a lawsuit filed this week by Australian-American Energy Co., the Crow Tribe claims AAEC has failed to make minimum annual expenditures called for under the agreement.

The company says it has spent more than $10 million toward the project but that "circumstances beyond the parties' control" have slowed its progress.

"The collapse of the global equity markets, the unanticipated development in the United States of vast resources of shale gas and regulatory uncertainty regarding support of coal to liquid projects have materially and adversely affected the economic feasibility of the project," the company declared in a Wednesday court filing.

AAEC also said conditions needed to support its continued investment, including the tribe's execution of a water rights lease, have not been met, and that the tribe had no grounds to send a termination notice.

It wants a temporary injunction until an arbitrator is appointed.

Tribal leaders warned last year the proposed Montana reservation project could founder without more federal support. A tribal representative said Thursday that the tribe still intends to pursue the project and said more details would be forthcoming.