Judge rejects challenge to Montana coal lease

BILLINGS — A judge has rejected a lawsuit challenging the state Land Board's lease of 587 million tons of publicly-owned coal in southeastern Montana.

Conservation groups had argued that further environmental studies were needed and that the lease sale would make mining inevitable if allowed to stand.

But District Judge Joe Hegel says the state did not give up its discretion to halt mining at a later date when it leased the coal to St. Louis-based Arch Coal Inc. for $86 million in 2010.

Hegel said in his Feb. 3 ruling that the state still must ensure the environment is protected if the coal is mined from the leases near Ashland.

"While it is true that the Land Board has a constitutional duty to prudently manage the property within its control with an eye towards financial return, it cannot do so by turning a blind eye to environmental protection," Hagel wrote. He added that the state "still retains the discretion to mitigate or halt the development."

The state-owned tracts are part of a coal reserve in an area known as Otter Creek that holds more fuel than the United States consumes annually.

Plaintiffs in the case included the Northern Plains Resource Council, Sierra Club, National Wildlife Federation and Montana Environmental Information Center.

In arguments last year, attorneys for the plaintiffs said they wanted studies on mining impacts and the consequences of releasing huge volumes of the greenhouse gas carbon dioxide when the coal is burned.

State officials and representatives of Arch have said those environmental studies will come later, during the mine permitting process.

Representatives of Arch could not be reached immediately for comment.

Northern Plains issued a statement that called Hegel's dismissal of the case a "mixed ruling" because it said the Land Board has continuing obligations to the environment.

"The Land Board should let all of us know what limitations it will impose on this coal mine before this project goes any further," Broadus-area rancher Walter Archer said in the group's statement. "I'm worried about what those limitations, or lack thereof, might mean for my ranching operation."

Arch, the nation's second largest coal company, earlier reached a $73 million deal with Great Northern Properties to lease the remaining coal at Otter Creek.