Montana Schools Poised to Benefit from Coal Revenue

Published July 1, 2009

The State of Montana will bring in $1.4 billion in new revenue from royalties and tax payments if it allows development of coal deposits in the Otter Creek area of southeastern Montana, an independent appraisal has determined. State officials are eager to take advantage of this new revenue source to provide funds for the state’s education system.

The Otter Creek mine appraisal was conducted by Norwest Corp., a Salt Lake City consultancy, and delivered to the Montana Land Board on April 20. For the first time since 1948, the Land Board consists entirely of Democrats.

Economic Windfall for Schools

Evan Barrett, chief business development officer to Montana Gov. Brian Schweitzer (D), says mining the land will deliver tremendous economic benefits to the state and help improve its education system dramatically.

“Most of the coal in Montana is owned by private people. But in this case, this is a checkerboard ownership with a private company. The state owns the coal, and the royalties of developing that coal go to the State of Montana, which will be sending them to the school trust fund. Millions will go into the school trust fund for use in K-12 education.”

In addition, Barrett said, “15 percent of the value of the coal is taxed; those proceeds are sent to many different programs across the state and also sent to the school trust fund.”

Benefits for Local Communities

“There is also the gross proceeds tax revenue from this project, and that goes to local governments. We must include negotiated royalty payments too, and then you have to throw on top of this new income taxes paid by all the people who work for the railroad company building and managing the rails, the new income taxes from the people who work in the mine, and finally the taxes paid by the mining company itself,” Barrett added.

“There are six ways local governments and the state government make money on this,” Barrett said. “This project does have significant benefit to Montana once it gets into development.”

Barrett emphasizes the coal revenue is an investment in the state’s future, particularly through educational opportunities.

“Gov. Schweitzer is very committed to education and anything that boosts education,” Barrett said. “This mine in particular has the potential to seriously improve education in Montana. It can be dedicated to substantially increasing teacher salaries, new schools, everything.

“As well,” Barrett continued, “there is an agreement with the Northern Cheyenne tribe that lies due west of the Otter Creek, in which the tribe is given preferential rights for hiring, and that is very important because the economy of the reservations is very weak. And there is also an option for developing tribal coal, but that’s up to them to decide.”

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.