AG Steve Bullock on the Corporate Welfare that is the Otter Creek Coal Leases

by jhwygirl

A timely post, given that the corporate welfare 15 cent bid (or bids) for the Otter Creek coal tracts were announced late Monday.

Below are Attorney General Steve Bullock’s comments at the February hearing where the Land Board (in a 3-2 vote, with Bullock and Superintendent of the Office of Public Instruction Denise Juneau voting no) lowered the bid price from 25 cent/ton to 15 cent/ton, a 40% reduction.

Governor, my colleagues – this is certainly a decision that’s received its share of attention and I think that often the loss of the arguments both for and against – and it always doesn’t fit into a two-minute news story – are the requirements that the Constitution imposes upon us as Land Board members.

This isn’t a policy decision like a legislator can make for or against continued development of coal. And it’s not like the decision to sell off a piece of surplus property. Montana Supreme Court has said that we have a duty to the public that goes beyond that of the ordinary business man. The courts have also said that the Land Board must get full market value – the largest measure of legitimate advantage – for any property that we lease or sell.

When I voted in December to lease Otter Creek I said that I’ll support the project if it’s done right…and doing it in a manner consistent with our Constitutional duties carries with it in my mind at least three considerations: First, the coal must be leased and developed in a way that follows our environmental laws and includes continued oversight by this board. Second, the lease must maximize the benefit to the trust as the Constitution requires, and third – that Montana taxpayers shouldn’t be footing the bill for a railroad that benefits coal and power companies.

I don’t believe that lowering the bid price to 15 cents per ton or monkeying with royalty payments fulfills that obligation to maximize the benefit to the state treasury. And I think it’s easy to think that all we’re talking about today when we’re talking about the difference between 25 cents and 15 cents per ton for a bonus bid is one thin dime.

The drop in our bonus bid of 10 cents will cost the state $57 million. That’s $57 million dollars.

This 10 cent reduction will cost the treasury about the amount generated by every timber sale this board approved over the last 5 years.

Even in these tough times, Montana’s budget is in a stronger position than just about every other state because we’ve been fiscally conservative. Unloading the coal with a bonus bid that’s a fraction of what our neighbors are charging isn’t’ consistent with that fiscal responsibility that we’ve shown.

And it certainly, in my estimation, doesn’t meet the Constitutional obligations to maximize the amount of money we return to the state treasury.

And as the board is looking and considering to lower the bidder royalty to make this more attractive for the coal developers I don’t think that we can do that without acknowledging that we will be funding the Tongue River Railroad. I’ve said since the beginning that what I don’t want to see is Montana taxpayers footing the bill for a railroad to get coal and energy companies a windfall. And I’ve also said that were the railroad in place I think everyone would agree that we’d be getting more for this lease than what Arch has so-far signaled that it is willing to pay.

I’ve asked rail economists to independently analyze this..and provided that to the Board and they concluded that the Wyoming-originated coal will save $2.83/ton in shipping costs if this railroad is completed.

While we’re debating whether to reduce our bonus bid by another 10 cents a ton, Wyoming shippers will be getting a discount of 28 times that if the railroad is completed. And while we’re talking about reducing the amount to our treasury by $57 million, this review shows that a railroad in the Tongue River can save existing coal mines and power companies potentially well over $100 million each and every year.

I just don’t think that in these tough economic times Montana taxpayers should be asked to effectively be bailing out multi-national coal and energy companies. That’s not the state’s role.

Now – there will be a time when this project makes sense and I think there will be a bidder that will be willing to pay full market value for the right to develop this resource. And as members of the Land Board that at that time we do have a Constitutional obligation to lease that land. Until then, I don’t think that we need to have a fire sale. I will be voting against the motion to reduce the bonus bid from 25 to 15 cents.

After which the room broke out in applause.

Bullock’s decision was not easy. It showed. Saying the things he said contradicts much of what the proponents of the leases (on both sides of the table) had said.

Doing the right thing should not be so hard. Insider politics makes doing the right thing hard. I hope Bullock has seen the support that has stuck to him his decision to do the right thing.

I know I will remember. Thank you Denise – Thank you Steve.

  1. Pilot

    I have to commend General Bullock as well, and Commissioner Juneau also. I also hope that scrutiny will be given to the three Commissioners who approved this ripoff.

    When they met in Billings recently both opposed still more bailout money for the Hardin Two Rivers Authority, the nutcases who begged for Guantanamo detainees to be sent to the local jail.

    • Lindeen is a disgrace in this. She campaigned on a biodiesel bus, fcs! I’m very disappointed that campaigned for her, yet alone gave her some of my hard earned $.

      She still has a chance to redeem, but I’m not holding my breath.

      The Board will decide whether to officially accept the least tomorrow.

      • Kevin

        I too gave money to Lindeen. Then I read this:

        I want my money back.

        • An argument was made during testimony in opposition that the Board had two mining related issues before them – one to save the Flathead, the other to decimate Otter Creek. Juneau spoke to it, also – and when Lindeen spoke, she said that she agreed that it was not fair that there was a plan to save the west part of the state from mining (and its consequences) but it was fine to mine the east – and for that reason, she said she was going to vote NO to closing the Flathead.

          Our state auditor – a woman who oversees our insurance industry here in the state – believes that it wasn’t fair to treat one side differently then the next, so she voted to mine both.

          I’ll be kind and say nothing more. Figure you can fill in the blanks.

  2. Big Swede

    Never mind the Bollocks.

  3. Big Swede

    May be bad news for you guys but the good news is Arch Coal has offered to place those new energy saving light bulbs in the miner’s mess hall.

  4. Kevin

    This is a very informative post. Thanks for posting Bullock’s speech. I’m glad to read his reasoning. I too am proud of Juneau and Bullock.

  5. Big Swede

    3 to 2 to accept the bid.

    Good job Land Board.

  1. 1 Otter Naught « 4&20 blackbirds

    […] the lone dissenting vote), but in the end, even Attorney General Steve Bullock changed his mind, seeing through the corporate welfare that was, eventually, approved – a 40% drop in price (and let’s not feign that this was […]

  2. 2 Montana Coal Porn Spring 2011 « 4&20 blackbirds

    […] Attorney General Steve Bullock talked about the economics of the bonus payment in relation to the amount of money that Arch will sa… immediately by shipping its coal across Montana with the railroad it’d be building (via […]

  3. 3 Free Markets, Capitalism, Private Property Rights & Eminent Domain « 4&20 blackbirds

    […] Otter Creek, we gave that away. Oil & gas? Nowthey’ll be drilling first and then doing an environmental […]

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    […] taxpayers were able to subsidize their bid for the state’s schoolchildren’s coal. Corporate coal welfare – what would the industry do without […]

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