The Otter Creek reserves, located near Ashland, are contained within 8,300 acres of state-owned minerals, which Arch has held lease rights to since 2010; it secured them from the Montana Land Board at that time for $86 million. The company subsequently submitted its surface permit application in 2012.
Arch officials cited “capital constraints, near-term weakness in coal markets, and an extended and uncertain permitting outlook” for the decision, which it confirmed on March 10.
“Since [2010], Arch has engaged state regulators through the permitting process in order to obtain the approval to mine,” the company said. “That process has taken longer than anticipated, and further deterioration in coal markets has led to the decision to suspend the permitting effort.”
The news comes just two months after the producer filed for Chapter 11 bankruptcy protection.
According to the Great Falls Tribune, Arch owed the Montana Department of Environmental Quality $67,000 in fees for the agency to work on the environmental impact statement for the Powder River Basin (PRB) mine, essentially stalling its progress.
Arch said current conditions to not allow it to devote the time, capital or resources needed to develop Otter Creek.
“Arch remains committed to navigating a challenging market environment, executing upon its prudent capital allocation strategy and preserving liquidity. This step will allow Arch to further intensify its focus on operating safe, responsible and low-cost mines,” it said.
Otter Creek, with an estimated 1.5 billion tons of reserves, was projected to mine about 20 million tons annually. Plans to construct a railroad to the complex, a project with a price tag of $400 million, were suspended indefinitely last year.
