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Four draglines

The Western Energy Company runs four huge draglines at its Rosebud Mine operation. The mine is set to be auctioned off on Jan. 22.

The lone source of coal for southeastern Montana's Colstrip power plant has been scheduled for bankruptcy auction in late January.

Rosebud Mine will be auctioned Jan. 22, if necessary, to help pay the debts of Westmoreland Coal Co., which owns the mine. The United States Bankruptcy Court Southern District of Texas on Thursday set terms for the auction, which the Colorado-based coal company had requested in October.

Westmoreland is also the owner of the Kemmerer coal mine. It's unknown what effect the bankruptcy will have on operations at the southwestern Wyoming facility.

The company did not respond to interview requests by Lee Montana Newspapers. The company filed for bankruptcy Oct. 8, indicating that it had more than $1.4 billion in debt and assets of $770 million.

The future of the mine has sparked concern from environmentalists and Colstrip power plant owners.

Montana’s state government is in the process of approving a 10-square mile expansion of Rosebud Mine, not knowing who the actual developer might be after a sale. Last week, Billings-based Northern Plains Resource Council asked the state Department of Environmental Quality to stop the permitting process at least until the developer is identified. Northern Plains earlier in the week also identified more than 50 springs it said would be destroyed by the mine expansion.

"First and foremost, the state must take a hard look at the financial stability of any buyer,” said Mark Fix, past chair of Northern Plains and a Tongue River rancher. “They must also require appropriate bonding to cover responsible reclamation and ensure that existing collective bargaining agreements are honored. In short, southeastern Montana's workers and landscapes shouldn't be traded away to benefit the industry's bottom line."

The auction comes as the four-unit Colstrip power plant’s contract for Rosebud Mine coal winds down. The current agreement guarantees coal at least through 2019. Four utilities with 70 percent ownership in Colstrip Units 3 and 4 have expressed concern about not having coal if a buyer of Westmoreland’s assets opts to mine coal at Rosebud, or not mine enough to feed Units 3 and 4.

The utilities are Puget Sound Energy and Avista Corp., of Washington; and Oregon utilities PacifiCorp and Portland General Electric. The four petitioned the court collectively as Northwest Colstrip Owners, or NWCO.

“Should the Rosebud Mine shut down, or materially reduce its output during the debtor’s cases, NWCO’s ability to operate the Colstrip plants would be jeopardized, which in turn would impact the ability of NWCO to generate electricity for its customers,” the utilities said in an objection to the sale.

News of the last several weeks have been troubling both for the mine and the power plant.

Colstrip operator and partial owner Talen Energy said in an October lawsuit that it will be financially challenging to honor its environmental cleanup obligations at the power plant, as well as its commitment to employee benefits. The company indicated that its predecessor, PPL, hadn’t handed down enough funding to cover those costs. Talen is suing PPL, which said there’s no merit to Talen’s claims.

The Rosebud Mine expansion was given preliminary approval by the state of Montana just three days before Westmoreland filed for bankruptcy. The Montana Department of Environmental Quality said last week that it would have been prejudicial to reject the mine expansion because of the bankruptcy. The mine employs about 300 people.

The cleanup bond for the expansion was set for $13.7 million, a price that struck the Montana Environmental Information Center as too low, increasing the likelihood that state taxpayers would someday be required to pay the difference. DEQ countered that the bond was for only the first five years of development at the expansion site.

Ten days after the bankruptcy and 13 days after getting preliminary approval to expand Rosebud, Westmoreland asked the court for permission to sell the mine, as well as San Juan mine in New Mexico. Both Rosebud and San Juan serve nearby power plants.

In its sale request, Westmoreland also identified its mining interests in Canada as part of the core assets it hoped to auction through a stalking horse sale, which is a process that allows a minimum bid amount to be set ahead of open sale.

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