I.H.T. Special Report: Business of Green
Rich in Coal, a Tribe Struggles to Overcome Poverty
By ERICA GIES
Published: October 25, 2011
SAN FRANCISCO — The Crow Nation in southeast Montana has long dealt with unemployment of nearly 50 percent. To create more jobs, Crow leaders are focusing on developing the nation’s energy resources.
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Sparsely populated and beautiful, with rolling plains and unusual rock outcroppings, the Crow reservation is home to about three-quarters of the tribe’s 12,144 enrolled members. Their land lies in the Powder River Basin, an epicenter of U.S. energy development that supplies more than 40 percent of the country’s coal. In spite of the Crow Nation’s long struggle with poverty, it is coal rich, with more than 9 billion tons of the fossil fuel.
Coal development might seem like an obvious step, and indeed, since 1974 the tribe has leased coal reserves to Westmoreland Resources at the Absaloka Mine near Hardin, Montana. The mine ships as much as 7.5 million tons of coal annually. But execution of a new coal project has proved difficult, and some tribal members are pursuing wind development as an alternative.
In 2008, Crow tribal leadership announced a 50-year, $7 billion deal with Australian-American Energy Co. to mine its coal and build a coal-to-liquids plant, or C.T.L. The technology has been mostly uneconomical since its invention in 1920s Germany. But now, with technology improvements and higher prices for crude oil, those numbers are beginning to change. Nevertheless, there is just one commercial-scale C.T.L. plant operating in the world at the moment, in South Africa, according to the World Coal Association.
The tribe was attracted to the project, called Many Stars, in part because it claimed to be environmentally friendly in capturing and sequestering carbon dioxide generated by production.
“With all this coal we have, one component of the coal monetization has to be state-of-the-art clean coal and addressing climate change, for long run utilization of coal,” said Bill Watt, Crow tribal attorney.
But claims that C.T.L. has a light environmental footprints have been disputed. A 2007 report from the Natural Resources Defense Council, an environmental organization, said C.T.L. created 8 percent more carbon dioxide emissions than standard gasoline, even when the emissions were captured for reuse or storage.
And it might not be. A study earlier this year from the Massachusetts Institute of Technology found that, in the near term, C.T.L. projects would not use carbon capture and storage because the added cost would be uneconomical.
In any case, the Many Stars project stalled this year because the energy company was unable to raise the additional investment that it needed.
“Continued uncertainties at the federal level have made it difficult to find additional support in the financial markets for a C.T.L. project,” said Dick Lyon, who is global projects director for Australian-American.
In May, the tribe moved to terminate the agreement because of the lack of progress. On May 18, the energy company sued the tribe in a U.S. court in Delaware to prevent termination. A few days later, it agreed to negotiate and by July it had agreed that Australian-American would help the tribe to find another investor, with a “stronger ability to self-finance,” Mr. Lyon said.
A call for competitive bids was issued Oct. 6 through Pritchard Capital Partners, in Covington, Louisiana. Bids are due by Dec. 1, Mr. Lyon said.
From the beginning, the proposed C.T.L. plant has been divisive among Crow tribal members. A group called the Crow Allottees Association feared their water would be taken or polluted by the project. In its place, they are planning wind development for their land.
Division among the Crow tribe has historical roots in the General Allotment Act of 1887, a bid by the U.S. government to grab land and disrupt the social cohesion of communal tribes by dividing up reservations into small land parcels, individually owned.
The Crow tribe now collectively owns just 20 percent of its original reservation land. Crow allottees individually own another 45 percent, and non-Indians own the remaining 35 percent, according to the Bureau of Land Management. As a result of inheritance, many allottee parcels are now jointly owned by multiple family members.
As originally proposed, the Many Stars project would strip-mine 38,000 tons of coal a day to make 50,000 barrels of diesel gasoline or aviation jet fuel. It would deliver 3,000 to 4,000 construction jobs and 700 to 900 permanent jobs in mine and plant operations. The energy company has also invested in local education, offering scholarships and supporting the development of vocational and professional programs.
Such enticements, however, have not swayed the allottees’ association.
“Any kind of extraction would damage the adjacent allottees’ land,” said John Dust, an association member.