BILLINGS, Mont.—A Crow official says the federal government has given preliminary approval to the American Indian tribe’s plan to build one of the first coal-to-liquid fuel plants in the nation.
The $7.4 billion project would produce an initial 50,000 barrels a day of diesel, jet fuel, fertilizer or other products. The fuel would be produced from coal mined on the Crow Indian Reservation in southeastern Montana.
The Bureau of Indian Affairs has told the tribe it can move forward with a plant development agreement signed last year with the Australian-American Energy Company, Crow attorney Bill Watt said.
Environmental approvals for the plant are still needed. But Watt said the contract approval signals that the federal government considers the project viable.
“I think it was a significant step that they approved it,” he said. “It gives the company (Australian-American) a great deal of assurance to continue putting in funds for coal exploration and developing the project.”
A site for the plant is expected to be chosen in the next 12 to 18 months, an Australian-American Energy representative said Friday. Construction is slated to begin in 2012 and finish by 2016.
The tribe would provide the land, coal and water needed to build and run the plant. Australian-American Energy would put up the financing and develop the project, known as Many Stars CTL.
The plant would initially convert 14 million tons of coal annually to liquid fuels.
Future expansions could ultimately boost Many Star’s fuel production to 125,000 barrels a day. That’s about 50 million barrels a year—equivalent to roughly 1 percent of the petroleum imported into the United States annually.
Bureau of Indian Affairs approval of the development contract was needed because the agency holds the Crow’s land in trust. Under the Indian Minerals Development Act, the agency has legal authority over resources the tribe plans to contribute to the coal-to-liquids plant.
BIA Rocky Mountain Region Deputy Director Darryl LaCount said he could not comment on the agency’s approval. The partnership between the Crow and Australian-American Energy is proprietary and exempt from freedom of information laws, he said.
However, future environmental reviews would be public information. LaCount said ground could not be broken for the project until those reviews are completed.
Oil prices could emerge as a future problem for the project if they don’t rebound from current low levels.
Crude oil futures were trading at $46.25 a barrel Friday on the New York Mercantile Exchange. That’s versus an oil price of $80 a barrel needed to make a coal-derived fuel competitive, said Ken Roberts, Australian-American Energy’s chief financial officer.
Roberts said the proposed plant’s lengthy construction timeline offers ample room for a return to higher prices.
“We have a long-term view,” he said. “All of our advisers, professional consultants that are forecasting crude prices, they all believe long-term crude prices will be in the range of $80 and growing thereafter. That’s the target price we need.”
Although members of the neighboring Northern Cheyenne Tribe have expressed wariness about the plant’s impact on local water resources, no organized opposition has emerged.
Other coal-to-liquid proposals have been criticized for their potential contribution to climate change, including at least two now-abandoned projects in Montana.
Plans for Many Stars CTL call for capturing most of the greenhouse gases it would produce. The gases would be stored in underground aquifers beneath the reservation or sold to oil companies that use carbon dioxide to squeeze more oil from aging fields.
That carbon capture process would put the fuel roughly on par with petroleum for its climate change impact. Greenhouse gases still would be released when the coal-derived fuel was burned.
