Montana regulators say coal mine proposal can't proceed without more information from company

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BILLINGS, Montana — Montana regulators won't move forward on a proposal for a major new coal mine until sponsor Arch Coal Inc. addresses hundreds of deficiencies in its application, the state Department of Environmental Quality said Friday.

The St. Louis-based company's Otter Creek Mine would extract up to 20 million tons of coal a year from state-owned and private leases south of Ashland near the Wyoming border. The proposal already was more than two years behind schedule and faced strong opposition from nearby landowners and conservation groups.

In a 65-page letter dated Thursday, state officials for the second time in two years said they needed more information from the company before the project could proceed.

"There are deficiencies related to wildlife, hydrology, agriculture, reclamation, soils, the mine plan, post-mine topography," said Kristi Ponozzo, the department's public policy director. "We're diving into more particular refinement of those issues."

An Arch spokeswoman said the company was reviewing the state's findings.

"This is a routine and expected part of the permitting process," spokeswoman Logan Bonacorsi said. She said Arch would respond to the state in a timely manner but did not offer a timeline. There is no deadline for a response, Ponozzo said.

The state Land Board sold the public mineral leases involved in the mine proposal to Arch exactly five years ago this week, for $86 million.

Since then, Arch's stock price has collapsed from a high of $36 dollars in 2011 and closed Friday at just over 90 cents a share on the New York Stock Exchange. Other coal companies have suffered similar declines as demand for their fuel wanes amid competition from cheap natural gas and stricter pollution rules for coal-fired power plants.

The company's reserves at Otter Creek hold an estimated 1.4 billion tons of coal. The mine application was submitted in July 2012 and revised last year.

An environmental study of the project is underway and tentatively scheduled to come out later this year, Ponozzo said. That schedule could change depending in part on how long it takes Arch to respond to Thursday's information request, she said.

A new rail line would be needed to get coal from Otter Creek to markets in the U.S. and to West Coast ports where the fuel could be shipped overseas. That project, too, is behind schedule.

The U.S. Surface Transportation Board expects to release a draft environmental study of the 42-mile Tongue River Railroad this spring. Arch is a co-owner of the railroad with BNSF Railway of Fort Worth, Texas, and candy-industry billionaire Forrest Mars Jr.

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