Cloud Peak Energy Inc. (NYSE:CLD), one of the largest U.S. coal producers, and the Crow Tribe of Indians today announced they have reached tentative agreements regarding exploration rights and exclusive options to lease and develop up to an estimated 1.4 billion tons of in-place Northern Powder River Basin coal on the Crow Indian Reservation in southeast Montana, near Cloud Peak Energy’s Spring Creek mine and recently acquired Youngs Creek Mining Company, LLC and CX Ranch properties. The agreements are being submitted to the Crow Tribal Legislature for review, which is anticipated during August. If approved by the Legislature, the agreements would be executed by the Tribal Chairman and Cloud Peak Energy and then submitted to the U.S. Department of the Interior for review and requested approval.
Cloud Peak Energy would pay the Tribe $2.25 million upon Tribal approval and execution of the agreements, $1.5 million upon approval by the Department of the Interior, and additional annual payments thereafter through the initial option period, to a cumulative total of up to $10 million. Additional option payments would be made through any extension periods. If the agreements are approved, Cloud Peak Energy anticipates conducting exploration during the initial option period to complete delineation of the potentially economic coal tonnages subject to the options.
The tentative agreements provide for exploration and three exclusive options to lease three separate coal deposits on the Crow Indian Reservation over an initial five-year term, with two extension periods through 2035 if certain conditions are met. Upon exercise of an option(s) to lease, Cloud Peak Energy would pay the Tribe an amount equal to $0.08 per ton to $0.15 per ton, depending on the lease and coal deposit and subject to adjustment for inflation. The proposed agreements also set forth adjustable royalty rates, ranging from 7.5% to 15%, and contain standard coal production taxes amounting to a nominal 20% of FOB mine gross proceeds to be paid to the Tribe. Cloud Peak Energy would also provide preferential hiring, training, and promotion for qualified Indians, funding of $50,000 per year for scholarships for qualified Crow Tribal members, and support for Indian-certified contractors, among other things.
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