Billionaire candy bar mogul buys one-third of Tongue River Railroad, gets into coal business

Billionaire Forrest E. Mars, Jr. has reached an agreement with BNSF Railway Co. and coal giant Arch Coal to buy one-third of the Tongue River Railroad. The candy bar and pet food mogul said the purchase would prevent the construction of the proposed railway along major stretch of the Tongue River Valley in southeastern Montana.

In a July 18 letter to Ed Gulick, chairman of the conservation group Northern Plains Resource Council, Mars said he would no longer help fund ongoing legal challenges or future litigation related to the controversial 130-mile long railroad that would transport coal from Montana to Midwestern power plants and beyond.

"I have reached an agreement with BNSF Railway Company and Arch Coal to buy the Tongue River Railroad permits from (Tongue River Railroad president) Mike Gustafson and protect a significant area along the Tongue River from future development," Mars wrote. "I sincerely hope that the Northern Plains (Resource Council) is pleased with this result."

[Click here to see the letter]

Mars concluded the letter by saying, "I should also tell you that I will not be helping you fund the current appeal or any future litigation on these issues."

According to Mark Fix,  past chair of Northern Plains Resource Council and a rancher along the route of the proposed railroad, Mars supported Northern Plains in the past when the Tongue River Railroad threatened to cross Mars' 82,000-acre Diamond Cross Ranch.

In July 2010 Northern Plains and Fix petitioned the Surface Transportation Board, the federal agency that regulates railroad mergers, to stop construction of the Tongue River Railroad arguing that no adequate study of the environmental impacts of the coal train had been completed. The STB denied the petition and the case is currently before the 9th Circuit U.S. Court of Appeals.

Fix said Mars' recent actions will have no affect on the ongoing litigation.

"We've got lots of members and basically we're a grassroots organization," Fix said. "We rely on our members. We don't look to huge donors to fund our campaigns."

Calls to Mars' attorney and managers at the Diamond Cross Ranch were not returned as of press time.

Mars said in his letter that under the deal the Tongue River Railroad would not be built between Decker, near the Wyoming border, and the southern border of the Northern Cheyenne Indian Reservation near O'Dell Creek road, about six miles northeast of Birney. The portion of the proposed railroad between O'Dell road, approximately 10 miles south of Ashland, and Miles City, would not be affected by the deal, according to Mars.

Conservation groups opposed to the railroad and the development of massive coal mines in the Otter Creek reacted harshly to the news Wednesday.

Ranchers and farmers along the route have fought for decades to prevent its construction, arguing that it would bisect farms and ranches in the Tongue River Valley and reduce property values, separating grazing land from water, spread weeds and possibly start fires.

“We have always been dedicated to protecting the entire Tongue River Valley,” said Jeanie Alderson, vice chair of Northern Plains a third-generation Tongue River rancher. “I depend on my neighbors as much as they depend on me. Our operations work because we are not dissected by an industrial railroad.”

Jim Jensen is the executive director of the Montana Environmental Information Center. That group sued the state Land Board in May 2010 arguing that board failed to weigh the environmental and economic consequences or consider any alternatives that might be more beneficial to the state when it agreed to lease 500 million tons of Otter Creek coal to Arch Coal for $86 million. That case is still pending in district court.

"This letter means that Forrest Mars won't have a railroad crossing his property and several other ranchers will be saved from that fate, but the Tongue River Railroad between Miles City and Ashland also crosses a lot of property and the river is beautiful there too," Jensen said. "We will do everything in our power forever to stop the mining of Otter Creek because coal is the fuel of the past. It's dirty and it's changing our climate."

Opponents of the project have speculated that one of the driving forces behind the Tongue River Railroad was the desire to ship Wyoming to Midwest power markets. Now landowners say the focus has shifted and the purpose is to transport Otter Creek coal to ports on the West Coast and on to markets in China.

"We will not allow the Tongue River Railroad to be built because it will tear apart Montana ranch land and negatively impact agriculture in southeastern Montana to haul more of our coal to China just to make corporations and rich individuals richer," Fix said.

Mars said the state would "greatly benefit" from new jobs and revenue created by the developing of the Ashland to Miles City-stretch of the railroad.

"The agreement with BNSF and Arch is the best of both worlds — it projects a large portion of the Tongue River and allow for economic development in Montana," Mars wrote.

Critics disagree.

"I disagree completely with Mr. Mars' contention that that will somehow be good for Montana," Jensen said. "It won't be good for Montana, won't be good for the region and certainly won't be good for the word. We do not need more death trains hauling coal to be burned."

"We really can't say we're the Saudi Arabia of coal anymore."

That’s the message from Brenda Pierce, head of the U.S. Geological Survey team that found that the U.S. coal reserves are probably about half of what they were previously thought to be.

Gov. Brian Schweitzer likes to use that phrase when talking about Montana's vast coal reserves, such as in this 2007 Time magazine piece:

"Now here's how Montana is going to save the world," [Schweitzer] proclaimed at one point. "We are the Saudi Arabia of coal," he said...

But is that characterization of Montana's--and the nation's--coal reserves accurate? Not according to a recent report in the Wall Street Journal (you have to be a subscriber to read the full article).

Basically, here’s the gist:

George Warholic calculates America's vast coal reserves the same way his predecessors have for decades: He looks up the prior year's coal-reserve estimate, subtracts the year's nationwide production and arrives at a new official tally.

Coal provides nearly one-quarter of the total energy consumed in the U.S., and by Mr. Warholic's estimate, the country has enough in the ground to last about 240 years. A belief in this nearly boundless supply has led officials to dub the U.S. the "Saudi Arabia of Coal."

But the estimate, recent findings show, may be wildly overconfident.

While there is almost certainly as much coal in the ground as Mr. Warholic's Energy Information Administration believes, relatively little of it can be profitably extracted. Last year, the U.S. Geological Survey completed an extensive analysis of Wyoming's Gillette coal field, the nation's largest and most productive, and determined that less than 6% of the coal in its biggest beds could be mined profitably, even at prices higher than today's.

"We really can't say we're the Saudi Arabia of coal anymore," says Brenda Pierce, head of the USGS team that conducted the study.

According to scientists, carbon dioxide emitted from coal-fired power plants is the leading contributor to global climate change. (A sobering note on that point: A new study by the USGS found Antarctica’s ice shelves are disappearing faster than previously thought.) That’s why lawmakers in Washington are busy working on new federal carbon legislation. Congress is likely to pass cap and trade legislation in the next year or so, and that in turn is likely to increase the cost of coal production and consumption even more.

Coal’s future seems to be getting darker by the day.

On the upside, as coal becomes more expensive to burn, Montana could end up faring better than other coal-producing states because we have another abundant source of energy in Big Sky Country: wind.

According to National Wind, “America's leading large-scale community wind project developer,” over two thirds of Montana has excellent wind resources for the development of utility scale wind projects.

Perhaps in the future Montana will be dubbed "the Saudi Arabia of wind."Oooh....I should trademark that. Shoot. It looks like T. Boone Pickens already beat me to the punch.