BILLINGS — A Montana tribe’s plan to build a $7 billion coal-to-liquids plant has stalled after it failed to attract sufficient financing, leading to a courtroom dispute between the tribe and its partner in the proposal.
A federal judge in Delaware has scheduled a hearing next week on a request by a Texas-based investment group that accuses the Crow tribe of backing out of their 2009 development agreement.
According to a lawsuit filed this week by Australian-American Energy Co., the Crow Tribe claims the company has failed to make minimum annual expenditures called for under the agreement.
The company says it has spent more than $10 million toward the project but that “circumstances beyond the parties’ control” have slowed its progress.
Construction originally was anticipated to begin next year but already had been pushed back by tribal officials to 2013 at the earliest.
“The collapse of the global equity markets, the unanticipated development in the United States of vast resources of shale gas and regulatory uncertainty regarding support of coal to liquid projects have materially and adversely affected the economic feasibility of the project,” Australian-American Energy declared in a Wednesday court filing.
The company also said conditions needed to support its continued investment, including the tribe’s execution of a water rights lease, have not been met, and that the tribe had no grounds to send a termination notice.
It wants a temporary injunction until an arbitrator is appointed.
Crow leaders warned last year the proposed project could founder without more federal support. A tribal representative said the tribe still intends to pursue the project.
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But tribal attorney Roger Renville said Thursday he could not talk about the lawsuit. “Because it’s in litigation, we cannot make a statement about the dispute,” he said.
The Crow have other energy projects in the works, including a hydropower plant on the Bighorn River downstream of Yellowtail Dam and a wind turbine project. Companies working with the tribe already produce natural gas from the southeastern Montana reservation.
But coal is at the center of the impoverished tribe’s economic development ambitions. The reservation sits atop an estimated 9 billion tons of the fuel — enough to meet the electricity demands of the U.S. for about four years.
Plans called for a plant on the reservation that would initially consume 14 million tons of coal annually, producing 50,000 barrels a day of diesel, jet fuel, fertilizer or other products. Carbon dioxide produced as part of the conversion process would be captured and stored or sold for industrial purposes.
The United States has no operating coal-to-liquids plants. But they have been proposed in Wyoming, Ohio and elsewhere. Plant developers in West Virginia broke ground on an 18,000-barrel-per-day project earlier this month, although how it will be financed remains uncertain.
Industry representatives have long sought Congressional backing for increased coal-to-liquid energy production as a way to prime the industry’s growth, including a bill offered in 2007 by then-Sen. Barack Obama that would have provided incentives for research and plant construction.
No such legislation has passed, and Obama has since backed off his strong support for the fuel.
Critics have questioned whether coal-to-liquids is financially viable without government support, and environmentalists have vowed to fight in court any plant that moves toward construction.
AP Business Writer Randall Chase in Dover, Del., contributed to this story.