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Billings, Mont. • A central Montana coal mine reached an agreement Monday with environmentalists and state regulators that is intended to avoid a major shutdown as a declining coal market leaves the future of some mining companies in doubt.
The deal comes after a state review panel rejected an expansion permit granted to the Bull Mountain Mine in 2013, threatening to halt most operations if the dispute could not be resolved.
The panel said a Montana agency failed to consider the mine's long-term potential to contaminate water supplies used by nearby ranches and residents. The agreement gives state regulators six months to look again at the effects from the underground mine.
Mine owner Signal Peak Energy cut about 20 percent of its workforce last month, citing a poor market that is hammering companies across the United States, including in the nation's largest coal-producing region. Montana and Wyoming combined produce almost half the coal in the U.S.
"We don't want to see anyone (at the mine) lose any work, but our big interest is to protect water resources, which is important to other people's work," said attorney Shiloh Hernandez, who represents the Montana Environmental Information Center. "We reached some common ground here."
Signal Peak spokesman Mike Dawson said the agreement should allow the company to avert a production shutdown.
"It gives us a pathway forward that we're pleased about," Dawson said.
The Montana Board of Environmental Review still must approve the deal and will consider it Tuesday. The agreement allows expansion development work to proceed, which is scheduled to begin in March.
The state's original analysis of the expansion concluded that no contaminated water would leave the mine area for 50 years after mining was completed. But Montana laws place no time limit on the threat contaminated water poses to streams or to water used by homes and ranches near the mine.
The Montana Department of Environmental Quality expects to complete its revised analysis within the six months called for in the agreement, Director Tom Livers said.
Signal Peak already has started collecting the additional hydrologic information needed, and the company is optimistic the work can get done in the time frame, agency and mine officials said.
The agreement says Signal Peak must cease all expansion work if a new permit is not issued in that time. If that happened, the company would have to lay off about two-thirds of its employees, Signal Peak Steve Wade told the seven-member review board last month.
Other coal companies in the region are preparing to scale back operations as competition from cheap natural gas erodes coal's once-dominant role providing fuel for power plants. The nation's second-largest coal company, St. Louis-based Arch Coal Inc., filed for federal bankruptcy protection Monday.
Signal Peak mined almost 8 million tons of coal from Bull Mountain in 2014 and almost 5 million tons through the first nine months of 2015, according to the U.S. Mine Safety and Health Administration.
After the Dec. 31 layoffs, the company expects to scale back production to 5.5 million tons annually until market conditions improve, Signal Peak President Brad Hanson said.
In the past, more than 90 percent of Bull Mountain's coal was sold overseas for use in Asian power plants. In December, the mine's owners notified shippers that they were reducing exports until prices rebound.
The mine has an estimated 431 million tons of coal in its reserves. It's owned by Wayne M. Boich and utility FirstEnergy both of Ohio and Gunvor Group, a global commodities trading company based in Switzerland.