He didn't dance around it, he told an outright falsehood about it (though his chemistry is probably so rusty I bet it was  an honest misunderstanding rather than a lie).  Any process which takes in mostly pure carbon and emits hydrocarbons is going to get hydrogen from somewhere.  That somewhere is not going to be its own byproducts.

A coal-to-liquids plant which uses no water but has a large waste stream of boron-11 would cause as many problems as it solved (as remarkable as it might be). ;-)

I didn't say it was a good dance.  Anyway, the west end of Montana is about 500 mi from the sea.  A 24" sea water pipeline to the gasification plants could be put in for maybe 600 million (at $10/diameter in-ft).  Expensive, but the plants are already multi-billion dollar affairs.
Much of the coal reserve in Montana is in the east end of the state, with extensions into the Dakotas. The site most often discussed for a pilot plant is in the southeast part of the state. From Broadus, one of the locations frequently mentioned, to Duluth at the tip of Lake Superior is 650 miles. Probably less total length, but more importantly in my mind, much less vertical distance (only about 2300 feet) and fresh water so there's no problem disposing of all that salt. My real concern would be EROEI -- pumping water >600 miles for feedstock has to hurt numbers that aren't terrific to start with.
The trouble with using the Great Lakes is that there is only about 1% excess water accumulation in the system; any more usage and the lake levels will start to fall.  I'm just guessing, but with the current drought, any Great Lakes water released would probably go to potable supplies.