The 265/75 R16 tire is about 31.5" , the 295/75 R16 is like 33.5" in diameter. This means that the smaller tire's one rotation is 6" shorten, then the "big-one". 99" vs. 105" to be exact. It wouldn't be a big difference if we are talking about only one full turn, but at like 1000 full turn of the tire is 6000 inches, what equals about 500 feet difference.
Anyways, the bottom line is, that you could run the same speed with a lower engine RPM, what would help the fuel mileage on flat land. But there is a significant advantage of the smaller tires in the mountains.
In your case, there is a chance that you'll get better mpg with a bigger tire, but it's not necessarily true - due to the mountains.