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Utah Legislature OKs $53 million cash swap to fund Oakland coal port

First Published      Last Updated Mar 10 2016 11:44 pm

Coal export » Critics call the deal a “shell game,” but the House clears it 52-17.

Legislators approved a fund-swapping scheme Thursday to commit $53 million to help build a deep-water port in California in the belief the project will allow Utah to sell coal and other products overseas.

Critics have called it a suspect "shell game," and it has sparked an outcry from environmental groups in California and Utah that say such coal shipments would further global warming and question if there is a market for such exports.

But the House gave final passage to SB246 on a 52-17 vote and sent it to Gov. Gary Herbert, who is expected to sign it.

"The big gamble is not to the state of Utah," said Rep. Brad King, D-Price, who represents Utah's coal country.

He argued the deal poses no risk to taxpayers because the state treasury would be reimbursed almost instantly by the Permanent Community Impact Board (CIB) with money from federal mineral royalties. These moneys were generated, King said, "by the blood, sweat [and] tears of every miner and every person who has worked in the gas and oil industry in Utah."

At the same time, the lone Democrat representing rural Utah said the deal has a good chance of saving jobs by opening new markets abroad for Utah coal and other products from oil to alfalfa.

The complex bill first surfaced Feb. 29, eight working days before the end of the legislative session. It authorizes the swap of $53 million in state sales-tax revenue, now earmarked for transportation, for an equal amount of royalties from the CIB. The state money would be deposited into a newly created "Throughput Infrastructure Fund" that would be controlled by the CIB.

Last year, the CIB approved loaning the money to four rural counties — Carbon, Emery, Sevier and Sanpete ­— to help pay for the development of the bulk-freight-loading seaport under development at the former Oakland Army Base.

Typically, CIB money is granted or loaned for local projects such as roads, public buildings, water and sewer systems or parks.

Environmentalists filed complaints with Utah Attorney General Sean Reyes challenging the use of CIB funds for an out-of-state project. Reyes has declined to comment on the legality, but concerns led to the unusual plan to trade royalty proceeds for state money that has fewer strings and regulations attached.

Rep. Joel Briscoe, D-Salt Lake City, noted Reyes' silence and complained that while the CIB "has done wonderful projects in the past, they have all been built in Utah."

He questioned the soundness of the project. "If this is such a great financial investment … where are the banks stepping up to fund this program?"

Some industry observers also expressed puzzlement at the deal, saying the global market for coal is drying up and international shipments have sharply tapered.

"Investing in a coal terminal is like building a stateroom on the Titanic after it hits the iceberg," said Clark Williams-Derry, director of energy finance at the Seattle-based think tank Sightline Institute.

He said Asia's coal imports are dropping as India boosts domestic production and China turns to other energy sources. Meanwhile, Bowie Resource Partners, which controls more than half Utah's coal production, lost its contract to supply Mexico's Petacalco power plant in 2015.

But King argued that China, for one, seeks the kind of clean, low-sulfur coal that Utah produces to help reduce pollution.

He said if Utah somehow could meet all of its demand, China would reduce its power-plant emissions by half.

Disagreeing is Tom Sanzillo, finance director for the Ohio-based Institute for Energy Economics and Financial Analysis. "The bill has more red flags than a 10-car pileup at a NASCAR race," because of the declining coal market, he said.

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