How the future of Utah’s coal industry rests with a federal judge in San Francisco

Three mines in central Utah want to expand but millions of tons of sooty exports need to pass through California port cities like Oakland, where residents have banned coal.

(Francisco Kjolseth | Tribune file photo) Crews move coal at the Levan transfer facility along Interstate 15--south of Nephi where a steady flow of trucks unload it before it is transferred to train cars. Utah Community Impact Board awarding a $50 million loan to four coal-producing counties to help build a deep-water port in Oakland, Calif. that would be a shipping point for Utah coal.

After years of study, three Utah coal mines are poised to expand into new federally leased lands that promise to keep them humming for another decade, securing hundreds of treasured mining jobs in rural communities.

But with U.S. markets for this coal are far from certain, mine operators are seeking chances to export it across the Pacific Ocean.

To that end, Utah officials have tried to help fund two major ventures: building a 43-mile rail line connecting the state’s biggest mine with a coal load-out in Levan and putting $53 million toward construction of a rail-to-ship export terminal in Oakland.

That city has banned the coal shipments leading to a legal fight in a federal court in San Francisco. Hanging in the balance could be the economic destiny of Utah’s coal-centric Carbon, Sevier and Emery counties.

After hearing three days of testimony last week, U.S. District Judge Vince Chhabria will soon decide to either affirm or invalidate Oakland’s coal ban that thwarted a major Utah coal producer’s hopes of shipping 5 to 10 million tons to Asian countries.

A subsidiary of Bowie Resource Partners, which operates Utah’s Dugout, Sufco and Skyline mines, holds an option to lease the Oakland Bulk and Oversized Terminal, or OBOT, under development on a 34-acre city-owned property on the San Francisco Bay’s east shore.

Dust in the air?

The judge completed the hearings Friday and will rule in the coming weeks. At trial, OBOT developer Phil Tagami’s lawyers — whose sizable legal bills Bowie is covering — highlighted what they say are glaring flaws in a coal risk assessment the city used to justify its ban.

Tagami contends the city breached agreements that vested him with a right to develop the terminal at the former Oakland Army Base.

In Chhabria’s courtroom, dueling expert witnesses that gave opposite views about the health and safety impacts of handling coal. The city’s witnesses testified that the coal-loading terminal could subject West Oakland, already a distressed part of town that bears a heavy legacy of industrial pollution, to unacceptable levels of coal dust.

A decision in favor of Tagami could clear the way for a large share of Utah’s exported coal to burn in Asian power plants and steel factories. But it could also set a dangerous precedent, according to anti-coal activists.

(Photo courtesy of No Coal in Oakland) This 2013 photo shows the site of a proposed export terminal in Oakland, known as West Gateway, located next to the Bay Bridge toll plaza. Utah’s largest coal producer Bowie Resource Partners has subleased the 34-acre city-owned parcel to build and operate a rail-to-ship bulk-freight loading marine terminal for shipping Utah coal to Asian markets. Bowie is also funding a lawsuit against Oakland’s ban on coal handling, now being tried in California’s federal court. Citing impacts to public health, the city enacted the ban in 2016, prompting the lawsuit from developer Phil Tagami, who alleges the city breached its contract with him.

“Every municipality is impacted if we lose,” Lora Jo Foo of the group No Coal in Oakland told Berkeley-based KPFA-FM. “It means every city in the country won’t be able to pass an ordinance regulating fossil fuel infrastructure, even if it’s to protect its local residents.”

Carbon County Commission chairman Jae Potter and the Utah governor’s Office of Energy Development (OED) declined to discuss Utah’s interests in the case until it is resolved. But last year the OED issued a report titled “Advancing Utah Coal” that emphasized the need for export capability.

“The possibility exists for Utah’s coal industry to partner with rapidly-growing economies that are in need of low-cost, reliable energy,” the report said. “Because of its high-energy, low-sulfur qualities, the majority of Utah’s coal is expected to have a competitive advantage within the global export space, particularly since many countries are working to address environmental considerations associated with power production.”

A needed lift

Utah coal production has waned, slipping to 13 million tons last year, less than half of its 1996 peak. The industry is losing customers as coal-fired plants in Utah and neighboring states shut down or switch to natural gas.

In 2001, Utah producers shipped 15.9 million tons of coal to 21 states, according to the OED report. But by 2015, those shipments had dropped to 2.1 million tons to five states. Without export markets, Utah’s coal industry may never recover.

Yet proposed marine terminals like the one in Oakland have run into stiff local opposition and none has won approval in recent years. Bowie ships some Utah coal out of shallow-draft ports at the Bay Area cities of Richmond and Stockton.

According to the OED report, Japan is a promising destination as it reduces its use of nuclear in the wake of the 2011 Fukushima meltdown. It is developing 45 coal-fired power plants and has overtaken China as world’s leading coal importer at 152 million tons.

Bowie is now securing final approvals to expand its Sufco and Skyline mines, which account for about two-thirds of the Utah’s production, or about 9 million tons. The company holds federal leases that it hopes to begin mining this year.

Rural jobs

As a rule of thumb, every 12,000 tons of production supports one mine job depending on the size and efficiency of the mine. Skyline, for example, supports a $39 million payroll and $134 million in federal royalties, half of which go to Utah.

Five miles southwest of Scofield, the 320-employee mine is getting into the 2,700-acre Flat Canyon tract, which would extend the underground mine’s life by nine to 12 years, cranking out three to 4.5 million tons per year, or 42 million tons total.

Several miles farther south on the Wasatch Plateau, the Bureau of Land Management has wrapped up an environmental analysis of the Greens Hollow tract, which Bowie has leased to keep the Sufco mine churning. That 6,175-acre patch will yield 56 million tons, adding 10 years of life to Utah’s oldest mine.

(Lee Davidson | Tribune file photo) Coal trucks arriving at a railroad siding near Levan. State officials are helping push for a proposed $124 million railroad link from Salina to Levan that could eliminate heavy shipments by truck of coal produced the Sufco mine. Those shipments could one day be bound for Asia — depending on a court case unfolding in Oakland over that city's ban on coal over health and safety concerns.

A third Utah mine looking to expand is the Coal Hollow Mine, operated by Alton Coal Development Co. whose current production is dwarfed by the Bowie mines. A final decision is expected on the company’s application to lease 3,000 federal acres adjacent to its existing surface mine.

Documents indicate that Alton company also hopes to expand its modest production, selling coal overseas by shipping it through West Coast marine terminals from a rail load-out west of Cedar City.