The West’s coal country has long sought to offset declining domestic coal consumption through exports to Pacific Rim countries. But politically liberal West Coast cities and states have gotten in the way, obstructing proposals for new coal-handling terminals.
Now, Utah is looking south of the U.S. border to ship its coal and possibly natural gas overseas.
On Thursday, the Utah Office of Energy Development (OED) signed a memorandum of understanding with economic development officials for the Mexican state of Baja California to establish “a close binational collaboration” aimed at connecting Utah energy resources with new markets abroad.
The idea would be to build on existing bulk-handling facilities at the Port of Ensenada, according to an OED news release. The port, 65 miles south of San Diego, is expected to expand into Puerto El Sauzal.
“Utah’s strong economic focus, consistent policy landscape and diverse natural energy resource mix have positioned us to become a global powerhouse for energy exports,” said Laura Nelson, Gov. Gary Herbert’s energy adviser. “As the world’s demand for energy continues to rise, Utah’s unparalleled resources can play a key role in helping the world realize greater energy security, which will also serve to strengthen our rural communities at home.”
Also of interest to the Beehive State is the port’s potential to export natural gas, which Utah holds in great abundance but has to be fully developed because of persistently low commodity prices.
Utah, Colorado and Wyoming have long backed a proposed liquified-natural-gas terminal in Coos Bay, Ore., that could deliver their gas to Asian markets — if it ever gets built. The Jordan Cove project has yet to commence after 20 years of planning.
Earlier this week, Nelson toured the Ensenada port, which features a nearby liquified-natural-gas terminal, where she sees an opportunity to export Utah gas. San Diego-based Sempra Energy is seeking to expand its Energia Costa Azul project here.
“It’s so impressive. The Port of Ensenada is a small port that allows them to be flexible and deliberate in the way they manage their operations,” Nelson said. “They’ve also got the tourist aspect because of where the cruise lines come in. It’s the first stop out of California. They have to be an efficient and clear port to support that tourism.”
Joining Nelson in Baja for Thursday’s signing were Carbon County Commission Chairman Jae Potter and state Sen. David Hinkins, a Republican from Emery County’s Orangeville, two of the Utah coal industry’s most enthusiastic supporters.
The informal agreement between Utah and Baja California is rather vague, seeking to “encourage cooperation across infrastructure development, trade opportunities among regulators and operators, in identifying potential global markets, and promoting visits by government, industry and other specialists,” according to the OED.
But it forms the foundation for a transnational partnership that will benefit both Baja and Utah and promote innovation, Nelson stressed.
“There are six activities. One is to expand cooperation around advancing opportunities for transport infrastructure. How do we work with these ports to bring forward Utah commodities?” Nelson said. “We have specified collaboration around energy and trade. It’s an opportunity to further enhance trade between our two countries. Economics and trade are great ways to build relationships and overcome other challenges you may have.”
A challenge facing central Utah is the steady drop in employment in what used to be its central industry: coal mining. Now, nearly all of Utah’s dwindling coal mines — including Skyline, Alton’s Coal Hollow, Lila Canyon and Sufco — are hoping to expand onto leases recently acquired on federal lands. State trust lands officials are also issuing new leases, but revenue from these deals won’t flow unless the coal is mined.
That won’t happen without a pathway to new markets in South America and Asia. Efforts to develop export terminals dedicated to coal are mired in controversy up and down the West Coast. Four coal-producing Utah counties have sought to invest $50 million in an export terminal under development in Oakland, Calif., while a Utah-based coal company is trying to build an even bigger terminal on the Columbia River in Longview, Wash.
In both cases, local and state authorities blocked plans to handle coal, triggering contentious lawsuits. Opponents object to publicly owned ports being used to ship the fossil fuel most heavily implicated in climate change. They don’t want coal handled in their communities because of fears that transloading would release unhealthy dust onto vulnerable populations.
Terminal developers recently won their suit against the city of Oakland, reopening the possibility for a terminal that would move up to 10 million tons of Utah coal from trains onto Asia-bound vessels.
Emery County, in the heart of Utah coal country, is just over 700 miles from Ensenada, about the same distance from Oakland. But the political and regulatory obstacles for coal exports may be much lower in Mexico — despite the need to cross a national border en route to a terminal.
Mexico’s second busiest deep-water port, Ensenada already handles bulk minerals and connects with 64 ports in 28 countries.
Meanwhile, Utah production of coal and natural gas is increasing even in the face of low prices.
“We, as an industry in Utah, need access to foreign markets,” said the Utah Mining Association’s Mark Compton.
There is already a glimmer of hope on the horizon for the coal industry.
U.S. coal exports surged by 61 percent, to nearly 100 million tons last year, reversing four straight years of declines, according to the U.S. Energy Information Administration. More than half this exported coal is used for metallurgy, as opposed to power generation.
According to the OED, Utah coal exports are expected to climb to 4.5 million tons this year, a 20-year high and quadruple the 1.1 million exported in 2016.
Follow @brianmaffly