Bay Area city might ban coal handling, shutting down a key overseas export point for Utah mines

(Brian Maffly | The Salt Lake Tribune) About 1 million tons of Utah-mined coal passes through the Levin-Richmond Terminal on the San Francisco Bay each year on its way to Japan. The city of Richmond, Calif., where the terminal has operated for 37 years, is poised to ban coal handling, potentially blocking a key export pathway for Utah's coal production.

Since its first year in business in 1982, the Levin-Richmond Terminal has been tied to Utah industries, first importing coke for use in the Geneva Steel plant, then exporting iron ore.

After Utah’s iron mines shuttered, its coal mines kept the deep-water terminal on the San Francisco Bay’s east shore busy, transferring coal from rail cars onto ships bound for Japan.

Now city officials in Richmond, Calif., are looking to sever that Utah connection with a proposed ordinance banning the handling and storage of coal. Such a prohibition would effectively eliminate a key pathway to Asia for Utah coal, potentially slowing production at Sufco and other big Beehive State mines and forcing many rural Utahns out of work.

The proposal has divided Richmond — a working-class city of 110,000 with long-standing ties to heavy industry, famous for oil refining and shipbuilding — pitting union workers against environmentalists and public health advocates.

Council member Eduardo Martinez contends the past six years of coal shipments have left a harmful coating of dust in Richmond neighborhoods near the rail shipping yards and terminal, and he hopes to put an end to it.

“It’s in the world’s interest [to restrict shipments of coal], but specific to Richmond, it’s all the coal dust that has blown out over our communities,” Martinez said. “We, as city legislators, have the ability to govern land use. Air quality is the reason we are employing a land use regulation.”

Opponents argue the initiative is being driven by out-of-town environmental activists whose real aim is to snuff the coal industry by blocking exports. Burning coal releases large amounts of carbon dioxide, the greenhouse gas chiefly responsible for climate change.

U.S. coal exports surged to 115 million tons last year but have since sharply fallen in the face of oversupply in Europe and a lack of export facilities on the West Coast, according to the U.S. Energy Information Administration.

While city officials say their goal is to protect residents from coal dust, terminal owners say they have invested heavily to contain emissions and runoff, denying their operations pose a threat to public health. The Utah coal often is seen stored in piles surrounded by shipping containers stacked three high to act as a windbreak and rigged with sprinklers to tamp down dust.

The proposed ordinance would put the terminal and possibly its companion rail operation out of business, costing many good-paying jobs in a city that needs them, terminal CEO and President Gary Levin told the Richmond Planning Commission in July.

The Planning Commission voted not to issue a recommendation on the proposed ban until more information was gathered on the environmental and economic impacts associated with coal shipments.

If ultimately approved, Richmond’s proposed coal ordinance would immediately bar new land uses from handling coal and petroleum coke, while phasing out these fossil fuel commodities over three years at the Levin-Richmond Terminal, a family-owned, civic-minded business employing 62 mostly union workers.

“We don’t want to shut them down,” Martinez said. “We want them to transition to better things.”

It would not affect rail transport of coal passing through Richmond to nearby Oakland, where a proposed bulk-loading terminal plans to ship Utah coal.

Good jobs vs. clean air?

The Oakland City Council enacted a coal ban a few years ago, but a federal judge refused to allow the city to apply the ordinance to the proposed Oakland Bulk and Oversized Terminal, paving the way for that $250 million project to move forward — for now.

That ruling was appealed to the 9th U.S. Circuit Court of Appeals, which heard arguments Tuesday. The Utah Legislature has set aside $53 million to invest in that terminal in hopes of shoring up the state’s flagging coal industry.

The Richmond City Council is scheduled to hold a public hearing on its proposed ban Dec. 3, after which it is expected to vote up or down, according to Martinez. The city has already banned coal from its publicly owned port facilities.

If Richmond enacts the prohibition, many city officials expect lawsuits from affected industries, which could include Wolverine Fuels, Utah’s largest coal producer, and Union Pacific, the railroad that carries coal west from loadouts in central Utah’s coal country, primarily in Levan and Wellington.

Since 2013, the Levin-Richmond Terminal has been handling Wolverine’s coal, and lesser amounts of petroleum coke, a residual byproduct from Richmond’s oil refineries, according to Gary Levin.

Last year, his terminal handled 1 million tons of coal and 300,000 tons of coke, along with some scrap metal, Levin told the Planning Commission during the July hearing, packed with union workers speaking against the ban and environmentalists and educators speaking for it.

“The terminal provides jobs, encourages imagination. It is involved in the community and gives,” terminal employee Tony Lester said. “Levin provides a cohesive sense of family and belonging. Bonds are powerful, stable, trustworthy and permanent. It is good to have this kind of employer in your vicinity.”

To support the ban, however, city planners pointed to an analysis of dust samples taken from various neighborhoods, which came back positive for coal. They also cited studies showing coal handling releases dust emissions that can generate up to $183 in public health costs for every ton handled.

Levin-Richmond operators and their lawyers flatly rejected the science behind those assertions.

“There is no legitimate basis for the ordinance. We don’t believe the PM2.5 [fine particulate matter] is coming from our terminal,” Gary Levin said. “No one has considered our investment in the terminal. It’s in the tens of millions of dollars. No one has done an economic impact analysis. Scientific data will reveal answers.”

Wolverine Fuels likewise has a lot riding on how the Richmond City Council votes.

Utah’s cleaner coal

Formerly known as Bowie Resource Partners, Wolverine acquired three of Utah’s largest coal mines in 2013 and has since been exporting some of its Utah products to Japan through California ports and looking for ways to develop new export capacity in Oakland and more recently in Mexico. At the time, domestic demand for coal was plunging as utilities turned to low-cost natural gas and renewable sources for power generation.

While many coal companies were going bankrupt, Wolverine, backed by a private equity firm, was buying up federal coal leases and coal processing and transportation infrastructure in Utah, as well as the production of its Utah competitors. It changed names to Wolverine and moved its headquarters from Kentucky to Sandy last year.

Wolverine is now exporting 3 million tons a year, about a quarter of Utah’s production, through the Bay Area. About once a week, it loads a 66,000-ton-capacity vessel about two-thirds full at the inland Port of Stockton on the Sacramento River Delta, company executives recently told Utah lawmakers. At high tide, the ships sail downriver to the deep-water Levin-Richmond Terminal on the Richmond waterfront, where they are topped off before sailing through the Golden Gate.

Utah officials have long argued that without export capacity, it will be impossible to reverse the decline in the state’s storied coal industry. While Asia has large coal reserves, Japan is hungry for Utah’s bituminous coal because it packs more energy per pound, but with less sulfur and ash, so power plants burning it don’t emit as much pollution and run more efficiently, Brian Settles, Wolverine’s general counsel, wrote in a July 16 letter to Richmond officials asking them to reject the proposed ban.

“Preventing Wolverine from exporting coal through [Levin-Richmond] will result in increased global [greenhouse gas] emissions as Japanese utilities will be forced to replace Wolverine’s coal with lower-quality international coal,” Settles wrote. If the the city adopts the ban, the coal company will challenge it in court as “an invalid and counterproductive burden on interstate and foreign commerce.”

While Settles did not respond to requests for comment, it is clear that Richmond’s proposed ban could disrupt Wolverine’s entire export program as it’s currently configured.

“It could accelerate exports through Mexico,” said state Sen. David Hinkins, whose district covers Utah coal country. The Orangeville Republican is among many Utah lawmakers who have long been wary of California communities’ efforts to disrupt the transport of coal and coal-generated electricity, arguing for Utah to file its own suits against California.

Hinkins and others believe the West’s coal reserves would find lucrative markets in Asia if only West Coast cities and states would get out of the way of projects that would boost export capacity.

Richmond’s Martinez and other East Bay leaders see coal shipments as a threat to the well-being of their constituents, obligating them to act. Martinez rejected Gary Levin’s claim that there are no bulk commodities available other than fossil fuels.

“If he can’t find any other products to ship,” Martinez said, “he shouldn’t be a port manager.”

Despite Oakland’s loss in court over its coal ban, Martinez said he is not concerned about litigation.

“If you don’t have a lawsuit from one side, you have one from the other,” Martinez said. “I would rather get sued from the side that’s on the wrong side of history.”