Big setback for Utah mines as Bay Area port city bans coal

(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, has voted to ban coal handling, potentially blocking a key export pathway for Utah's coal production.

A Bay Area city that has been a key export gateway for Utah mines has approved a ban on the storage and handling of coal, potentially severing a vital link to the global marketplace for a commodity that is rapidly losing domestic customers.

In a unanimous vote Tuesday and despite fierce resistance from industry and labor unions, the Richmond City Council OK’d a measure that allows a three-year phaseout for the city’s one coal handler, the Levin-Richmond Terminal, where about 1 million tons of Utah coal is transferred each year from rail to Japan-bound vessels.

“I guess we are going to litigate,” said Jim Holland, the terminal’s vice president for facilities, equipment and environment. He contends that the ban will put the terminal out of business, costing at least 60 mostly high-paying union jobs. Also threatening to sue is Utah’s largest coal producer, Wolverine Fuels, which announced its intentions in a letter to the council before a Dec. 3 hearing on the coal prohibition.

Council members heard hours of testimony at that earlier hearing and made their vote Tuesday without any discussion. Wolverine’s general counsel did not respond Wednesday to a request for comment.

Public health and environmental advocates applauded Richmond’s adoption of a coal ban, which had been in the works for more than a year and was spurred by residents’ complaints about coal dust allegedly coating homes, yards and streets.

“Richmond communities are already overburdened by pollution from the I-80 and I-580 corridors, the Chevron refinery and other industrial polluters," said Julia Walsh, a professor of health at the nearby University of California in Berkeley. "Cutting out this source of deadly particulate matter in the form of coal dust means fewer trips to the hospital, fewer kids with asthma, and longer life spans for many residents.”

The Sierra Club, an environmental group deeply engaged with disrupting U.S. coal exports, promised to work with the city to explore ways to ensure the Levin terminal remains a part of Richmond’s economy by handling cleaner bulk commodities.

“Today, Richmond communities made a stand for clean air and public health,” said Minda Berbeco, who directs the club’s San Francisco Bay Chapter.

The coal industry and its political allies have argued that moves to block coal exports from West Coast ports have nothing to do with protecting public health and everything to do with keeping U.S. coal in the ground, putting American miners, truckers, rail engineers and others out of work.

“The stakes are high. Adoption of this ordinance threatens jobs and will result in years of litigation," said Levin’s marketing director, Barbara O’Neill. “Furthermore, the City Council’s asserted need for the ordinance — ‘protecting the public from the hazards of fugitive dust emissions from coal and petroleum coke’ — has been shown to be without support.”

She highlighted an evaluation of upwind and downwind air-monitoring data indicating the terminal has not been a source of harmful fugitive dust.

A similar ban enacted by the nearby port city of Oakland got derailed when city officials tried to apply it to an export terminal proposed for an old military base under a development agreement with the city. A federal judge ruled that the city failed to demonstrate that coal handling posed a sufficient threat to public health to warrant prohibiting the developer from moving forward with his plans. That ruling is under review by the 9th U.S. Circuit Court of Appeals.

Oakland, meanwhile, has terminated the development contract, and Insight Terminal Solutions, the company that would build and operate that export terminal, has filed for Chapter 11 bankruptcy protection.

Wolverine is so confident in Japanese demand for Utah coal, with its high-energy content and low sulfur and ash, that it has acquired much of the Beehive State’s coal-handling infrastructure and is pursuing plans to open a new mine in Emery County, known as Fossil Rock, and to expand the federal lease supporting its Skyline Mine by 120 acres.

In addition, Wolverine operates the Sufco and Dugout mines, producing a total of about 10 million tons of coal a year. The company’s export program interrupted a decadelong slide in Utah coal production.

For the past few years, Wolverine has shipped coal by rail to Richmond and the inland Port of Stockton on the Sacramento River. The Japan-bound ships, each with a capacity of 66,000 tons, are loaded about two-thirds full at Stockton, then floated downriver to Richmond’s deeper waters, where they are filled to capacity at the Levin terminal.

Taking Richmond out of play could effectively disrupt loading operations at Stockton if Wolverine cannot find another bay-side terminal to top off its ships. Such a scenario elevates the importance of the proposed Oakland terminal, which could handle 10 million tons a year.

In a bid to shore up the coal industry, Utah lawmakers have pledged $53 million from state coffers to help build that terminal, estimated to cost $250 million. Now a major Japanese utility has emerged as a potential financial savior for the Oakland project.

JERA Co., which has two new coal-fired power plants under construction and others proposed, is interested in buying 4.4 million tons of coal shipped each year through the Oakland terminal, according to a declaration Insight executive John Siegel filed in the bankruptcy case.

JERA oversees numerous idled nuclear power plants, including the Fukushima Daiichi plant that suffered a direct hit from a 2011 tsunami. Siegel served as executive chairman of Wolverine, then known as Bowie Resource Partners, when it quietly hatched the plan to build the Oakland coal-export terminal with developer Phil Tagami.

According to Siegel’s declaration, JERA’s bank, Sumitomo Mitsui, is in discussions with Insight to finance the full construction costs of the terminal. But all these efforts to push Utah coal overseas through the Bay Area could be moot if the courts side with Oakland and Richmond in the pending and threatened suits over their coal bans.