Utah is suing a California city over its coal ban

Attorney general argues local law violates Constitution and could cost Utah jobs.

(Francisco Kjolseth | Tribune file photo) This Tribune file photo from 2017 shows crews moving 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 bound for export terminals in California. Utah has joined industry lawsuits seeking to invalidate a coal ban enacted by the city of Richmond, a key port city where Utah coal is shipped to Japan.

Utah has fully joined the latest round of lawsuits over exporting coal through West Coast ports, this one brought by Utah coal-producer Wolverine Fuels fighting one city’s coal ban that threatens to disrupt an export program that helps keep Utah mines churning.

The ordinance passed last year by the Richmond City Council triggers a three-year phaseout on the shipping of coal and an oil-refining byproduct called petcoke through Levin-Richmond Terminal, on the San Francisco Bay. This move will effectively choke off Wolverine’s export pathway to Japan, whose electrical utilities buy about 3 million tons of Utah coal a year.

Utah officials say the restriction violates interstate commerce rights.

“Through its passage of the Ordinance, Richmond has made itself a gatekeeper for interstate and international commerce based on what it alone concludes are good public health and environmental policies, all in violation of the Commerce Clause of the United States Constitution,” wrote the Utah attorney general’s office in its successful motion to intervene. “This gatekeeping by Richmond severely affects state and local economies in the State of Utah, as well as the state and local infrastructure programs supported by revenue received from Utah’s coal economy.”

Richmond officials justified the ban as needed to protect residents from coal dust wafting into the city from rail cars and open mounds of coal piled along the docks.

In three separate federal suits, Wolverine, the terminal operator and Phillips 66 Co., a Bay Area refiner that ships petcoke through the terminal, allege the ordinance impedes interstate commerce, is preempted by federal regulation over rail transportation and is not grounded in scientific evidence.

In various rulings, U.S. District Judge Yvonne Gonzalez Rogers rejected Richmond’s motion to dismiss the suits and granted Utah’s and the Sierra Club’s petitions to intervene. Utah is siding with the Wolverine, while Sierra Club supports Richmond. The state of California filed an amicus brief supporting Richmond.

In yet another legal battle, Utah is participating as an amicus in suits brought by Salt Lake City-based Lighthouse Resources, Wyoming and Montana over Washington state’s refusal to permit a massive coal-loading terminal on the Columbia River. Lighthouse, which operates mines in Wyoming and Montana, sought to develop the Millennium Bulk Terminal to ship coal to Asia. In the face of collapsing domestic demand for coal, the company filed for Chapter 11 bankruptcy protection last month.

Richmond’s ordinance so irritated Utah lawmakers that one coal-country senator sought a $500,000 appropriation to fund a lawsuit to have it invalidated, calling the anti-coal rule a “slander on Utah.” Industry beat Utah to the punch when it filed its suits in March.

The Richmond suits mirror the one filed by the would-be developers of an export terminal in nearby Oakland, Calif., whose city leaders had passed an ordinance against the handling of coal. Utah, which has set aside $53 million to invest in the Oakland project with the goal of boosting coal exports, did not intervene in that suit which ended in industry’s favor. A federal judge held that the ordinance could not be applied to the Oakland Bulk and Oversize Terminal, but the developers later lost their interest in the project in bankruptcy proceedings and its future is far from certain.

In rejecting Richmond’s motion to dismiss the latest suits, the judge concluded most of industry’s claims hold merit and should be fully litigated.

“Levin and Wolverine claim that if the Levin-Richmond Terminal is not available, coal exports to Japan may need to be shipped from terminals as far away as Mexico,” she wrote. “The Court finds plaintiffs have adequately alleged a significant burden on the interstate markets for coal and petcoke.”

In the meantime, however, a California state judge last month tossed out a related suit in state court.

For the past several years, Wolverine Fuels has shipped its coal from its Utah mines by rail to the Bay Area. Vessels are partially loaded with this coal at an inland port in Stockton and then travel down the Sacramento River to be topped off at the Levin-Richmond Terminal. Nearly once a week, a 66,000-ton-capacity freighter full of Utah coal passes under the Golden Gate Bridge headed to Japan, an island nation with no energy resources of its own.

Environmental groups lobbied hard to shut down the Levin terminal and block other coal-handling export facilities from being built, arguing U.S. coal exports are furthering global reliance on a dirty fuel that contributes to climate change. They also argued that coal shipments from Rocky Mountain states to the West Coast endanger public health.

But Utah officials maintain the bituminous coal produced from Utah mines is a far cleaner-burning product that what is available from Asian mines. In the wake of the 2011 Fukushima nuclear disaster, Japan plans to build 43 coal-fired power plants that require the low-sulfur, high-energy coal Utah is known for, the state’s lawyers claimed in their court filings which cite a report by the Univerisity of Utah’s Kem C. Gardner Policy Institute.

Levin is one of the few terminals available to coal on the West Coast. Without it, Utah coal will not reach Japan unless an alternate pathway is developed at Oakland or possibly on the Mexican coast at Ensenada.

“In addition to supporting and fulfilling important national policies and priorities, the Levin Terminal sustains a significant component of Utah’s economy, provides millions of dollars in annual tax revenue, enables the State to provide critical state and local infrastructure programs, and supplies thousands of high-paying jobs to its rural counties,” Utah’s filings state. “If the Ordinance is enforced, the resulting economic loss to Utah would be substantial.”

The filings claim the state “depends heavily” on a severance tax on coal to fund public education and critical infrastructure.

A close read of the Gardner Institute’s 2020 report, however, suggests the state is overstating economic importance of coal exports, which account for a fifth of the state’s total production. Utah’s seven coal mines combined employed about 1,500 and produced 14.4 million tons in 2017, worth nearly $500 million, making Utah the nation’s 11th largest coal producer. Unlike other states, Utah does not collect a severance tax on coal.