Will Utah's coal ship ever sail?

Utah legislators moved quickly toward the end of the legislative session last month to approve a fund-swapping plan that commits $53 million to help build a deep-water port in Oakland, California, to facilitate selling Utah coal overseas.

Utah legislators moved quickly toward the end of the legislative session last month to approve a fund-swapping plan that commits $53 million to help build a deep-water port in Oakland, California, to facilitate selling Utah coal overseas. But California officials are moving just as quickly to quash the plan.

The movement of the funds, previously earmarked for transportation, was accomplished by the final passage, by a vote of 52-17 in the House, of SB246, which Gov. Gary Herbert signed late last month.

Critics have called the bill a “shell game,” and it is being opposed by environmental groups in California and Utah that expect such coal shipments to promote global warming. In Utah, critics wonder if there is a market for such global shipments.

“The big gamble is not to the state of Utah,” said Rep. Brad King, D-Price, who represents the coal-producing counties in eastern Utah. He claims the deal poses no risk to taxpayers because the state treasury would be reimbursed immediately by the Permanent Community Impact Board (CIB) with money from federal mineral royalties collected on the exports. King told the local media that those monies are generated by the “blood, sweat and tears of every miner and every person who has worked in the gas and oil industry in Utah.”

King, Utah’s lone rural Democrat, claims the deal has a good chance of saving jobs by opening new markets abroad for Utah coal and other products, from oil to alfalfa.

The bill that moved the money was introduced Feb. 29, just eight days before the end of the legislative session. It authorizes the swap of $53 million in state sales tax revenue, now in the transportation budget, for an equal amount of cash from the CIB when those monies are collected down the road. The money that is already available would be deposited into a newly created throughput infrastructure fund that would be controlled by the CIB.

Last year, the CIB approved loaning the money to four rural counties — Carbon, Emery, Sevier and Sanpete — to help pay for the development of the bulk-freight-loading seaport under development at the former Oakland Army Base. In the past, CIB money has been loaned for local projects such as roads, public buildings, water and sewer systems or parks.

Meanwhile, the passage of SB246 hasn’t gone unnoticed in Oakland. The city’s officials have been paring down volumes of evidence on whether transporting the ore to their city would endanger residents. Oakland city staff and outside consultants are reviewing evidence submitted to the city in preparation for a report to the city council sometime in April.

In 2013, Oakland city agreed with developer Phil Tagami to transform the former Oakland Army Base into a logistics center but the pact made no mention of coal transfer as a possible function of the facility. Although city officials have been worried about the coal transfer systems for some time, the Utah legislation last month still seemed to catch them by surprise. The Tagami agreement did not specifically restrict coal as one of the commodities to be exported there.

Since then, Tagami and Terminal Logistics Solutions (TLS), the company developing the facility, have proposed exporting coal as part of the massive, $250 million bulk commodities terminal located on the Outer Harbor, southeast of the Bay Bridge toll plaza, south of downtown Oakland.

Recent discussions in Oakland City Council open meetings have seemed to indicate the one way for the city to stop the coal transports — which the council generally opposed in a 2014 resolution opposing the transportation of coal and crude oil through Oakland — would be to declare the shipments a health and safety hazard to residents along the rail line.

Passage of the Utah bill was applauded by the head of TLS, but criticized by environmental groups and most Democratic legislators in the area, led by Sen. Loni Hancock, D-Oakland. The environmental groups say the funding increases pressure on Oakland leaders to act swiftly to halt coal as an option for the terminal.

“It’s up to the Oakland City Council to act quickly to stop this dangerous proposal to ship coal through Oakland,” said Cesia Kearns of the Sierra Club’s Beyond Coal campaign in a statement. “Unless Governor Brown’s administration and the Oakland City Council act, legislators in Utah will be dictating California energy policy and Oakland air quality.”

Starting last Tuesday, the California Senate Committee on Transportation and Housing began hearings on two of Hancock’s four bills targeting coal shipments in California. The bills cover a variety of issues, from the health and safety risks to West Oakland residents, to prohibiting the use of public funds to build projects for coal transport — such as Tagami’s

Jerry Bridges, president and CEO of TLS, said the vote in Utah “is a positive development. Utah has various commodities that they need to have a port for and they are invested in their future,” Bridges said late last month. “I think it’s a very smart move on their part.

“I think the record is clear as far as TLS is concerned there are no health and safety issues associated with the shipment of any commodity through our terminal,” Bridges said.

Under the Utah plan, coal would be taken by rail from Utah to Oakland and shipped overseas to Asia. Environmental groups argue it would expose West Oakland residents to greater risks of respiratory illness and that the exports of coal run contrary to California’s commitment to clean air and energy.

Last month, Hancock introduced four bills targeting coal shipments in California and asked the California Transportation Commission (CTC) to stop funding to the Oakland project. The redevelopment of the former Oakland Army Base is set to receive hundreds of millions in public funding and $242 million from the CTC for rail and access improvements to the site.

Meanwhile, Oakland area politicians are worried about the propriety of the Utah legislation. The East Bay Express recently reported that a Kentucky-based coal company donated $750 to Utah State Sen. J. Stuart Adams, who introduced the Utah coal legislation and a total of $5,950 to 11 Utah senators who voted in favor of the bill. The paper also said the coal producer has given money to Herbert.

Environmentalists groups have also filed complaints with Utah Attorney General Sean Reyes challenging the use of CIB funds for an out-of-state project. So far, Reyes has declined comment on the complaints.

Some coal industry observers have also expressed puzzlement at the deal, saying the global market for coal is drying up and international shipments have sharply tapered. “Investing in a coal terminal is like building a stateroom on the Titanic after it hits the iceberg,” said Clark Williams-Derry, director of energy finance at the Seattle-based think tank Sightline Institute. He said Asia’s coal imports are dropping as India boosts domestic production and China turns to other energy sources.

Meanwhile, Bowie Resource Partners, which controls more than half of Utah’s coal production, lost its contract to supply Mexico’s Petacalco power plant in 2015. But King argued that China, for one, seeks the kind of clean, low-sulfur coal that Utah produces to help reduce pollution.

He said if Utah somehow could meet all of its demand, China would reduce its power plant emissions by half.