Coal Producer Fights To Open West Coast Export Window

As U.S. coal-fired plants close and coal tonnage on the rivers plunges, coal exports are a bright spot in an otherwise dire picture for the U.S. coal industry.

On January 16, U.S. coal producer Cloud Peak Energy announced an export agreement to supply up to 1 million metric tons of coal a year to two new state-of-the art coal gasification power plants in Japan.

Having decided to pivot away from nuclear energy after the accident at its Fukushima Daiichi nuclear plant in 2011, Japan is building or planning new coal-fired plants—up to 45 of them, according to Rick Curtsinger, a spokesperson for Cloud Peak.  The two new plants will be built in Fukushima Prefecture to replace the closed nuclear plant.

The National Mining Association is about to release a report showing that U.S. coal exports were up 61 percent in 2017 from the previous year’s levels. That demand was mostly for metallurgical coal that serves the global steel industry, but with a big spike in demand for steam coal towards the end of the year.  At the beginning of last year, Cloud Peak said it expected to export 1 million tons; by year’s end it had exported 4 million. But historically, the US. has accounted for only 5 percent of coal imported to Asia.

The Cloud Peak coal, whose shipments will start leaving at the end of 2019, will go to Vancouver, British Columbia, by train. That’s because the Vancouver export facility is, at present, the only one on North America’s West Coast.

Utah-Lighthouse Resources, formerly known as Ambre Energy, has already plowed tens of millions of dollars into trying to develop its $680 million Millennium Bulk coal export facility in Longview, Wash. The effort has taken 5 years, 11 months, and 14 days, as a “ticking clock” graphic on the website of the Northwest Alliance for Jobs and Exports will tell you. If and when completed, the Millennium facility plans to ship 44 million tons of Powder River coal a year to Longview and export it by ship to Asia.

When Lighthouse’s efforts began, there were seven competing export coal facilities under development or consideration on the West Coast. Today there are only two: Millennium and another proposed project in Oakland, Calif.

The other projects dropped away for two reasons. One is the unpredictability of the coal industry, which has been on a wild ride due to natural gas from fracking and to environmental regulations. During the past few years, every major U.S. coal company has reorganized under bankruptcy protection.

But the more important reason has been implacable hostility from state and local officials in Washington and California, who have employed every trick in the book, and a few from outside the book, to tie up, bog down and ultimately kill any project involving coal movement or transport. That’s what Lighthouse is charging in court, anyway.

Back in October, Millennium Bulk Terminals filed suit in Cowlitz County Superior Court against the state’s Department of Ecology, arguing that the agency unfairly and illegally denied a key water quality permit for the project.

At the time, Millennium’s CEO and president Bill Chapman said in a press release, “Just last April, Ecology’s environmental statement announced that Millennium’s project met all state and federal water quality standards. But Ecology has chosen to ignore its own water quality findings and make up special rules for this project.” Millennium appealed the denial to the state’s Pollution Control Hearings board.

But its parent company didn’t leave it at that.

On January 3, Lighthouse filed a second suit, in federal court this time, against Washington Gov. Jay Inslee and members of his administration. Everett King, Lighthouse’s CEO, said, “It’s no secret that Washington state officials are philosophically opposed to coal. But that does not give them legal authority to discriminate against this project and block foreign trade and interstate commerce.”

Lighthouse is arguing that Washington state officials are acting illegally in restraint of interstate commerce. The suit also claims the state violated the ICC Termination Act, which gives the federal government jurisdiction over railroads, and the Ports and Waterways Safety Act, which governs the operations of vessels in U.S. harbors.

The promoters of the Oakland coal export facility are also suing the state of California, alleging illegal restraint of trade.

The two suits open issues of transportation, commerce and federal versus state preemption that should resonate beyond the borders of both states.