EXPORTS

With Oregon and Vancouver decided, coal export fight moves to Washington

2014-09-02T11:00:00Z 2014-09-03T09:56:04Z With Oregon and Vancouver decided, coal export fight moves to WashingtonBy BENJAMIN STORROW Star-Tribune staff writer Casper Star-Tribune Online

Environmentalists and industry supporters searched for meaning last week in the recent rejection of a coal dock in Oregon and the expansion of an existing terminal in British Columbia, and both sides prepared for what promises to be an even larger fight over coal exports in Washington state.

Opponents of the docks said the rejection of a terminal on the Columbia River near Portland set a precedent for how future projects will be judged.

Coal backers called the move political. Oregon Gov. John Kitzhaber, a Democrat, announced his opposition to the plan in April. And they hailed the expansion of the Port of Vancouver in Canada as evidence strong of Asian demand. Wyoming and Montana coal will be shipped abroad regardless of what Washington and Oregon decide, they said. 

But both decisions, while not yet final, looked to be relative skirmishes compared with the coming fight in Washington. Ambre Energy’s plans on the Columbia River called for shipping 8.8 million tons of coal abroad each year. The Port of Vancouver expansion will boost its annual capacity by 4 million tons.

By contrast, the two terminals proposed in Bellingham and Longview would almost double America's export capacity, annually shipping a combined 92 million tons of coal abroad.

“If either of them go through, that is a very sizable amount of coal for the Powder River Basin,” said Hans Daniels, who tracks the industry at Doyle Trading Consultants, a research firm. “That would be a game changer for the market, because the PRB would have an outlet outside the U.S.”

American coal consumption is declining due to a tightening regulatory environment and low natural prices. 

Oregon rejected the dock proposal on the grounds it would damage marine and riparian ecosystems and posed a threat to fishing grounds long used by Native American tribes in the region. Tribal fishing rights are also at play in the case of the Evergreen State terminals.

While the Oregon and Washington projects are reviewed by regulators in their respective states, the two neighbors have similar regulatory environments and politics, said Clark Williams-Derry, deputy director of the Sightline Institute, a Seattle-based think tank opposed to the docks.

"I think the Ambre denial may foreshadow similar problems for the megaprojects," Williams-Derry said.

Losing the Oregon permit could also impact Ambre’s joint venture with Arch Coal in Longview, Wash., which would ship 44 million tons of Powder River Basin coal to Asia annually, he said.

Ambre agreed to have its permit for the Oregon project wrapped up by December 2015 as a condition of a $50 million loan extended to the Australian mining firm in 2012 by Resource Capital Fund, a Denver-based private equity firm.

Liz Fuller, an Ambre spokeswoman, said the Oregon deadline should not pose a problem to the Millennium project. Ambre and its shareholders are sophisticated enough to expect delays due to permitting and litigation, she said. The terms of the contract allow the private equity firm to extend the deadline.

The company has until Sept. 8 to file a challenge. It is weighing its options, Fuller said.

Opponents of the two docks first raised concern coal exports would contribute to global warming. When that didn’t stick, they turned their fire to coal dust from trains. Now they’re fighting on economic grounds, she said.

“It signals weakness,” Fuller said. “I think it is a sign it is moving closer and closer to fruition.”

Resource Capital did not respond to a request for comment.

The Wyoming Legislature and Gov. Matt Mead recently tapped the Wyoming Infrastructure Authority with promoting coal exports in the Pacific Northwest.

Loyd Drain, the authority’s executive director, has made two trips to Washington this summer to visit Millennium Bulk Terminals and Gateway Pacific, respectively. Mead paid a separate visit to Millennium to stump for the project.

Drain called Oregon's decision disappointing. But he took consolation from the expansion at the Fraser Surrey Docks southeast of Vancouver.

The expansion marks the second move by Canadian ports to boost their exports this month. Cloud Peak agreed to a deal at Westshore Terminals in Roberts Bank, British Columbia, that will boost shipments by 25 million tons through 2024.

"I don’t know if it’s a trend, necessarily, but it is proof we are going to be successful in raising the amount of coal we export," Drain said. "If it doesn’t happen in Washington state, it will happen elsewhere."

A Mead spokesman echoed that sentiment, saying the governor was disappointed by the Oregon decision and was gathering information about how Wyoming might respond.

“He remains optimistic that the northwest states in the U.S. will catch up with our neighbors to the north,” Renny MacKay wrote in an email to the Star-Tribune.

Cloud Peak Energy, a Gillette-based mining company, also remains bullish on the prospect of the Washington ports, said Rick Curtsinger, a company spokesman. Cloud Peak and Peabody Energy have signed deals with Gateway Pacific to ship their coal through the Bellingham facility if it is built.

Curtsinger said he would let the recent developments “speak for themselves” but added demand from Asia remains strong.

“Capacity is the real bottleneck at this point. British Columbia and others are taking steps forward to increase their capacity,” he said. “We still see the terminal projects in Washington state as viable.”

Gateway Pacific expects to begin operations in 2019 if approved. A preliminary environmental analysis of Millennium Bulk is expected in 2015.

Williams-Derry, of the Sightline Institute, questioned the economics of shipping Powder River Basin coal to Asia.

Bloomberg News reported prices at the Chinese port of Qinhuangdao were between $76 and $77 earlier this month, the lowest level since September 2007.

“The real problem is, the global market is working against U.S. coal right now. It could change,” he said. “It is harder and harder to see how southern Powder River Basin coal will price into Asian markets.”

Many of the exports from the region today are from mines in the northern Powder River Basin. 

Prices are a short-term challenge but should rebound, said Daniels, the researcher. Producers in countries like Indonesia and Australia increased supply to meet growing Asian demand. Today’s low prices mean supply will likely be constrained in the short-run, helping prices rebound, Daniels said.

“Right now is as low as it's going to be, but the markets are going to turn,” he said.

Reach energy reporter Benjamin Storrow at 307-335-5344 or benjamin.storrow@trib.com. Follow him on Twitter @bstorrow

Copyright 2015 Casper Star-Tribune Online. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(1) Comments

  1. TBA
    Report Abuse
    TBA - September 02, 2014 4:34 pm
    I don't blame people in Oregon and Washington for not allowing coal kings to use them for their selfish greed.One day coal will no longer be wanted then coal producing states,like Wyoming,will be singing a different tune with their hands out.
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