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Four Utah counties invest $53 million in California port for coal, other exports

By Amy Joi O'Donoghue | Posted - Apr. 26, 2015 at 1:09 p.m.

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SALT LAKE CITY — Millions of tons of Utah coal will have a secure shipping port from a former Army base in Oakland, California, under a $275 million deal being brokered among multiple parties.

Four Utah counties — Sevier, Emery, Carbon and Sanpete — have already secured a $53 million low-interest loan from the state's Community Impact Fund Board to assure that Utah exports, notably coal, have a guaranteed share of the port's capacity.

The investment, approved earlier this month, buys Utah exports such as coal, potash, salt and hay cubes 49 percent of the new facility's capacity, described as 9 million metric tons. The dry bulk port will occupy land owned by Oakland City and provide a more direct West Coast route for the state.

Jeff Holt, a consultant for the counties, told the board members that port space is at a premium and other Western states are looking to secure viable shipping options as well. Wyoming lawmakers, he added, have agreed to spend $1 billion for access being eyed in the Pacific Northwest. In Utah's case, the money does not buy equity interest but rights of access.

Laura Nelson, director of the state Office of Energy Development, said the investment is a prudent use of money to ensure the state's coal supply has direct access to international markets.

"We have the resource here, and if we can move it to locations where we can displace low quality coal with our higher quality coal, that is a win-win for economic development and environmental improvements," she said.

Even as the U.S. demand for coal is ramping down and environmental regulations are bringing increasing pressure on domestic coal-fired power plants, Asian markets are hungry for the energy source.

"If you want to look at some of the fastest growing economies, they are in Asia," Nelson sad. "Indonesia, Thailand and Vietnam are in the top three in terms of per capita utilization of coal and they are doing that to enhance their quality of life and they are going to continue to do that so they can get affordable power to the masses."

We have the resource here, and if we can move it to locations where we can displace low quality coal with our higher quality coal, that is a win-win for economic development and environmental improvements.

–Laura Nelson, Utah Office of Energy Development

Nelson said the Oakland port — should the deal go through — will be an opportunity for those markets to displace dirtier coal with Utah coal, which has a lower sulfur and water content and higher BTU, which means it produces energy more efficiently.

"Longer term, we are looking to displace the coal they are using," she said.

Utah, 14th in the nation for its coal production with 16 million tons, will probably send 4 million to 5 million tons of coal to Oakland via rail, she added.

If Delta's Intermountain Power Plant no longer uses coal, the Oakland port could become its new destination.

Commissioners from the four counties have toured the Oakland site and are hopeful the port — which is 14 miles from the open sea — will help assure the long-term future of Utah's coal and other exports.

"Hopefully this will not only help our counties but the entire state," said Emery County Commissioner Keith Brady.

Holt said Redmond salt and Sanpete County hay — bound for Asia – are transported via costly trucking routes.

"This would provide long-term sustainable demand for Utah products for markets around the world," he said.

But Jeremy Nichols, climate and energy program director for WildEarth Guardians, said further expansion of Utah coal markets is the wrong move.

"It is a bad deal for Utah public land, it is a bad deal for our climate and it is not where we need to be going," Nichols said.

The Permanent Community Impact Fund makes loans and grants to communities in the state that are impacted by mineral development. It is funded by Utah's portion of mineral royalties that are returned by the federal government.

Amy Joi O'Donoghue

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