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2018 brought little progress for proposed West Coast coal export terminals

The surge in U.S. coal exports helped offset the lag in domestic coal demand through much of 2018, but as the year ends, some western coal producers are no closer to taking advantage of the seaborne market than they were a year ago.

Two proposed coal export terminals along the West Coast have not made much headway in the last year, as the proponents continue battling localities and environmental organizations in the courtroom. And there has been little public discussion of the Trump administration's suggestion to export coal from military installations, an idea that was floated in October.

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A barge is filled with coal along the Mississippi River at Knight Hawk's Southern Illinois dock.

Source: S&P Global Market Intelligence

Time may be running out for western producers to reap the benefits of the seaborne market. The U.S. is a global swing supplier, and analysts are projecting "storm clouds" on the horizon as demand decreases in some markets.

Kristen Boyles, a staff attorney with the environmental nonprofit Earthjustice, who is leading its legal efforts against a proposed terminal in Washington, called the projects "a dying idea."

"I think the coal terminals are economically unviable, and so I don't think that they're going to be moving anytime soon," she said.

Lighthouse Resources Inc. is still pushing to build a terminal in Longview, Wash., through its subsidiary Millennium Bulk Terminals-Longview LLC to gain access to Asian markets. The developers sued state officials in January for denying a necessary water quality permit for the project, alleging the state's actions were pre-empted by federal law. Millennium laid off 15% of its employees in November and attributed the cuts to Washington's permitting decisions.

A district court judge ruled that Washington did not violate federal regulations when denying the permit, which some law experts said likely gutted the backers' case. But the company "remains confident" in its "core claim" that the denial infringed upon Congress' role in regulating interstate commerce and trade with other nations. Though the terminal backers still have to argue those claims in court, Paul Seby, an attorney who has counseled clients from the mining and energy industry, said "the big issues in the case have been decided." The case will go to trial in May 2019.

The future of the Oakland Bulk and Oversized Terminal, a proposed export facility that would be built at the site of the former Oakland Army Base, remains uncertain as well. The Oakland City Council banned shipping or storing coal in 2016 after learning that the developers intended to export coal through the facility. A federal judge struck down the ban in May. Legal experts had varying opinions on the city's chances of winning its appeal, with some saying there were too many errors in the case's factual record to support the city's claims and others believing Oakland might fare better by imposing regulations on the terminal's operation.

The city terminated the developers' lease on the site in November, saying they defaulted on the terms of the contract by failing to begin construction on time. The developers filed another suit against the city, alleging that "an uninterrupted pattern of delay and interference" prevented the work.

While both projects remain in legal limbo at the local level, the coal-friendly federal government has taken little concrete action to promote West Coast exports. It is unclear whether the Trump administration was or is seriously considering using federal property to export coal, but there has been little mention of the idea since it was introduced.

Seby, an attorney with Greenberg Traurig LLP, said doing so would provide a "very strong alternative to states blocking and using environmental permits as the means to block coal terminals." But he has not heard anything more about the idea.

William James, national mining expert for the U.S. Army Corps of Engineers, said in an October interview that the project would likely need a permit under Section 10 of the Rivers and Harbors Act of 1899 to build a structure in navigable waters as well as a permit under Section 404 of the Clean Water Act to regulate the dredged or fill material into the water, both of which are issued by the Corps. Other permits would depend on the size and scope of the project. More controversial plans tend to "drive up the processing time," he said, and could require an environmental impact statement.

The proposal appeared to be an "off-the-cuff statement" and did not seem to be a "serious proposal," Boyles said. The actual process would depend on the details of the proposal, but would require an environmental review and the development would have to comply with environmental regulations, including the Clean Air Act.

"Proposing to do some sort of a private-corporate activity on a federal military base doesn't actually change any of the requirements you need for permitting and certifications," Boyles said. "The federal government still has to go through these processes too."