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Lighthouse could use NAFTA to fast-track approval of Wash. coal export terminal

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Lighthouse could use NAFTA to fast-track approval of Wash. coal export terminal

SNL Image

National flags representing Canada, Mexico and the U.S. are lit by stage lights at the North American Free Trade Agreement renegotiations in September 2017. The talks could be used to ease the approval of a controversial coal terminal project in Washington.

Source: Associated Press

A coal producer is pushing the Trump administration to use ongoing North American Free Trade Agreement renegotiations to override state opposition to a proposed export terminal that would allow more U.S. thermal coal to be shipped to Asian markets.

"Lighthouse Resources Inc is looking at all reasonable solutions to the impasse created by Washington state officials' refusal to fairly consider [Millennium Bulk Terminals-Longview LLC]'s permit applications," Michael Klein, vice president of legal and business development and general counsel of Lighthouse, told S&P Global Market Intelligence. "One possible legislative solution that has been proposed would involve NAFTA. We believe that permitting and regulatory reform as well as infrastructure and workforce development within NAFTA is a win-win and the right thing to do."

Washington officials have denied critical permits for the project in part based on "unavoidable and negative environmental impacts."

A recent letter from a trio of Republican senators urged President Donald Trump to propose a chapter in NAFTA that would "improve American economic competitiveness" by fast-tracking infrastructure and manufacturing projects.

The proposal from Sens. Ted Cruz, Cory Gardner and Steve Daines does not mention Millennium Bulk but suggests streamlining permitting for projects, codifying regulatory reform measures and developing a "modern physical and digital infrastructure that enables the swift movement of cargo" from the U.S. interior to and through borders and ports.

"Under the Trade Promotion Authority Act's expedited procedures, we can avoid a filibuster and pass implementing legislation in the Senate with only 50 votes," they wrote.

Todd Tucker, a fellow at the Roosevelt Institute who wrote a book on the presidential fast-track authority, said it could be invoked to override state permitting decisions about the coal terminal.

"Fast track is convenient because you can put other things into it," he said. Former President Bill Clinton invoked the power during the first NAFTA negotiation in order to get the act authorizing the deal through Congress; to do so, Trump would need to make the argument that Canada and Mexico would not agree to the new deal unless Millennium Bulk was approved.

Trump would be on stronger footing if the pact included language requiring the terminal, but it is unclear whether the other parties would agree, since exporting coal from Washington might not align with their interests.

"It's one thing to have a competitiveness chapter in NAFTA that commits governments to certain general norms," Tucker said. "Including a specific permitting issue for named projects would be a leap."

However, he said, Trump also benefits from discretion in constructing the federal legislation to implement a new pact, "so if Trump wanted to tack on the coal export terminal, and Congress didn't object, it could conceivably get through."

Environmental groups could fight the decision in court, arguing that it breaks domestic environmental standards, and Tucker said Democrats "would object vehemently to such a move, and could get a lot of political mileage out of calling this a dirty back-room deal."

Lighthouse is suing Washington on constitutional grounds for denying permits for the terminal. Klein said the company believes that its lawsuit will succeed but is looking for additional clarity on the scope of federal authority on the issue.

"We are committed to see this project through," Klein said. "It's important to our customers in Asia as they fulfill their energy policy objectives. It's important to U.S. national interests that we support our trade allies. It's important from the perspective of the economy, for the jobs it supports and creates, and trade is a central pillar of that."