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Council votes to phase out coal handling, ends another West Coast export option

Another city council in California took action to limit coal exports off the West Coast by voting to phase out storage and handling of the fuel at an existing terminal.

The Richmond City Council in California passed an ordinance Jan. 14 that will phase out some existing uses of coal in the city over three years, Bloomberg News reported. The council will also ban the establishment or expansion of storage and the handling of the fuel along with petroleum coke within city limits, according to a draft of the ordinance. The council said the move will protect the public from associated health hazards while providing a period for affected businesses to transition.

The ordinance will affect a port operated by Levin-Richmond Terminal Corp., the CEO of which has reportedly threatened to sue and has claimed that the ban will put his company out of business. The terminal shipped nearly 1 million tonnes of coal to Japan and South Korea in 2018, Bloomberg reported.

In the third quarter of 2019, the Port of Seattle was the only West Coast facility to break into the top five U.S. ports based on export coal tonnage, though two California ports also made the top 10.

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Environmental groups and some community advocates heralded the council's decision, noting the expected improvements to air quality in the area without the presence of coal dust, according to a Jan. 15 release from the Sierra Club.

The move is the latest in a slew of coal terminal battles being waged up and down the West Coast. Western coal producers want additional export capacity to sell more of their product to strong Asian demand centers, which are often otherwise too expensive to access. The coastal states have fought against proposed terminals and with Richmond's decision, sought to eliminate terminal capacity at existing sites.

Two other proposed projects are tied up in legal disputes. In Oakland, Calif., about 12 miles south of Richmond, developers of the Oakland Bulk and Oversized Terminal sued the city when it banned coal shipping and storage after granting a lease for the project. A federal judge ruled in favor of the terminal, and the city is appealing the ruling.

In Washington, Lighthouse Resources Inc. is trying to build a coal export facility through subsidiary Millennium Bulk Terminals-Longview LLC. The state government denied a critical water quality permit for the project, effectively halting its development. The company then sued, claiming the move preempted federal law. Four cases related to the project are in various stages of judicial proceedings.

Gregory Marmon, a senior research analyst with Wood Mackenzie, said in December 2019 that additional capacity could open up soon in Canada. Teck Resources Ltd. plans to shift much of its coal to Neptune Bulk Terminals (Canada) Ltd., potentially freeing space for Powder River Basin producers with Westshore Terminals Investment Corp.'s limited partner, Westshore Terminals LP, in British Columbia.

While the seaborne coal market was kind to U.S. producers in 2018, prices dropped to levels in 2019 where some companies could no longer compete. All told, 2019 coal exports plunged 20% year over year to 92 million tons. The U.S. Energy Information Administration recently projected that international shipments will decline by another 10.6% to 82.6 million tons this year before increasing slightly in 2021.