Utah’s leading coal producer is fighting to reverse a California city’s ban on exporting coal and open new markets for local mines

Between Utah’s rich coal beds and potential markets overseas lies 850 miles of rail track and 5,000 miles of ocean that converge in the California port city of Oakland.

A proposed Oakland export terminal once promised an economic lift for distressed portions of California’s prosperous East Bay — and a new conduit for Utah’s coal to reach Asian markets. But the questionable project is now mired in a legal swamp, as one of Northern California’s best high-profile developers takes on his own city over a coal-handling ban Oakland leaders enacted in 2016.

Under agreements with the city, that owns the 35-acre site known as West Gateway, Phil Tagami is developing a deep-water bulk-freight loading station on a decommissioned military base at the foot of the Bay Bridge. But those plans jackknifed in 2016 after word got out that four coal-producing Utah counties had pledged $53 million approaching the project, called Oakland Bulk and Oversized Terminal, or OBOT, in exchange for guaranteed export capacity.

News of that Utah connection ignited a political firestorm that led to Oakland City Council’s vote to prohibit coal; Tagami responded with a federal suit that heads to trial this month in a San Francisco courtroom. The suit alleges Tagami’s firm holds a “vested right” to process any legal commodity it chooses at the terminal.

Key adversaries in the drama include Utah’s leading coal producer Bowie Resource Partners and activist groups looking to reduce global reliance on the carbon-heavy fuel best closely linked to climate change.

And according to court filings, the firm that would operate the Oakland export station is a wholly owned subsidiary of Bowie Resource Partners, that is bankrolling Tagami’s suit to the tune of at least $1.7 million.

New markets vs. health worries

Domestic demand for coal is plummeting as power utilities angle to cleaner energy sources for electricity generation, so industry officials see Asia’s expanding economies as an alternate destination for the West’s relatively clean, high-energy coal.

However, West Coast cities — populated with citizens concerned about coal’s greenhouse gas emissions — are balking at the prospect of their ports expanding the trade.

But Oakland’s legal rationale for blocking coal is strictly about local impacts to public health as opposed to broader climate concerns, according to Aaron Reavin, an Oakland school teacher.

“It was totally within [Oakland’s] authority under the agreement with Phil Tagami to act on health and safety issues. There was a tremendous amount of medical and scientific evidence marshaled to backing banning the handling of coal,” stated Reavin, a coordinator with the grassroots group No Coal in Oakland. “Of course climate issues play into this. To us, they are twin evils.”

Reavin’s is among a host of groups — including the California Attorney General’s Office — filing briefs in the lawsuit in backing of the coal ban. The Sierra Club, an environmental group, has intervened on Oakland’s side, along with San Francisco Baykeeper, that advocates for ecosystems and communities relying on the bay.

On Wednesday , U.S. District Judge Vince Chhabria will wade over a series of court motions seeking quick resolution to the case. Both sides are asking the federal judge for summary judgments in their favor without a two-week trial, that is now scheduled to begin Jan. 16.

Oakland and its allies assert by enacting the coal ban, the city exercised its duty to protect residents from coal dust that would waft off trains, conveyors and loading pits and potentially accumulate to explosive levels in the terminal’s containment structures.

The ‘hidden‘ Utah link

They further allege Tagami and his associates deceived city officials by falsely denying coal would be part of the project, then concealing the central role they hoped Utah coal would play for more than a year.

In 2014, Tagami entered a secret deal with the Bowie subsidiary Terminal Logistics Solutions, granting the coal producer an option to sublease the West Gateway, the city claims in its filings. Under that arrangement, that has netted Tagami $1.2 million in a series of payments from Bowie, the coal producer would own and operate the terminal for the sake of exporting coal from Utah’s Sufco, Skyline and Dugout mines.

In April 2015, a authority panel called the Utah Permanent Community Impact Board (CIB) let the cat out of the bag when it approved an unusual $53 million loan to Sevier, Carbon, Emery and Sanpete counties to invest in the project. The investment guaranteed five to 10 million tons of Utah coal would move over the California terminal every year.

The revelation stunned Oakland city leaders, who opened a formal inquiry into the environmental and health impacts of processing coal.

The city’s subsequent ban on coal handling, however, runs foul of the law on three grounds, according to Tagami’s suit. It poses an unconstitutional restraint on interstate commerce; it is trumped by three federal laws regulating rail transportation; and it breaches various agreements between Oakland and Tagami’s development firm.

The terminal would be designed to keep coal dust from escaping into the environment, Tagami’s lawyers disputed in court filings, although existing laws and a permitting process for the project would protect the health and safety of nearby residents and workers.

“While the Terminal has consistently been planned as a multi-commodity bulk terminal,” Tagami’s lawyers wrote, “such terminals often require an ‘anchor tenant’ to make the terminal financially feasible; Bowie’s bituminous coal from Utah is currently the ‘anchor tenant.’ ”

Project in detail

Rail cars carrying the coal would be specially equipped with covers, although such cars are not currently in use. Railroad giant Union Pacific would ship the coal in 100-plus-car “unit trains” from Utah sites to Oakland, where an intermediary carrier called Oakland Global Rail Enterprises (OGRE) would perform “last mile” services.

OGRE would break the trains into 26-car sections that would be unloaded in enclosed dump pits, according to Tagami’s filings. OGRE would then re-connected the emptied cars, air test and inspect them ahead of sending them back to Utah. Bowie would own the coal all the way over transport from the mines, processing at the terminal and loading onto ships preceding to setting sail.

Bowie has already been exporting a few of its Utah coal over other California ports in Richmond, Stockton and Long Beach, but those shallow-water terminals can’t handle the deep-drafting freighters coal producers require to export profitably.

In the meantime, a few Utah officials have tempered their enthusiasm for the Oakland project. Carbon County Commissioner Jae Potter denied to comment on his county’s current interest in the terminal although the litigation remains unresolved.

State lawmakers have after diverted the $53 million originally slated for the export terminal to a main revolving-loan program backing “throughput infrastructure.” That new program’s goal is to spur rural economic development by premises facilities to fulfil commodities extracted in Utah to out-of-state markets.

The Oakland terminal can still be eligible for authority money, but it would be in competition with other proposals.

”If there is a viable application that provides benefit to the people of Utah and the [community impact] board approves it, there would be interest,” stated CIB chairman Jonathan Hardy. “There are other projects that can be funded if [the export terminal] doesn’t pan out.”

Proposals in the works that can qualify for CIB money include an oil pipeline, a rail project and a power transmission line, Hardy said, but none has yet applied for a loan.

California’s AG weighs in

Still, Tagami has to triumph his lawsuit ahead of his project can receive an additional dollar of Utah’s money or an additional pound of coal. The developer has a long list of opponents followed up from him, including California Attorney General Xavier Becerra, who filed an amicus brief saying Tagami’s suit undermines the authority of local and authority governments.

Becerra accused the developer of trying to expand the reach of federal laws “to prevent Oakland from exercising its police power to protect a few of its best vulnerable residents from dangerous pollution.”

The ban does not restrict rail transport of coal over the city, but rather its unloading, loading, storage and intermodal transfer.

Opponents of the coal terminal argue no amount of mitigation would prevent the release of harmful dust into a neighborhood that has been burdened with industrial pollutants for years. West Oakland residents suffer from higher rates of asthma and other chronic illness and can expect shorter lives than residents of more affluent neighborhoods, Becerra wrote.

But in Utah’s coal country, Carbon County residents are further at something of an economic disadvantage and experience a few of the state’s poorest health outcomes. And a few leaders there point to the disappearance of resource-extraction jobs that had once sustained Utah’s rural economies.

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