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Proposed coal export terminals offer US producers options

By Beth Ward in Washington, DC

October 5, 2012 - Proposed coal export terminals in the Pacific Northwest are seen as extremely important for Western coal producers in light of weakening domestic demand, but it's unclear how much capacity will actually come online.

In 2011, almost 5 million short tons of PRB coal was moved through Seattle to Canada for export, according to the National Mining Association.

But that amount is a fraction of the more than 400 million st produced in the PRB annually.

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While Canada's three export terminals on the West Coast have a combined capacity of approximately 60 million metric tons, the bulk of this is used by Canadian producers.

"PRB needs dedicated West Coast facilities for the volume of demand envisaged ultimately by Asian markets," Jonny Sultoon, lead analyst-Atlantic, Global Coal Markets Research at Wood Mackenzie, said in September.

Five terminals have been proposed in Washington and Oregon. While reported estimates vary, almost 150 million st of coal could be exported if all the terminals come online over the next five years. A sixth coal export terminal at the Port of Grays Harbor's Terminal 3 in Hoquiam, Washington was proposed by RailAmerica, but the short-line railroad decided to shelve plans for the 5.5 million st facility in August (PCT 8/16).

Sultoon said producers remain bullish on the expectation of proposed terminals in the Pacific Northwest, but any proposals would face a number of challenges.

With one project already dropping out and the decision to move forward with another expected in November, it is unclear how many of the terminals will come online.

Northwest proposals moving forward

The proposed terminals have faced fierce opposition from community and environmental groups citing concerns about coal dust from increased train traffic and the broader climate impacts from the coal being burned overseas. More than two dozen communities along with the US Environmental Protection Agency, federal and state lawmakers, and the Oregon governor have asked the US Army Corps of Engineers to conduct a regional environmental impact statement to determine the cumulative impact if all five terminals are built.

"We need a region-wide evaluation to see how this will affect the cities the trains will go through," Meagan Andrews, who works with the Sierra Club's Business Outreach Team, said in September. "Even though the coal is not being exported there, it's going to impact them."

Opponents of such a review say it is outside the requirements of the National Environmental Policy Act and could unnecessarily delay the projects that will bring jobs and tax revenue to the area. The Corps has not yet made a decision on the issue, Scott Clemans, spokesman for the Corps' Portland District, said in an email.

Ambre Energy's Morrow Pacific coal export terminal may be the furthest project along. The terminal at the Port of Morrow near Boardman, Oregon, would receive about 8 million mt of coal at full capacity at an enclosed warehouse. Coal would then be transferred to enclosed barges on the Columbia River that would travel to the Port Westward Industrial Park at the Port of St. Helen's where it would then be put on ocean-going ships headed for Japan, South Korea or Taiwan, according to the company.

In April, Ambre signed agreements with two South Korean utilities to purchase thermal coal, set to begin when the Morrow Pacific project is online (CO 5/7).

Ambre touts that "[f]rom the Port of Morrow facility until it arrives in Asia, there will be no visible coal and little, if any, coal dust," according to the website.

"It's designed to mitigate a lot of the local environmental concerns," spokeswoman Liz Fuller said in September.

Despite those efforts, the project is still facing opposition, she said.

The project completed its environmental review in August and has since submitted it to the Corps. The agency will use the review to conduct an environmental assessment of the potential impacts of the project, specifically the location of the proposed dock and the rail unloading and storage site, according to the company. While an EA is often considered a faster process than a full Environmental Impact Statement, it could still be several months before it is completed.

"It's very possible we could end up preparing an EIS-if we identify potentially significant environmental impacts during our analysis of the construction activity, [the National Environmental Policy Act] requires us to," Clemans said in an email.

Brett VandenHeuvel, the Columbia Riverkeeper called the Corps' decision to do an EA "fast-tracking" that would ignore "too many unanswered questions." In a written statement, VandenHeuvel called for a full EIS to be conducted. An EIS can take at least 18 to 24 months.

Opponents of the project also latched on to a recent announcement that the time frame for opening the Morrow Pacific terminal moved from 2013 to 2014.

"It's hard to predict a project's time line, but for Ambre pushing back the operational date to 2014 was not a huge change," Fuller said. In order to be operational in 2014, construction would need to begin next year. In addition to a Corps permit, the project also needs to secure permits from the state.

Despite the progress of the Morrow Pacific project, analysts said facilities with bigger capacity are needed to have a real impact on the PRB.

The Millennium Bulk Terminals, a joint venture between Ambre and Arch Coal, has a planned capacity of about 44 million mt. The project near Longview, Washington involves redeveloping a brownfield industrial site. In February, developers submitted applications for permits from the Corps as well as the Washington State Department of Ecology and Cowlitz County (PCT 2/27).

In July, the Corps determined that an EIS would be necessary because the terminal would be "major federal action significantly affecting the quality of the human environment," Seattle District Regulatory Branch Chief Muffy Walker said in a July statement. Walker said then that the project was just beginning its permit application review.

An EIS is also being conducted for the proposed 54 million mt Gateway Pacific Terminal planned for Cherry Point, Washington. The Corps along with Whatcom County and the Washington Department of Ecology are jointly producing the EIS and opened a 120-day comment period on September 24 for the scope of the EIS.

"Through scoping, the agencies will decide what impacts to analyze in the EIS. The three lead agencies will ask other agencies, tribes and the public to comment on what impacts the EIS should address," according to a September 21 statement.

The timing of all the projects will depend on the environmental review process, permitting and other company-specific determinations.

Residents wary of proposed terminals

Portland resident Carol Ross said she moved to the area last year, in part to escape mountaintop coal mining that was taking place in her community.

"I just felt that there was no way the population could stop this," she said. "The destruction of the Appalachian mountains will weigh on me for the rest of my life."

Ross, who worked with local environmental groups in West Virginia, said she saw the destruction of cemeteries, water and homes and finally reached her limit.

"I wanted to move somewhere more progressive environmentally," she said. Shortly after moving to Portland, Ross said she saw the slogan "Coal free by 2020."

When the terminals were first proposed, Ross said she was surprised there was any support for it.

If the proposals move forward, Portland would have trains passing through the city on their way to export terminals. The city recently passed a resolution opposing coal trains traveling through Portland until the regional EIS is completed.

Wim de Vriend, a restaurant owner and 40-year resident of Coos Bay, Oregon, said he is skeptical that the proposed coal export terminals will be successful based on previous attempts. De Vriend published a book documenting the various redevelopment plans at the Port of Coos Bay over the past 30 years.

"There has always been the illusion that it could be another San Francisco or Seattle," he said.

The proposed terminal at the Port of Coos Bay is "conceptual at this point," spokeswoman Elise Hamner said.

The port entered into an exclusive negotiating agreement with one of four producers last October (PCT 10/25/11). Over the past year, the developers have been conducting due diligence on what would be required for a coal export terminal including permits, the capacity of the rail line that would serve the terminal and other issues, Hamner said.

The agreement expires in November and a decision on whether the project will move forward is expected then, she said.

De Vriend said the area has been in a similar position before, citing a proposed coal export terminal at the Port of Portland that fell through.

"People keep making the same mistakes over and that makes me skeptical," he said.

But Josh Thomas, spokesman for the Port of Portland, said the circumstances are different.

"The Port of Portland did have a brief and distant history with coal, but given the changes in the industry/marketplace over the past few decades, it is not an apples to apples comparison with the proposals of today," he said in an email.

In 1983, the port considered a lease at one of its terminals that would have included a coal export facility. Although the project "did not materialize," the work that was done helped develop the terminal into a potash export facility, he said.

"It has been an active and productive use of the land, providing steady revenue and jobs," Thomas said.

He added that the port is not involved in any conversations about handling coal and future growth plans include other commodities such as grain, autos and steel.

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