R. Bruce Striegler

Western U.S. coal producers seek access to Asian markets

Once again environmentalists in British Columbia are protesting, but this time, they’re railing against Port Metro Vancouver’s coal export expansion plans, not Alberta bitumen. One of the differences with this protest is that an American chapter of the Sierra Club has added its heft to the opposition to coal exports.

Motivated by concerns of air pollution and global warming, on June 5th, the Sierra Club and several co-­‐complainants filed suit in U.S. federal court in Seattle against BNSF Railway, Peabody Energy and several others, for violations of the U.S. Federal Water Pollution Control Act (commonly known as the Clean Water Act). Their suit charges that trains carrying coal from Wyoming and Montana, bound for Vancouver, have discharged coal, coal chunks, coal dust, metabolites or related byproducts of coal, into waters of Puget Sound and other water bodies in and around the Seattle area, as well as throughout the State of Washington.

In 2012, a little more than 32 million tonnes of coal was exported through Port Metro Vancouver’s Neptune and Westshore terminals. A quarter of that was from America’s largest coal-­‐producing state, Wyoming. With no comparable coal-­‐handling ports in the U.S. Pacific Northwest, Port Metro Vancouver has become a magnet for American producers eager to expand their access to Asian markets. As early as 2010, the coal producers with most to gain, Peabody Energy and Australian-­‐based Ambre Energy began touting development of new deep-­‐sea port facilities at locations on the Oregon and Washington coasts, promising that new loading facilities and barges would be enclosed to minimize coal dust.

Significant grass-­‐roots opposition exploded in Wyoming, Montana, along Oregon’s coast and Washington’s inland rail right-­‐of-­‐way. Citing the dangers of coal dust and associated environmental hazards, the protestors attracted luminaries such as Robert F. Kennedy Jr., who for years has fought coal mining in Appalachia. Many argued it was counter-­‐intuitive that at the same time Washington State was weaning itself off coal for electric power generation, the State seemed to be promoting coal by supporting deep-­‐sea infrastructure including docks, large coal storage areas and massive conveyor systems. Meanwhile, the U.S. Environmental Protection Agency is in a final round of consultation over rigorous new rules which will forever change the American coal-­‐fired, electric power generation industry.

Although the United States has long generated the bulk of its electricity from coal, over the past six years that share has fallen from 50 per cent to 38. Plans for more than 150 new coal-­‐fired power plants have been cancelled since the mid-­‐2000s, existing plants have been closed, and in 2012 just one new coal-­‐fired power plant went online in the United States. New EPA rules are expected imminently, and will further impact the industry as more than 600 do not have the requisite pollution controls, and are at risk of noncompliance under the proposed new rules. With final rules still unclear and implementation dates uncertain, many plant owners have not yet decided the fate of their generation plants, and as a result, industry analysts have been unable to calculate the total magnitude of the closures.

What is certain is that the approaching loss of coal for electricity has highly motivated western producers to try to increase existing export markets and open new ones. But they don’t have the infrastructure in-­‐place to support high-­‐volume coal exports from the western U.S. states.

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Seizing the moment, Vancouver expands capacity

The industry’s export push has put the four states on the front lines of what local observers are calling one of the Northwest’s biggest environmental battles in a decade. With coal-­‐burning power plants a major contributor to global warming and ocean acidification, environmental groups and their allies have mounted a major campaign to try to restrict shipping coal overseas. Last fall, thousands of people turned out at public hearings on the proposed export terminal at Cherry Point, Washington. More than 100,000 people sent comments, many citing concerns about the impacts of increased coal-­‐train traffic, to the county, state and federal agencies that will

conduct environmental reviews. Last winter, Canadian protestors on their side of the border blocked BNSF coal trains en route to Westshore Terminals at Roberts Bank.

As to the six new Pacific Northwest port proposals, by May 2013 those at Grays Harbour and St. Helens, Washington were withdrawn. A project at Coos Bay Oregon has been shelved. Developers are still exploring or seeking permits for terminals in Boardman, Oregon, Longview, Washington, and at Cherry Point near Bellingham, Washington. Vancouver, B.C. however, is proceeding with at least one coal terminal expansion and mid-­‐way through a public consultation for a second terminal enlargement which would add coal handling for the first time.

On January 23, 2013, Port Metro Vancouver issued a project permit to Neptune Terminals to expand the terminal’s steel-­‐making coal handling capacity. Neptune is now investing approximately $63.5 million, adding a second enclosed railcar dumper, making on-­‐site track and ship loader improvements, adding conveyors and upgrading site power systems. The improvements will increase Neptune’s capacity to 18.5 million tonnes and add one train per day and one ship per week. Port Metro Vancouver’s second terminal handling coal is Westshore Terminals, covering 54 hectares south of Vancouver at Roberts Bank. Regarded as the busiest coal facility in North America, Westshore is in its 43rd year of operation and recently completed a five-­‐year period of major equipment upgrades to increase metallurgical coal capacity from 23.5 million tonnes to 33 million tonnes annually. In 2011, Westshore shipped 27.3 million tonnes of coal which included 8.2 million tonnes from Wyoming and Montana.

Opposition to Fraser Surrey Docks coal transfer proposal

The most controversial expansion proposal drawing protest is for Fraser Surrey Docks (FSD). This multi-­‐ purpose marine terminal currently handles containers, breakbulk and bulk products in the City of Surrey. FSD’s project proposal is to develop a direct transfer coal facility, which would include handling coal, a new product for this existing terminal. If approved, four million tonnes a year of coal, moved by rail from Wyoming and Montana would be loaded onto barges on the Fraser River and towed to ships waiting at Texada Island in Georgia Strait, then loaded onto freighters bound for Asia. There is potential to expand the facility further to handle eight million metric tonnes, although another permit and environmental review would be required.

This proposal has met with universal opposition from both environmental groups as well as civic governments in the region. In mid-­‐June, the regional governing body for Metro Vancouver voted to oppose U.S. coal shipments through Fraser Surrey Docks. Among the issues for the Metro Board in the proposed $15 million expansion was air quality, the only issue Metro Vancouver has jurisdiction over. However, some of the Directors suggested that greenhouse gases were also a factor in their decision. The Coal Alliance, an industry lobbying body expressed disappointment with the decision that could have negative implications for the coal industry and the 26,000 B.C. jobs it supports.

In a news release, the organization said, “Essentially, they passed a resolution asking for more information on the review process for permit applications by Neptune Terminals and Fraser Surrey Docks, and in the same breath voted to oppose coal shipments from the Fraser River. They made up their minds in the absence of the very information they were seeking to make a decision,” said Alan Fryer, Coal Alliance spokesperson. “We also don’t think that all of the Directors took a balanced view during their deliberations, or took into account the responsible and safe operations of the terminals and railways, and the economic benefits that the coal industry and Port Metro Vancouver have on all British Columbians”. The Coal Alliance also noted that ten federal and provincial agencies are responsible for oversight and that for decades Vancouver has shipped coal.

In May, Fraser Surrey Docks invited the local media to tour the site. At the event, hosted by the company’s CEO, he outlined a list of safety, health and environmental precautions that would ensure clean transport of coal. He said the company is committed to implementing dust control systems and water sprayers at the mines and at various points along the route, enclosing coal sheds as well as employing monitoring and meteorological stations in and around the Surrey site. At the same event, BNSF Railway’s Northwest Regional Director of Public Affairs noted that new technologies can reduce coal dust by as much as 85 per cent.

None of these precautions satisfies the primary environmental activist organization, whose spokesperson told the media that its opposition has little to do with coal dust. He is quoted as saying, “We don’t want them to safely get the coal to Asia and be burned and contribute to climate change. This stuff just has to stay in the ground. That’s our take.” Surrey Fraser Docks CEO Jeff Scott described the coal expansion project as a matter of survival for the port. He said that it would create 25 full-­‐time jobs at Fraser Surrey Docks and an additional 25 positions along the supply chain. Scott noted that the current number of people employed by the dock stands around 230, which is significantly less than the more than 500 people who were working the port before the financial decline that began in 2008.

In mid-­‐June, a high-­‐level delegation which included the Governor of Wyoming and various American business representatives visited Vancouver to tour Port Metro Vancouver’s facilities and meet with federal, provincial and municipal officials. Representatives from industry have noted that restricting coal exports from British Columbia would have no tangible effect in reducing global coal use, pointing out that proposed shipments through Fraser Surrey Docks represent 0.1 per cent of world coal production. Moreover, any coal not supplied by Canada would gladly be supplied by one of its international competitors.

clip_image001An Angus Reid public opinion survey released in mid-­‐June showed among other things, that a majority (65 per cent) of British Columbians agree that B.C. should be exporting coal to overseas markets so long as all applicable environmental laws and regulations are followed. Just over one third (36 per cent) support restrictions and reductions of coal exports in order to fight climate change. And nearly seven in ten (69 per cent) agree that if B.C. stops exporting coal, other countries will simply take the Province’s place and the only change will be B.C. losing investment and thousands of jobs. Port Metro Vancouver continues to study the expansion proposal and monitor public opinion before announcing its decision sometime later this year. In B.C., the coal industry creates more than 26,000 jobs and generates over $5 billion in economic activity every year, including about $400 million in revenues that go to support public services such as healthcare and education.