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Could Coal Exports Run Through Vancouver Port?

July 16, 2013 | OPB
CONTRIBUTED BY:
Bonnie Stewart


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  • This bird's eye view of the Port of Vancouver clearly shows the port's new Terminal 5 and the rail loop that surrounds it. credit: Port of Vancouver
  • The Port of Vancouver is building a new rail system that will serve its many customers, including grain exporters who use these silos for storage before the grain is loaded onto ships for export. credit: Bonnie Stewart
This bird's eye view of the Port of Vancouver clearly shows the port's new Terminal 5 and the rail loop that surrounds it. | credit: Port of Vancouver | rollover image for more
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U.S. coal exports are up, but the coal isn’t leaving the country through Pacific Northwest ports. Not yet.

To date, Washington and Oregon have fielded six proposals for coal export terminals. Three of the projects are still active and moving through the environmental permitting process.

Those export terminals would provide the shortest route to top destinations for Western coal; places like South Korea and China. But building the terminals will take years.

There is, however, one port in the Pacific Northwest that doesn’t have a coal export terminal in the works — but does have just about everything needed to ship coal to Asia.

That’s the Port of Vancouver in southwestern Washington.

Right now, the high-profile commodity being considered for the Port of Vancouver is oil. The port’s commissioners are set to vote this month on a proposal from Tesoro-Savage to handle up to 360,000 barrels of crude oil per day. It’s a development that’s under the cloud of a deadly oil-train crash in Quebec.

ANALYSIS

Coal is the other fossil fuel that’s generating a lot of public debate in the Northwest. So far, however, the Port of Vancouver has stayed out of the coal controversy. But that could change. A coal exporter has approached the Port of Vancouver as recently as November, public documents show. Right now, the port isn’t ruling coal in — or out.

“Have we said, ‘no, no more coal, quit bugging us?’ No, we’ve not said that,” said Curtis Shuck, the port’s director of economic development and facilities.

“We have other opportunities that we believe are more viable and more imminent,” he said.

Those opportunities include the Tesoro-Savage oil proposal and another project to export potash, a potassium-rich salt used as a fertilizer. Neither is a done deal. In the next few months, however, the port’s commission will be making decisions about those two projects and the more than 100 acres of prime port real estate they would require.

‘Port Of Possibility’

The Port of Vancouver’s 1,400 acres stretch west of the city of Vancouver, just across the Columbia River from Portland. It bills itself as the “Port of Possibility.”

Recent dredging at the port has opened up many of the berths to large vessels suitable to take heavy loads like coal across the ocean.

Vancouver is right on the Northwest’s coal route. Trainloads of coal destined for Asia — about 2 million tons a year — pass by the Port of Vancouver on the way to a port in British Columbia. Two of the three current coal-export proposals would take coal by rail through Vancouver.

The Port of Vancouver has been building a new rail loop that feeds off the same mainline railway. The port’s new rail loop easily could handle coal trains. The port originally designed the loop to accommodate trains with 110 cars. But recently, it extended the loop to serve trains with 120 cars — the size of most coal trains.

The new rail loop will service yet-to-be developed real estate known as Terminal 5. It is big enough to store large quantities of bulk commodities on the ground or in yet-to-be-constructed building or tanks.

The Port of Vancouver’s new rail system and its newly dredged, deep-draft berths will provide attractive infrastructure for companies trying to move any number of commodities.

Adding to the port’s appeal to potential coal exporters: Much of the environmental permitting for these improvements has been accomplished without getting sidetracked in the coal debate.

That’s not to say the port could allow coal to come in without any public debate or regulatory scrutiny. For example, if the port decided to use all that new infrastucture to ship something other than potash, it would have undergo a full environmental review, said Patty Boyden, the Port of Vancouver’s director of environmental services.

Potash vs. Coal

Of all the marketable properties at the port, Terminal 5 is best-suited for handling trainloads of coal. But this property is reserved — at least for now — for a different bulk commodity.

The Port of Vancouver’s pursuit of an arrangement to export potash has effectively shielded it from confronting the question of whether to trade in coal.

In 2010, when coal companies were scouring the Northwest for potential export terminal locations, the Port of Vancouver signed a land lease agreement with Australian-based mining, oil and gas giant BHP Billiton to work out the details for a potash-exporting facility. The agreement gave the company control over 33 acres at the port’s Terminal 5 while a final lease is negotiated.

BHP Billiton Businesses

  • Aluminium, Manganese & Nickel
  • Coal
  • Copper
  • Iron Ore
  • Petroleum & Potash

BHP Billiton, which has interests around the world, plans to export 8 million tons of potash each year from mines in Canada.

The company’s land lease agreement with the port has been amended and extended more than once. The company now controls 48 acres and has the first-refusal rights on 51 more acres, said port spokeswoman Theresa Wagner in an email.

The Columbian newspaper in Vancouver reported that by the end of 2012, BHP Billiton had paid the port $2.24 million to keep the property off the market. The 99 acres plus the 16 acres the port may lease to Tesoro-Savage represent most of Terminal 5’s marketable space — leaving little room for other ventures.

But BHP Billiton has yet to sign a binding lease to start developing the potash export facility. If it fails to do that by Oct. 31, the port will face a choice: extend the negotiating period once again, or open up Terminal 5 for other commodities.

Recent statements by BHP Billiton’s CEO Andrew MacKenzie have raised questions about how committed the company is to exporting potash.

At a June event in London, MacKenzie referred to potash as “a great option for the future.” Then he added: “…but it’s just an option.” (Follow this link to listen to the speech.)

BHP Billiton has begun preparing the Canadian potash mine site, including excavating a mine shaft, but it has not completed its engineering study or its feasibility study, according to Bronwyn Wilkinson, a company spokesperson.

That means mining the potash could be years away.

Coal Talk

The Port of Vancouver does not have a formal coal proposal on the table now, but one long-term port tenant did approach the port about coal in late 2012.

At the end of October, port officials were exchanging emails with a Kinder Morgan representative about what one of them termed a “potential coal opportunity.” EarthFix obtained the email exchange through a public-records request.

Kinder Morgan is a U.S. energy company best known for pipelines. It has been handling copper concentrate and bentonite clay at the Port of Vancouver.

In November, top port officials met with a Kinder Morgan representative. Kinder Morgan’s idea was to bring coal into the port by train and store it in the train cars until it was time to load the coal onto ships.

That idea was a non-starter, said Shuck, the port’s director of economic development and facilities.

“What that means is that your storage becomes your rail capacity,” he said. “The railroad is not going to support that, and again, from the port perspective, we don’t have the space.”

After learning about the port’s coal discussion with Kinder Morgan, a key environmental activist in the Northwest said that worried him.

“The Port of Vancouver has rejected coal in the past, but it looks like they are continuing to have conversations about coal export, which is a big concern to people in the Pacific Northwest,” said Brett VandenHuevel, executive director of Columbia Riverkeeper.

Kinder Morgan has not given up on finding a way to get coal out of the Northwest.

The company may be looking for a way to move the 30 million tons of coal it once proposed moving through the Port of St. Helen’s near Clatskanie, Ore. The company walked away from that possible deal in May. Company spokesman Allen declined to answer questions about alternative sites that Kinder Morgan may be considering.

He instead issued this statement in an email this week: “We continue to explore potential sites for coal export in the Pacific Northwest, based upon customer interest.”

The Port of Vancouver is 50 miles upriver from Clatskanie.

Fore declined to say whether Vancouver was under consideration as a coal export site for Kinder Morgan. But port officials were more explicit.

“They don’t have a proposal before us today to handle coal,” said the port’s Boyden.

Beyond the Northwest, the company has been positioning itself for a much larger role in the coal-export business.

In June, Kinder Morgan Energy Partners announced it has created a new coal business. The company said it plans to purchase coal reserves and spend millions expanding its coal-shipping terminals on the Gulf of Mexico and “pursuing additional opportunities.”

Key Votes

In the next few months, Port of Vancouver commissioners will be making major decisions about some of the commodities that could move through Terminal 5, the space most attractive for coal shipments. They may end up finalizing the potash deal. Or they could walk away and look for alternatives.

Port commission president Oliver said he is confident that BHP Billiton’s potash project will move forward.

But the port’s two other commissioners -– Brian Wolfe and Nancy Baker — have expressed reluctance to give BHP Billiton more time should the Oct. 31 deadline pass without a final agreement to built a potash-shipping facility.

“If BHP Billiton isn’t going to be a tenant then we need to be out finding someone else. … We need to start making revenue on this project,” Wolfe said.

Columbia Riverkeeper’s VandenHeuvel hopes that “someone else” won’t turn out to be a coal exporter.

“In this region we look to the Port of Vancouver for innovation and caring about the community and not falling for a dirty product like coal,” he said.

No Promises

None of the port’s three elected commissioners would say how they’d vote on a proposal to export coal. And if the potash deal works out, they likely won’t have to.

“Coal is not something that we are encouraging as a port because of the controversies,” Wolfe said. “It’s a cargo and if the potash project doesn’t materialize for whatever reason, I suppose we have to look at it.”

The Port of Vancouver has a lot riding on BHP Billiton. It is tying up 99 acres of prime export terminal property that will have access to a new rail loop and a deep-draft berth.

A decision about potash could come before Oct. 31, but that is the next deadline the company has for signing a long-term lease at Terminal 5. As written now, a draft of that lease would give BHP Billiton until June 30, 2014 to begin construction of a potash facility. The agreement also would require the company to begin shipping potash by the end of 2017.

Potash or no potash, port officials simply aren’t taking a specific stand on coal. Until they do, the possibility will remain that coal could someday be transported by the trainload into Vancouver.

Other Northwest ports have dampened or snuffed out entirely such speculation. The environmental advocacy think tank Sightline catalogued on its blog in 2011 the positions Northwest ports had taken on coal. It reported the ports of Tacoma and Kalama had ruled out specific proposals to bring coal into their facilities. The Port of Portland knocked down coal-export speculation before any specific proposals were made. It stated publicly that: “The Port needs to be reflective of the community and its values. Coal doesn’t seem to fit within those values.”

The Port of Vancouver has not taken such a preemptive position on coal. The port’s Curtis Shuck said his employer’s guiding principle is to hear out any proposals that potential customers want to bring to the table, and then review them on their merits.

As he put it: “We don’t say no to proposals that haven’t been made.”

(Hover over markers to hear reports on coal in communities of the Northwest. Then click “website” for more EarthFix coverage. Click here for larger map view. Note: Train routes are approximations. They illustrate potential corridors based on existing lines and publicly available information.)

© 2013 OPB
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