Port dodges coal, embraces potash

The Port of Vancouver decided to export the fertilizer instead of the fossil fuel — but will coal eventually find its way to the port as demand in Asia grows?

By Aaron Corvin, Columbian port & economy reporter

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Faced with a choice of helping to grow food or feed industry, the Port of Vancouver picked a fertilizer ingredient over the dirtiest fossil fuel on the planet.

The port’s decision in 2009 to export potash rather than coal positioned it to accomplish long-term economic development objectives.

It also enabled the port to sidestep a growing controversy over whether Washington state should become a big player in exporting coal, primarily to Asia.

In Cowlitz and Whatcom counties, business and environmental interests are clashing over this question. Burning coal pollutes air and water, and has been pegged as a leading cause of global warming. However, backers of the controversial commodity say its abundance in the U.S. and the hunger for it in developing countries make it necessary for meeting the world’s energy needs.

Although the Port of Vancouver now says it’s not interested in coal and is focusing on potash, officials aren’t completely taking coal off the table.

“It’s difficult to say we would never look at it, but we just don’t have any opportunities at this point,” said Todd Coleman, deputy executive director of the port who will succeed port chief Larry Paulson in April 2012.

The port’s choice — potash, a natural mineral fertilizer used to boost crop production, or coal, a potentially lucrative but politically volatile commodity — came down to two companies: BHP Billiton or Sino-American Import and Export LLC.

Both were eyeing the port’s 218-acre Terminal 5 as far back as 2008. BHP Billiton, an Australian mining giant, was interested in shipping potash to Asia from the site. Sino-American, a Beaverton, Ore.-based international trading company, thought the terminal could make a good home for a coal export operation, public records show.

In an Oct. 28, 2008, email to colleagues, Mike Schiller, operations manager for the port, spelled out the coal project described by Sino-American leaders.

Sino-American intended to secure a long-term lease to build and operate a coal export operation at the port that would be designed to handle up to 12 million tons of coal annually, according to Schiller.

“Regardless of current market situation, China and India are developing nations that will require energy to grow,” he wrote. The company’s export operation manager, Lewis Novasio, “mentioned that India is projecting an 8.2 million ton shortfall in coal requirements versus supply for 2009,” Schiller continued.

“Mr. Novasio understands that the deal will need to be attractive for the Port.”

A stronger option

By January 2009, the port was deep into talks with BHP Billiton, and the deal to bring a potash export venture to Terminal 5 looked good.

Yet Sino-American wasn’t out of the running, as Schiller wrote in a Jan. 16, 2009, letter to Novasio.

Talks with Sino-American never got very far, said Coleman, the port’s deputy executive director. The port wanted coal storage facilities to be enclosed to control the spread of coal dust, partly for environmental reasons. There was a strong business angle, too: The area where the port handles Subaru vehicle imports is near Terminal 5. The port reasoned that Subaru of American Inc. wouldn’t take too kindly to coal dust wafting over its prized vehicles.

Coleman said Sino-American balked at the enclosed structure, while BHP Billiton was willing to enclose its product. “What we liked about potash is we could keep it under cover,” he said.

Paulson, the port’s executive director, said BHP Billiton was the ideal tenant, a well-capitalized heavy-hitter that would make a long-term investment in the economy, help the port build up its rail network and create jobs.

Paulson said Sino-American’s proposal was a “distant second” to the one raised by BHP Billiton. “BHP Billiton is a well-established, longstanding international company,” he said. “It was making a commitment to be here for 70 to 80 years. Coal facilities have a tendency to come and go.”

Sino-American is out

Chris Roberts, president of Sino-American, recalled the coal dust issue differently. He said his company told the port it would keep the coal under cover and deploy dust-control mechanisms. “The chances for dust were real slim,” he said, “but they were still very concerned about the potential for dust.”

Roberts said his company saw the port as a potential handler of coal partly because the Columbia River channel is deeper now — thanks to a massive dredging project the port and others supported — and capable of handling ships with larger loads. The port’s rail network also was a lure, he said.

Although the deal with the port never came together, the market is still ripe for coal, and Roberts said Sino-America is looking at three other potential export sites. Two are in Washington and one is in Oregon. Roberts declined to name the sites.

His company’s plans involve hauling coal from Utah, Wyoming, Montana and some mines in Canada to Pacific Northwest ports, from which it would be shipped overseas.

“China and India are both growing and becoming more prosperous,” Roberts said. “In the process, they need more power.”

Coleman said the port has received about 12 inquiries from coal exporters over the past several years. Like the Sino-American proposal, none of those got very far, he said.

Even if the port wanted to bring a coal exporter to Vancouver today, it couldn’t. BHP Billiton plans to inhabit about 30 acres at Terminal 5. Another 100 acres there are set aside for a rail loop, part of which will serve the Australian mining giant’s operations. Meanwhile, the port is preparing an additional 25 acres at Terminal 5 to store shipments of wind energy components.

Except for the edges of Terminal 5, where small-scale tenants could be located, the port no longer has room. It lacks space for a second large bulk-handling facility like the one planned for potash.

Business sense, more than environmental considerations, led the Port of Vancouver to turn away from coal, but other ports have likewise avoided the fossil fuel.

“Coal terminals take a lot of land, and it has to be zoned appropriately, and you need a lot of rail access,” said Eric Johnson, executive director of the Washington Public Ports Association, which represents 75 ports in the state. He said he’s not aware of any public ports that are pursuing coal projects.

In Cowlitz and Whatcom counties, however, controversy has erupted over plans to export coal from privately owned terminals.

Millenium Bulk Logistics, a subsidiary of Australia-based Ambre Energy, wants to haul coal from Wyoming and other locations to a former industrial site in Longview and then ship it to Asia.

Environmentalists appealed Millenium’s proposal to the state Shorelines Hearings Board, arguing the county failed to fully consider the environmental consequences of issuing a permit to the company.

The company has since backed off its proposal, saying it will conduct a more extensive environmental review of its project and resubmit its proposal at a later date.

SSA Marine is just getting started in Whatcom County. The company is proposing a bulk handling facility at the Gateway Pacific cargo terminal at Cherry Point north of Bellingham. It would export coal, among other bulk shipments. Environmental groups are fighting the project.

Meanwhile, Vancouver’s port remains focused on making sure its preliminary agreement with BHP Billiton to set up a potash enterprise becomes final.

If all goes as planned, the company would ship potash by rail to the port, where it would then be loaded onto ships bound primarily for Asia. BHP Billiton would haul the potash from a mine it’s developing in Canada’s Saskatchewan Basin.

Although the details of the port’s lease agreement with BHP Billiton haven’t been settled, the port expects to collect significant revenue from it. That will help the port finish its West Vancouver Freight Access project, a planned $150 million expansion of track to improve rail access to port property, eliminate rail yard congestion and aid development of Vancouver’s waterfront.

The port expects BHP will create at least 60 permanent Vancouver jobs after construction is finished, sometime in 2014.

It’s unclear whether the Port of Vancouver will again weigh coal exports in the years to come.

The Pacific Northwest maintains a reputation for anti-fossil fuel environmental initiatives, and Washington is moving to phase out TransAlta’s coal-burning plant in Centralia.

But Roberts, the president of Sino-American, believes coal is here to stay and will find its way to Washington and Oregon export terminals.

The demand for coal in Asia is growing, he said, and the West Coast is uniquely situated to serve it. Coal-exporting countries such as Australia can’t handle the demand all by themselves, he added.

Coal backers say that even if the Pacific Northwest doesn’t embrace coal, China and other developing nations will continue to import it whether it comes from the U.S. or not.

But that’s not a reason to allow coal exports to take root in the Pacific Northwest, said Brett VandenHeuvel, executive director of Columbia Riverkeeper, a nonprofit organization that opposed the coal proposal in Longview.

“Coal is dirty,” he said. “The transport of it is dirty; the dust causes asthma. It contains toxics. It has a tremendous impact on local communities and the river. That’s our primary concern. The fact that it would encourage the burning of dirty coal in China just makes it worse.”

Paulson, the Vancouver port’s executive director, said the future of coal is cloudy. China wants it, but it’s also investing heavily in renewable energy.

As far as he’s concerned, the future of potash is brighter. It’s a central ingredient in global farming.

“People will always grow things,” he said. “That’s just a fact of life.”