Investing $53 million of Utah mineral lease money in a California port operation is an unusual use of funds generally reserved for Utah community improvement. But Carbon County Commissioner Jae Potter insists the pending deal meets the letter and spirit of Utah law. Potter, a member of the state’s Community Impact Board, says it could bring dividends to coal producing counties and other state industries as a whole.
First, some background. In remarks to a recent Chamber of Commerce meeting, Potter said the CIB agreed to set aside funds based on the prospect of exporting coal and other bulk commodities. The CIB is the agency that appropriates part of the state’s federal mineral lease receipts as grants and loans for various community projects. The money comes from royalties companies pay for extracting coal, oil and natural gas from federal land.
The allocation, if ultimately approved, would give Carbon, Emery, Sanpete and Sevier counties first right on exports from the proposed Port of Oakland. Exports could be significant, he said, ranging from four to six million tons per year of commodities, including Utah bituminous coal.
The facility would be constructed and operated by TLS, Terminal Logistics Solutions. Potter and the TLS website indicate that covered rail cars would deliver to a covered storage facility. From there the product would be loaded aboard ships to destinations across the Pacific.
The port could accommodate some huge ships. Cape Class carriers can hold 180,000 deadweight metric tons. To put that in perspective, that’s about 15 of those long coal trains seen leaving Helper.
Potter told the chamber members that the deal could produce a return on investment to the counties in the 10 percent range.
Some questions remain about the deal, though, and in a later interview with the Sun Advocate he addressed the issues.
First, will the counties have to bond for the CIB money because it is a 30-year, 2 percent loan and not a grant?
Potter replied that this has not been determined yet. The four counties have an agreement and have hired legal counsel, but the details of each county’s share of debt have not been calculated, and will have to be reviewed by bond attorneys. If the counties have to bond as individual entities instead of as an association, then there will be public hearings in each county.
Next, in its last annual report to the legislature, the CIB stated that corporations, associations, other nongovernmental agencies are not eligible for grants or loans. Furthermore, eligible entities like cities and counties cannot apply for funds on behalf of the ineligible recipients. Eligible applicants also have to own the property where the improvements are going. How does this deal with TLS avoid those rules?
Potter said, “We would not be borrowing to give to TLS. We would basically be investing and taking ownership for the counties.” The four-county investment would be only part of the estimated $250 million construction cost, he said.
Must be feasible
The whole deal still has to face due diligence review before a dollar can be spent, he stressed. That $53 million has been set aside but not awarded. “It has to be economically viable before the loan could go through,” he said.
TLS has its own hurdles to clear. The port facility is fully permitted, but various news reports indicate that Oakland is not entirely thrilled with the port and train traffic for environmental reasons.
Potter countered that burning Utah coal would be better for places like China and India than the fuels they are now using. Utah bituminous has traditionally been regarded as low-sulfur, high-BTU. “How could we deny them [China and India] what we have?,” he asked rhetorically. “We get to take hot showers and heat our homes. Why shouldn’t they?”
As he sees it, the deal would produce benefits for all involved. Asia and the Pacific Rim get fossil fuel. The four counties would split the return on investment, perhaps $5 million or so a year divided four ways. The federal, state and local governments would increase mineral lease revenue. Other industries in the state could ship potash, hay, grains and other products in bulk.
Finally, he said, the expansion of the coal export market could mitigate the loss of jobs in coal mining.