THE PORT OF CORPUS CHRISTI GAMBLES ON COAL EXPORT DEVELOPMENT CORPUS CHRISTI, SHOULD CORPUS CHRISTI TIE ITS FUTURE TO VOLATILE INTERNATIONAL MARKETS AND OUTDATED COAL?

I. INTRODUCTION communities and emergency responders. Answering In a recent survey commissioned by the city’s the tough questions and making the right decisions Regional Economic Development Board, more than are critical in building Corpus Christi’s future. 1,900 respondents made it clear that the surf and II. GRAND AMBITIONS FOR COAL EXPORT AT sand must be protected and leveraged to bring new THE PORT OF CORPUS CHRISTI growth to Corpus Christi. Their favorite things about the city are the water, beach and family. The City In 2011, the Port of Corpus Christi was approached needs, among other things, a better way to connect by two mining companies who sought to use the with its natural environment.1 Port’s bulk terminals to export coal mined in the Western . New Elk Mining Company, The city is clearly taking strides in that direction, a subsidiary of Cline Mining, began exporting having recently begun discussions, for example, coal out of the port last year, and will export about the Corpus Christi Integrated Community approximately three million tons of coal this year.2 Sustainability Plan, which focuses on new renewable In 2012, Australian mining giant Ambre Energy growth, revitalization of commercial buildings, and a will also begin exporting upwards of two million renewed commitment to protecting the city’s most tons of coal out of Corpus Christi. Based on these important assets — the surf and the sand. Yet the two contracts — totaling 5-6 million tons of coal city and the Port of Corpus Christi may be going in a annually — the existing bulk terminals at the port will completely contrary direction, and jeopardizing the reach capacity this year. The companies’ executives very things — water, beach, and family — that make are considering joining forces to propose a new bulk Corpus Christi an attractive place to live. terminal that will solely export coal. If the proposal Indeed, while the city is looking to gain is approved, the terminal will be capable of handling momentum by bringing in new economic activity upwards of 20 million tons of coal annually starting focused around sustainability and quality of life in 2017. At the same time that these private entities improvements, the Port of Corpus Christi is instead are proposing a massive new coal export terminal, looking to add new customers that lock Corpus to the Port is internally considering a separate plan volatile markets and dirty coal. that incorporates a bulk coal export facility into the proposed La Quinta Trade Gateway — a fundamental This report will discuss the plans for increased coal shift from what was originally proposed to the exports at the Port of Corpus Christi, how the coal community. export rush in the U.S. influenced this decision, how unstable international coal markets should put this According to the Port’s website, La Quinta was project in doubt, and the dangers of coal export envisioned as a “state-of-the-art multi-purpose facilities to local communities. In light of these dock and container facility” designed to handle a concerns, the paper will also ask whether locking the wide variety of general cargo including containers, Port of Corpus Christi into coal export development military cargo, wind turbines, steel pipes, and more.3 now makes sense. To support this project, the Port is funding a large project to deepen the La Quinta Ship The City of Corpus Christi is at an economic and Channel. While this original vision is still exclusively public health crossroads. City leaders and the Port featured on the Port’s website,4 documents Authority will need to consider the impacts of new recently acquired from the Port as part of a coal export proposals on job creation, air quality, public information request indicate that the Port quality of life issues, impacts to the beach and Gulf, is considering two amendments to the proposal: and the impacts of increased rail traffic on rail-side

The Port of Corpus Christi Gambles on Coal Export Development 1 (1) developing the entire site as a coal export bulk and Europe, and, with the expansion of the Panama terminal and scrapping all plans for a multi-use Canal, increasing access to Asia. dock or (2) devoting part of La Quinta to a coal export terminal, and scaling down the portions of IV. A HISTORY OF INSTABILITY AND the property that would be devoted to containers, VOLATILITY IN THE INTERNATIONAL COAL EXPORT MARKET general cargo, or other bulk materials.5 When the Port of Vancouver, Washington, was III. COAL EXPORT RUSH approached by an undisclosed coal company These proposals are part of a larger coal export rush represented by Sino-American,9 an Oregon-based that started in the Pacific Northwest. This expansion international trading company, the Port rejected is fueled by a drive to feed new and emerging the proposal out of hand. The Port’s operations markets the dirty fossil fuels coal companies believe manager, Mike Schiller, summarized the Port’s they require for the markets continued economic reasoning succinctly, concluding that “[c]oal is growth. International coal export is also seen as the most risky bulk mineral market.”10 Mr. Schiller’s a way to mitigate a flagging national appetite for statement is supported by figures kept by the coal fired power. The domestic demand for coal U.S. Department of Energy, recent predictions by has been steadily decreasing in recent years, due to industry analysts, and by the West Coast’s history of competition from natural gas, an economic slow- failure with thermal coal export terminals. down, stricter environmental protections against The Sightline Institute has recently analyzed data toxic emissions, and growing investment in clean from the Department of Energy, which clearly energy sources. Investment in new coal-fired power demonstrates the volatility of the global market for plants has plummeted, and utilities are making the coal.11 Their analysis finds that coal exports coming decision to retire a good number of existing plants. from Western Customs Regions (where a majority of “Coal is a dead man walkin’,” says Kevin Parker, the coal exported is thermal coal for Asian markets) global head of asset management and a member of have a long history of volatility: the executive committee at Deutsche Bank. “Banks won’t finance them. Insurance companies won’t 20 QUARTERLY COAL EXPORTS FROM insure them. . . And the economics to make it clean WESTERN CUSTOMS DISTRICTS don’t work.”6 18 However, executives at coal companies like 16 Ambre Energy and Cline Mining view a decrease in domestic consumption as a signal to maximize Los Angeles 14 revenue by looking to export markets. These companies predict that demand for imported coal 12 in Asia will continue to grow over the next several decades, and have been trying to woo ports in 10 Washington and Oregon, hoping to build massive new terminals to facilitate export to China and other 8 Seattle developing Asian nations. Many major ports in the TONS SHORT 100,000 Northwest, such as Portland, Kalama, and Vancouver, 6 have rejected these proposals, finding the international market for coal to be too unpredictable 4 San Francisco and risky.7 Some smaller ports, which have more Anchorage difficulty securing new business, are working with 2 coal companies on proposals for new terminals. 12 0 Despite the ports’ enthusiasm, these proposals have 1995 1998 2001 2004 2007 2010 faced massive public opposition wherever they CREDIT: SIGHTLINE INSTITUTE have been proposed and have been the subject of multiple lawsuits.8 After facing rejection from the The above graph reflects coal export’s history of ports and opposition from the communities in the failure on the West Coast: two large cities have Pacific Northwest, companies like Ambre and Cline gambled and lost on coal export terminals.13 With are turning to the Gulf. Gulf Coast ports, like Corpus high hopes for big profits, both Los Angeles and Christi, have access to markets in South America Portland invested millions of dollars and high-value

The Port of Corpus Christi Gambles on Coal Export Development 2 acreage at their ports in coal export terminals, only opened, the facility shut down due to unfavorable to watch those facilities fail.14 The trend line for the market conditions, forcing the City of Lost Angeles Seattle Customs District, according to the Sightline to forfeit $94 million in expected revenue and write Institute report, shows an increase in Powder River off $19 million in capital investment in the facility.19 Basin coal shipped through Seattle on railcars for Finally, the City had to pay a $28 million settlement export to Asia from Canadian ports. to resolve a lawsuit which alleged that the City had failed to consider alternate uses for the site and had During a coal rush in the 1980s, the Port of Portland improperly managed it.20 signed a 25-year lease with Pacific Coal, committing 90 acres of riverfront to the project. After investors The coal companies which push new export and the Port spent $25 million dollars on the new terminals argue that the coal boom today is different facility, not one lump of coal was ultimately shipped and more stable that the boom and bust periods in from the Port of Portland.15 the 1980s and 1990s, relying primarily on projections of increased demand for coal in China. However, the Reporting on the failure, the Oregonian concluded International Energy Agency has warned that the that investors and public officials were fooled by trade markets are made much more unpredictable an over-hyped estimate of Asian demand, which due to China’s volatile domestic production levels.21 bottomed out: “China’s imports can either double or fall by two- What the [Far East trade representatives] thirds in the next five years,” said Laszlo Varro, head apparently had in mind was a reserve supply of IEA’s gas, coal and power division. “That’s the that also would work to keep base prices 22 low. If West Coast ports could be talked into range of uncertainty.” spending their own money to turn themselves V. COAL EXPORT FACILITIES ARE BAD into Far East coal colonies, so much the better. … Analysts later determined that coal export NEIGHBORS: COAL DUST, DIESEL EMISSIONS, failed because the Asian demand was based AND COMMUNITY CONCERNS on promises rather than actual long-term In addition to recognizing how few jobs are created contracts. And international banks studying by coal export terminals, port authorities and the issue found that the demand for coal had observers have noted that coal export facilities are 16 been ‘vastly overstated.’ often poor neighbors who have adverse impacts Despite U.S. coal producers’ ambitions in the 1980s, on both the community and on other customers countries like Australia and Indonesia continued to at the ports.23 Coal is typically stored in large dominate the coal export market in Asia, and the open piles, and “coal terminals by their nature are U.S., with its greater transportation costs, failed to active sources of fugitive dust.”24 When the Port of enter the thermal coal export market in a significant Vancouver rejected a proposed coal export terminal, way. it noted that existing customers would be negatively affected by the dust created by the coal piles.25 Despite its knowledge of the failure of the Portland project, the Port of Los Angeles forged ahead to Increased coal shipments have the potential for develop a large coal export facility in the 1990s, significant harm to the communities through which partnering with Peabody Energy and a large this coal will travel. Plans for the Port of Corpus consortium of investors. The investment was Christi call for 20 to 80 million tons of coal to be controversial from the start, as a 1993 article from transported through the Port annually. The coal the Los Angeles Business Journal noted: will be brought in every day by uncovered trains, … although the terminal will create jobs and each over a mile in length, running through Corpus taxes throughout Southern California, the Christi and many other communities along the route terminal will have a negligible impact on L.A. across our state. According to BNSF, one of the County because the product (coal) is sourced railroad companies involved in transporting coal, from other states and the automated terminal an average of 500 pounds of coal dust and chunks 17 won’t generate many direct jobs. can escape from a single loaded rail car in transit. There were also fears regarding the safety of storing Each coal train contains over 100 rail cars,26 which vast amounts of coal in large piles, which proved to means over the course of one trip from Wyoming to be well-founded; there were at least two fires at the Texas, 50,000 pounds, or 25 tons, of coal dust would facility in its short period of operation attributed escape from rail cars onto the ground and possibly to the accumulation of dangerous amounts of into surface and ground water. Coal dust has been coal dust in the machinery.18 Just six years after it linked to chronic bronchitis, emphysema, pulmonary

The Port of Corpus Christi Gambles on Coal Export Development 3 fibrosis (pneumoconiosis), and environmental recognized that container and machinery cargo contamination through the leaching of toxic heavy facilities generate more jobs than bulk commodity metals.27 Given the serious health impacts linked to terminals.29 An economic impact study prepared coal dust, transporting such large quantities of coal by the Port of Seattle “found that shipping 1,000 via uncovered rail cars is a major risk for all rail-side metric tons of grain — a bulk commodity like communities. coal — generates just 0.09 jobs, compared with 0.57 jobs for containerized cargo and 4.2 jobs for ‘break Increased rail traffic to Corpus Christi presents bulk’ cargo, such as big machines or goods shipped an additional problem: the potential for delays on pallets, which requires more handling.”30 Similar in emergency response times or trauma at rail conclusions were reached by a study at the Port of crossings, or general traffic delays. Neither the City Baltimore, which found that “coal export supports nor the Port have examined this problem. The Port just 0.11 jobs per 1,000 metric tons, as compared to of Corpus’s last study on this issue raised significant 0.41 for other dry bulk commodities, 0.43 jobs for concerns for some crossings, and yet, no remedial containerized cargo, and 1.71 jobs for autos.”31 action has occurred thus far and no real public outreach regarding areas of concern.28 While the The Port of Corpus Christi also calls itself “America’s primary concerns with this report focus on the La Port” on its website,32 and with Texas’s Quinta project and proposed new export terminals, booming wind-power industry, wind turbine imports City leaders and Corpus Christi residents must should continue to be a growth area for the Port. consider the complete impacts of increasing rail traffic through Texas to the Port of Corpus Christi. VII. HARD QUESTIONS FOR THE CITY JOB CREATION VI. WHY LOCK THE PORT OF CORPUS CHRISTI The City of Corpus Christi needs to ask the Port to INTO COAL? carefully consider its proposals for building a new The Port of Corpus Christi has a long-term vision coal export terminal and the incorporation of coal aimed at increasing traffic to the Port and growing exports into the La Quinta project. To protect jobs the port’s customer base. In connection with that and local economic development, the Port should vision, the Port announced a major initiative in 2009 reject the coal companies’ proposed new bulk called the La Quinta Trade Gateway Terminal (La terminal and refuse to make massive investments Quinta). La Quinta was originally envisioned as a in the volatile coal export market. Rather, the port state-of-the-art, multi-purpose dock and container should implement the original vision for a state-of- facility on a 1,100-acre, previously undeveloped the-art multi-use dock and terminal at La Quinta. greenfield site which could serve as an economic AIR QUALITY driver and diversify the Port’s customer base. This The City of Corpus Christi needs to ask the Port to vision allowed the Port to reach a wide variety of carefully study the cumulative effect of air emissions customers. for the proposed bulk coal export terminal, in the Now, however, the Port is not only considering context of the Port’s own long-term vision for devoting substantial acreage to a new bulk terminal bringing cleaner air to Corpus. to export coal funded by Ambre Energy and NEW FUTURE FOR CORPUS Cline Mining, already a risky move, but it is also The City of Corpus should look at the proposed considering a significant change to the Port’s own coal export facilities in the Northwest and the past La Quinta project to incorporate coal exports. Why failures on the West Coast and learn from their should the Port put its money at risk and enter mistakes. Coal export is subject to an extremely an unstable global market, when similar attempts volatile market with an uncertain future; the Port and to export thermal coal have failed spectacularly the City should carefully consider whether the risks and coal export projects present so many health are worth the rewards of substantial investment in and safety hazards to Corpus Christi and all the the world’s dirtiest . communities along the rail line? IMPACT TO BEACH AND GULF This question is particularly pertinent because, if The City of Corpus Christi should request the Port the Port changes its plan for the La Quinta project go beyond the bare minimum required to protect now, it runs a real risk of bringing fewer jobs to the our region’s most important asset: the beach. area than if it proceeds with the original multi-use proposal. Industry analysts and ports have long

The Port of Corpus Christi Gambles on Coal Export Development 4 IMPACT ON EMERGENCY RESPONDERS 13 http://www.sightline.org/research/energy/coal/Coal%20 Increased rail traffic could impede the ability of first Export-A%20History%20of%20Failure.pdf responders to quickly get to where they’re needed. 14 Id. The City of Corpus Christi should ensure that its 15 Eric Goranson, “Coal’s once bright future goes up in emergency personnel are engaged in the discussion smoke,” The Oregonian, February 14, 1983. about coal exports to ensure that the City can still 16 James Long and Leslie L. Zaitz, “A terminal case: Demise of provide excellent emergency care to its citizens. coal port more than just bad luck,” The Oregonian, March The City of Corpus Christi and the Port should 14, 1984. carefully consider whether the proposals for new 17 “Planned coal-export terminal promises jobs, taxes,” Los coal export terminals will serve the long-term goals Angeles Business Journal, August 23, 1993, http://www. of sustainable economic growth set forth in the allbusiness.com/north-america/united-states-california- metro-areas/389538-1.html City’s Sustainability Plan. By turning the La Quinta multi-use facility into a coal export terminal and 18 Exponent, “Coke and Coal Shiploader Fire: Los Angeles Port,” http://www.exponent.com/Coke-and-Coal-Shipload- allowing out-of-state mining interests to occupy er-Fire-Los-Angeles-Port/. prime waterside real estate, the Port may be trading jobs for coal dust and an uncertain future. ### 19 Patrick McGreevy, “L.A. Weighs Costly Exit From Coal Terminal,” Los Angeles Times, June 14, 2003, http://articles. latimes.com/2003/jun/14/local/me-coal14. ENDNOTES 20 Patrick McGreevy, “L.A. To Pay $28 Million to Settle Port Suit,” Los Angeles Times, December 14, 2006, http://ar- 1 http://www.caller.com/news/2012/jan/26/survey-results- ticles.latimes.com/2006/dec/14/local/me-settle14 to-prosper-corpus-christi-needs/ 21 http://www.platts.com/newsfeature/2012/coaltransport/ 2 Most of this coal is metallurgical and used in steel making index?WT.mc_id=PLCOMF1209_CoalTrial&WT.tsrc=Eloqua processes. 22 Id. 3 http://www.portofcorpuschristi.com/related-links/la-quin- 23 http://daily.sightline.org/2011/03/15/are-coal-export-termi- ta-trade-gateway.html nals-good-neighbors/ 4 http://www.portofcorpuschristi.com/related-links/la-quin- 24 Douglas L. Cope and Kamal K. Bhattacharyya, A Study of ta-trade-gateway.html Fugitive Coal Dust Emissions in Canada, “Chapter 8: Coal 5 See attached power point. Terminals: Fugitive Dust Emissions and Control,” prepared 6 http://www.washingtonpost.com/wp-dyn/content/ar- for The Canadian Council of Ministers of the Environment, ticle/2011/01/01/AR2011010102146.html November 2001. 7 http://www.sightline.org/research/energy/coal/Coal%20 25 http://www.columbian.com/news/2011/apr/03/dodging- Export-A%20History%20of%20Failure.pdf (also discussing coal-embracing-potash-the-port-of-vancouve/ (“The port the failed coal export facilities of years past in Los Angeles reasoned that Subaru of American Inc. wouldn’t take too and Portland, discussed in depth below). kindly to coal dust wafting over its prized vehicles.”) 8 http://www.nytimes.com/2011/02/15/us/15coal.html; http:// 26 http://www.coaltrainfacts.org/docs/BNSF-Coal-Dust- www.npr.org/2011/10/26/141687537/in-northwest-town-a- FAQs1.pdf local-fight-against-global-coal 27 http://www.coaltrainfacts.org/whatcom-docs-position- 9 http://www.columbian.com/news/2011/apr/03/dodging- statement-and-appendices coal-embracing-potash-the-port-of-vancouve/ 28 http://sanpatwater.com/news1.23.12.php 10 Email from Mike Schiller, operations manager, Port of 29 http://www.sightline.org/research/energy/coal/coal-FAQ. Vancouver, Washington to Alastair Smith, November 20, pdf 2008 (obtained from Public Records Act request); see also 30 Id. at 7. http://www.columbian.com/news/2011/apr/03/dodging- coal-embracing-potash-the-port-of-vancouve/ 31 Id. 11 http://daily.sightline.org/2011/10/12/the-instability-of-coal- 32 http://www.portofcorpuschristi.com/related-links/wind- exports/ power-information.html 12 Id.

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The Port of Corpus Christi Gambles on Coal Export Development 5