Groups Call for Federal Investigation of Utah Plan to Finance Oakland Coal Export Terminal - Global Trade Magazine
  June 28th, 2016 | Written by

Groups Call for Federal Investigation of Utah Plan to Finance Oakland Coal Export Terminal

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  • Critics allege Oakland terminal project involves a misuse of federal funds.
  • Utah legislature fast-tracked a bill to subsidize Oakland terminal for Utah coal exports.
  • Supporters of the coal terminal say that boosting exports is just what the ailing U.S. coal industry needs.

Conservation, health, and good government groups are calling for U.S. Attorney General Loretta Lynch to investigate alleged legal and ethical violations in Utah’s $53 million taxpayer-funded loan to build a deepwater terminal in Oakland, Calif., to export coal.

A letter sent to Lynch cited Utah’s misuse of federal community development funds and potential conflicts of interest that propelled the terminal scheme through state agency and legislative approval processes with scant public scrutiny.

“It’s staggering that the legislature and governor were willing to throw tens of millions in taxpayer money at a project so rife with conflicts of interest,” said Michael Shea, Policy associate at HEAL Utah. “It is very clear that someone from the outside should take a careful look at this.”

The letter lays out the effort to export Utah coal overseas through a Pacific port. Several Utah counties began seeking funding to build transport operations to export coal from mines owned by Bowie Resource Holding Partners as early as 2001. In late 2014, in a deal brokered by Jeffrey Holt, a private investment banker and advisor to the counties and then-chairman of the Utah Transportation Commission, the counties requested a $53 million loan from Utah’s Community Impact Board to finance the terminal.

The Community Impact Board (CIB) is charged with administering proceeds from the royalties to the state under the federal Mineral Leasing Act (MLA). The act restricts the use of the money to community planning, construction, and maintenance of public facilities, and provision of public services to mitigate the adverse impacts of mining on the communities.

The Community Impact Board approved the loan, and then, when questions arose about the misuse of funds, the legislature gave fast-track approval to the bill earlier this year, a procedure designed to evade the Mineral Leasing Act’s funding limitations by swapping state general fund money with Mineral Leasing Act money for the loan.

“It is inconceivable that this is an intended or proper use of $53 million of MLA, CIB, or taxpayer funds and this appears to represent the worst kind of corporate cronyism that members of the Utah legislature are usually so fond of rallying against,” said Joshua Kanter, board chair of the Alliance for a Better Utah. “Diverting these funds is not only improper but will leave these communities without the money they really need to help them retool their economic base as the coal industry continues its decline. There has been no showing that there is a shortage of available port capacity for Utah coal or that exporting Utah coal to Asia makes economic sense, either of which is easily addressed by the free-market without this shell-game and abuse of the public trust.”

Supporters of the coal terminal say that boosting exports is just what the ailing U.S. coal industry needs. The developer also denies that the project in question is a coal terminal but a multi-commodity, bulk terminal. “That is what the city approved, vetted, and permitted in 2012 and 2013,” said Phil Tagami, president and CEO of California Capital & Investment Group, the master developer of the project. “Reports claiming anything to the contrary are simply not true.”

The Oakland City Council is considering placing health and safety restrictions on the operation of a coal terminal in the city. There is also legislation pending in the California State Legislature which would require additional environmental reviews for this type of terminal project and bring more transparency to project funding.

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