As producers scale back, strategic buyers are few and far between—and the coal-industry outlook appears bleak By JOHN W. MILLER and MATT JARZEMSKY Oct. 13, 2015 5:43 p.m. ET Tom Clarke received a cold reception when he first approached Patriot Coal Corp. earlier this year. The company and its advisers were trying to sell some of its Appalachian mines afterfiling for bankruptcy protection. At first they doubted Mr. Clarke’s conservation group, whose mission is “to conserve Virginia’s natural resources to address climate change,” would have the money and know-how the deal required, according to people familiar with the matter. But Mr. Clarke managed to get an audience with the embattled miner. In a conference room at a private airport in Charleston, W.Va., he made his pitch: His Virginia Conservation Legacy Fund Inc. would take control of mining operations and cleanup projects, aiming to sell coal bundled with carbon credits linking it to forestry projects. Patriot, in exchange, would be freed from about $400 million in liabilities tied to the mines but wouldn’t receive a significant cash payment. Patriot accepted the offer. Mr. Clarke’s deal with Patriot illustrates the depth of the coal industry’s slump. Major U.S. producers are scaling back, trying to shed mines and laying off employees. But the financial investors and large industry buyers that figured prominently in the last coal shakeout as acquirers are largely sitting out this round. “There’s just a vacuum of strategic buyers, especially at a larger scale,” said Fred Vescio, a managing director at investment bank Houlihan Lokey. Three major U.S. coal companies—Patriot Coal, Alpha Natural Resources Inc. and Walter Energy Inc.—filed for bankruptcy protection this year. Patriot is selling most of its assetsto Blackhawk Mining LLC, a Kentucky-based regional miner founded five years ago by coal entrepreneur Mitch Potter. Alpha Natural has said it won’t immediately sell mines as part of its restructuring. Walter Energy is evaluating options after last month’s breakdown of its initial restructuring plan, which would have given creditors ownership of a slimmed-down version of the company. “I don’t think we could have even begun to think about doing this [deal] five years ago,” Mr. Clarke, a father of eight who also runs a Virginia-based health system, said in an interview. Black Diamond Capital Management LLC has agreed to commit $25 million in debt financing for a 30% stake in a mine the conservation fund is acquiring, among other compensation, according to people familiar with the matter. A judge approved the arrangement as part of Patriot’s bankruptcy-exit plan last week. In past coal-industry routs, buyers like Mr. Clarke would likely have been outbid by investors such as Wilbur Ross, the billionaire who revels in reviving down-and-out industries. Mr. Ross and other investors bought assets from bankrupt Horizon Natural Resources to form International Coal Group Inc. in 2004. In 2011, ICG sold to Arch Coal Group Inc. for $3.4 billion. This time around, those investors are put off by the U.S. coal industry’s bleak long-term outlook. Coal burned by power plants faces competition from cheap and relatively clean natural gas, and a slowdown in demand from China has driven the price of coal used in steelmaking to an 11-year low. In an email, Mr. Ross said he’s not inclined to invest in coal assets because of Environmental Protection Agency regulations, the decline of Appalachian reserves and inexpensive natural gas. Mr. Ross isn’t the only big player on the sidelines. Billionaire coal investor Chris Clinehasn’t bought any new mines this decade. Nor has former Xstrata PLC chief Mick Davis,who now runs a fund called X2 Resources. Other cash-rich mining funds, such as Aaron Regent’s Magris Resources Inc., are investing in mines. But coal, said Mr. Regent, “is not at the top of our list.” Mr. Davis declined to comment, and Mr. Cline couldn't be reached for comment. A big exception is U.S. coal king Robert Murray. In April, his Murray Energy Corp. bought a significant stake in Mr. Cline’s Foresight Energy LP, which operates some of the most productive mines in the U.S. in the Illinois basin. Industry experts think Mr. Murray is done shopping for the time being. A company spokesman said the miner is still interested in buying the “best possible” coal assets in a few target areas. Other major U.S. producers could yet make an appearance. Alliance Resource Partners LP,Consol Energy Inc. and Westmoreland CoalCo. have less debt than some rivals and didn’t indulge in expensive acquisitions over the past decade.
“We’re always interested in buying properties that conform to our business model” of buying mines adjacent to power plants, said Westmoreland Chief Executive Keith Alessi.Consol and Alliance didn’t respond to requests for comment. For now, analysts say, deal-making in the U.S. coal sector features mainly smaller players picking off modest mining operations. Take 31-year-old Ian Ganzer. A decade ago, the Emory University baseball player was headed for a career on Wall Street, but a detour to pitch in the summer leagues led him to work on developing a coal mine part-owned by his doctor father. Now, Mr. Ganzer is teaming up with investors including South Carolina-based Royal Energy Resources to buy, for $20 million, two coal mines that straddle the Ohio-West Virginia border. The mining complex, which cost around $220 million to build, holds 185 million tons of thermal coal and, at peak production in 2009, generated 250,000 tons a month, while employing 200 miners. Mr. Ganzer looked at two dozen potential mine acquisitions in Appalachia before settling on the property, which has a new coal-processing plant, a barge-loading facility and is near two coal-fired power plants. Mr. Cline offered to sell it because of geological hurdles, including sandstone embedded in the coal. Mr. Ganzer’s bet is that with equipment, labor and energy all less costly now, coal prices only have to recover a little for his mines to turn a profit. Even as the U.S. turns away from coal, it remains the source of over 30% of the nation’s electricity. And developments, such as a Republican winning the White House and repealing environmental rules, could make coal a desirable commodity once again. “I hope this will be a long and prosperous journey or a short and painful one,” said Mr. Ganzer, who owns a piece of the company and was recently named its chief operating officer. “But I wouldn’t be doing this if I didn’t think that I would be successful.” Write to John W. Miller at john.miller@wsj.com and Matt Jarzemsky atmatthew.jarzemsky@wsj.com http://www.wsj.com/articles/in-coal-industrys-slump-usual-buyers-go-underground-1444772623
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State of California Environmental Protection Agency and the AIR RESOURCES BOARD FINAL Emission Reduction Plan for Ports and Goods Movement in California BOARD APPROVAL On April 20, 2006, the Air Resources Board (Board) considered the Proposed Emission Reduction Plan for Ports and Goods Movement in California, together with public testimony and staff’s recommendation for action. The Board adopted Resolution 06-14 approving the Proposed Plan, with one addition to the list of goals stated in the Proposed Plan to protect public health from the impacts of ports and goods
movement operations. As shown below, the new fifth goal emphasizes the importance of protecting communities near ports, rail yards, freeways, and distribution centers. Plan Goals: 1. Reduce total statewide international and domestic goods movement emissions to the greatest extent possible and at least back to 2001 levels by year 2010. 2. Reduce the statewide diesel PM health risk from international and domestic goods movement 85 percent by year 2020. 3. Reduce NOx emissions from international goods movement in the South Coast 30 percent from projected year 2015 levels, and 50 percent from projected year 2020 levels based on preliminary targets for attaining federal air quality standards. 4. Apply the emission reduction strategies for ports and goods movement statewide to aid all regions in attaining air quality standards. 5. Make every feasible effort to reduce localized risk in communities adjacent to goods movement facilities as expeditiously as possible. In 2009, the Port of Oakland committed to achieving an 85% reduction in seaport-related diesel health risk by 2020 from a 2005 baseline In just three years the Port of Oakland have already achieved a 70%reduction in particulate matter emissions, even though there has been an increase 3% in cargo handling from 2005. Enclosing, can the Global Trade and Logistic Center or the proposed new Coal Terminal (OBOT) present any numbers of emission reduction planning. Can the terminal operator have any numbers on reduction of coal dust to the California Air Resources Board? Can the previous writer on the subject of coal trains has any research or data that would support making Oakland a City with cleaner air and healthier communities. Monday, September 14, 2015 Climate Threatened by More Coal Mining in Utah Suit Filed to Thwart U.S. Interior Department Sale of Coal for Export Through California's Bay Area Contact: Jeremy Nichols (303) 437-7663 Denver—WildEarth Guardians filed suit in federal court late last Friday to overturn the U.S. Interior Department’s sale of more than 42 million tons of coal in Utah that stands to be shipped overseas, undermining global climate progress and setting back U.S. carbon reduction efforts. “For our climate, it’s time for our coal to be kept in the ground,” said Jeremy Nichols, WildEarth Guardians’ Climate and Energy Program Director. “The last thing the Department of the Interior should be doing is giving the green light for companies to mine our publicly owned coal and ship it overseas to be burned.” The Flat Canyon coal lease was sold last June for 40¢ a ton to Bowie Resources. The lease would expand the company’s Skyline mine, the second largest producer in Utah. Bowie’s purchase of the publicly owned coal comes as the company is securing additional capacity to export coal overseas through the Bay Area of California. Most recently, it was revealed that four Utah Counties—Sanpete, Emery, Carbon, and Sevier—secured a loan from the State of Utah for more than $50 million to invest in a new port facility in Oakland. Reports indicate the Counties secured the loan to bolster Bowie Resources’ plans to export coal from its Utah mines. The sale of the Flat Canyon coal lease comes even as Sally Jewell, the Secretary of the U.S. Department of the Interior, has raised questions over whether the mining of publicly owned coal is consistent with U.S. climate objectives. More than 40% of all coal produced in the nation is publicly owned. When burned, this coal releases more than 10% of all U.S. greenhouse gas emissions. The sale of the Flat Canyon coal lease stands to unleash more than 78 million tons of carbon dioxide, equal to the amount released annually by more than 16.4 million passenger vehicles. The Interior Department originally approved the sale of the Flat Canyon coal lease in 2002. At the time, the agency claimed that the climate implications of mining coal were “beyond the scope” of the analysis. It wasn’t until June of this year that the agency decided to move forward with selling the coal. “The climate implications of more coal mining and burning may have been ignored in 2002, but in 2015, it’s unacceptable,” said Nichols. “It’s time for Interior to pull its head out of the sand and stop selling more coal that only promises to dig us deeper into a climate debt.” The Flat Canyon coal lease comes as the Interior Department is weighing other leasing proposals in Utah, including most recently the Alton coal lease in southern Utah. The Flat Canyon lawsuit was filed in the U.S. District Court for the District of Colorado, where WildEarth Guardians’ Denver office is located. http://www.wildearthguardians.org/site/News2?page=NewsArticle&id=12001&news_iv_ctrl=1194#.VhXtHXpVhBd "Who is paying for the investigation into the Oakland city councilmembers? And why?"Mining and banking industry lawyers have been seeking numerous records and communications from three councilmembers who oppose the shipment of coal through Oakland.By Darwin BondGraham @Darwinbondgraha September 18, 2015 VIA ONLINE SUBMISSION AND CERTIFIED MAIL – RETURN RECEIPT REQUESTED Arlette Flores-Medina Open Government Coordinator The City of Oakland 1 Frank Ogawa Plaza, 6th Floor Oakland, CA 94612 Re: California Public Records Act Request Dear Ms. Flores-Medina: This is a request for public records under the California Public Records Act (the “Act”). This public records request is directed to the City of Oakland District 1 Councilmember Dan Kalb and any and all staff, including Olga Bolotina, Oliver Luby, and Monica Harris. Pursuant to Government Code § 6253, we respectfully request the disclosure of any and all of the following documents, voicemails, emails, text messages, and any other writing from any device owned or operated as required by the Act: 1. Between September 8, 2015 and the date of this letter, any and all communications by and between City of Oakland District 1 Councilmember Dan Kalb or any of his staff and any member(s) or individual(s) associated with the following organizations: (1) West Oakland Environmental Indicators Project; (2) Communities for a Better Environment; (3) Asian Pacific Environmental Network; (4) San Francisco Baykeeper; (5) Earthjustice; (6) Sierra Club; or (7) any other environmental organizations. Pursuant to the Act, we look forward to a prompt response within ten days of receipt of this request. Please let us know at your earliest possible convenience regarding any copying charges related to this request. Thank you for your time and attention in this matter. If you need any additional information, please do not hesitate to contact me at the phone number, email, or facsimile listed below. Sincerely, Kristin A. Nichols Phone (303) 290-1613 Fax (303) 416-4497 KANichols@hollandhart.com Over the last few months, a law firm with close ties to the coal industry has been investigating three members of the Oakland City Council — Lynette Gibson McElhaney, Dan Kalb, and Rebecca Kaplan — who have expressed opposition to a proposal to ship millions of tons of coal through a new maritime facility at the former Oakland Army Base. Records and interviews show that the law firm has pursued its investigation quietly through a series of public records requests submitted to the City of Oakland. The requests were made by Kristin Nichols of Holland & Hart, a Denver-based law firm that counts among its clients some of the largest coal mining companies in the world, and financial corporations that fund the expansion of coal mining. In at least five different records requests — three submitted on June 15, one on September 9, and another on September 18 — Nichols asked the three city councilmembers and their staffers to hand over an extensive list of records, including "voice mails, emails, text messages, and any other writings," between themselves and various groups and labor unions that are leading the opposition to coal shipments through Oakland. Among the groups identified in the law firm's investigation into the councilmembers' communications are the Sierra Club, West Oakland Environmental Indicators Project, the International Longshore and Warehouse Union, and the Asian Pacific Environmental Network. Nichols is also seeking the councilmembers' appointment calendars and other documents regarding the old Oakland Army Base redevelopment project that relate to the controversy over whether or not to ban coal shipments in the city. Gibson McElhaney, Kalb and Kaplan have been critical of a plan by Oakland developer Phil Tagami and businessman Jerry Bridges, a former Port of Oakland executive director-turned maritime shipping executive, to accept a $53 million investment from four Utah counties in the Oakland Bulk Oversized Terminal. Tagami is building the terminal near the Bay Bridge on the old Army Base site, and Bridges' firm, Terminal Logistics Solutions (TLS), will operate it. The money from Utah would secure capacity for coal exports far into the future, with the Kentucky-headquartered Bowie Resource Partners coal company, which owns three massive coal mines in central Utah, earning potentially billions of dollars on the deal (see "Banking on Coal in Oakland," 8/19). So who are Holland & Hart's attorneys working for? Who is paying for the investigation into the Oakland city councilmembers? And why? I reviewed numerous public records and asked the major players behind the coal export scheme, but no one is willing to say who hired Holland & Hart. In August, I called officials with Bowie Resource Partners to ask them if they had hired Holland & Hart to look into Oakland councilmembers. James Wolf, Bowie's chief financial officer, declined to answer any questions about his company's efforts to bring Utah coal to Oakland. "Let me tell you, I don't want to be rude. ... You need to talk to TLS," said Wolf, in a hostile tone of voice, before hanging up the phone. Since them, Bowie representatives have not returned my emails and phone calls. Bridges and other TLS representatives have also not responded to multiple phone calls and emails. But it's unclear why TLS would hire the Colorado law firm, because TLS does not appear to have a connection to it. Tagami, who is the master developer of the Oakland Army Base, also did not respond to emails and a telephone message left with his secretary concerning Holland & Hart. At the September 21 Oakland City Council hearing on the controversial coal issue, Bridges and TLS and Tagami and his company, California Capital Investment Group, were represented by lawyers from the firms Stice Block and Venable — not Holland & Hart. In August, I called Nichols of Holland & Hart at her office in Greenwood Village, a suburb south of Denver, and I asked her who she was working for. She declined to say. But in a subsequent email, Nichols wrote that "Bowie Resources has not hired Holland & Hart to submit record requests to the City of Oakland nor to prepare a lawsuit against the City of Oakland." In my last email to Nichols, I also referenced whether she was working for Morgan Stanley bank. The reason is that information on the law firm's website, and in public records maintained by the US Securities and Exchange Commission, raised questions as to whether Morgan Stanley was behind the investigation. According to Holland & Hart's website, Nichols is a junior associate in the firm's mining practices group. The head of the firm's mining group is attorney Robert Bassett, a partner in Holland & Hart. Bassett is essentially Nichols' boss, and Basset's webpage lists some of his clients, and the work he has accomplished for them. This includes recent assistance he provided to Morgan Stanley bank "in a $470 million financing for the purchase of three operating coal mines in Utah." The law firm's website doesn't list the names of the mines, nor the name of the company that bought them with borrowed money from Morgan Stanley. But other documents link Morgan Stanley to Bowie Resources and to three of its Utah coal mines — Sufco, Skyline and Dugout Canyon — which are located in the same counties that have proposed to invest $53 million in the Oakland terminal. In 2013, the Arch Coal company sold these three mines to Bowie Resource Partners for $435 million in cash. A press release issued by Bowie Resource Partners at the time of the deal stated that Morgan Stanley bank made part of the loan to Bowie to purchase the mines, and that "Morgan Stanley & Co. LLC is acting as the financial advisor to Bowie." Bassett of Holland & Hart was part of that deal. I called and emailed Bassett last week to ask him who he's working for, and why his colleague Nichols has been seeking so many records from the Oakland city council. "I don't believe anyone at our firm is in a position to comment on the Oakland port issue," he replied on Monday. I sent a follow up email the same day asking him to confirm or deny that he's working for Morgan Stanley. "We cannot comment on this matter," he wrote in a one-line response. Then I asked Morgan Stanley representatives if the bank had hired Holland & Hart to investigate Oakland councilmembers, and if the bank was actively involved in plans led by Bowie Resource Partners to ship coal through Oakland. Mary Claire, a spokesperson for Morgan Stanley, wrote back in an email, "[W]e will decline to comment." In several follow-up emails, I pressed the bank for an answer, but Morgan Stanley representatives repeatedly declined to comment. Records show that Deustche Bank also partnered with Morgan Stanley in loaning Bowie money in 2013 to buy the Utah mines in question. And Bassett of Holland & Hart has worked for Deutsche Bank in previous years, according to the law firm's website. Deutsche Bank representatives declined to comment. The three councilmembers who are the subject of Holland & Hart's investigation said they don't know who the law firm is working for. "I'm not sure what they expect to get, but when we get public records requests, we comply with them," said Kalb. "I would just hope anyone who wants to take a position on this would have the honesty to say who they are," added Kaplan. But all this secrecy about who's pushing the coal export plan in Oakland, and who is hiring attorneys to investigate city officials who have spoken out against it, has frustrated opponents who say coal will cause harm to people's health and the environment. "There is a global landscape of powerful economic interests, including desperate western coal companies, international financiers, and big national banks, who are trying to make toxic economic decisions for Oakland," said Margaret Rossoff, a member of the No Coal in Oakland Coalition. Ben Collins, a senior research and policy campaigner at the Rainforest Action Network, has been tracing the connections between banks and coal companies since 2011. He said the coal industry relies on loans from banks such as Morgan Stanley and Deutsche Bank to finance the acquisition of new mines, expand mining operations, and find markets for their fuel, and that these banks have earned billions on deals involving coal. If Holland & Hart's attorneys are working on behalf of Morgan Stanley, or another bank, it wouldn't be surprising. Morgan Stanley and Deutsche Bank are gambling hundreds of millions on whether or not Bowie Resource Partners can gain access to Oakland's waterfront. The 2013 loans that both banks extended to Bowie is just the beginning. In June, Bowie filed paperwork with the SEC to prepare the way for a potential public offering of its shares. Morgan Stanley is one of the investment banks that hopes to help take Bowie public. Others include Citibank, UBS, Credit Suisse, and Stifel. A Bowie IPO would be worth much more to these banks if the company can demonstrate to investors it has secured access to Asian markets via Oakland. As to why these financial giants would have bet so much money on bringing coal through Oakland, at a time when communities across the West Coast are rebelling against the industry, Collins said, "I would speculate they see it as high risk, high reward." http://www.eastbayexpress.com/oakland/coal-attorneys-investigate-oakland-councilmembers/Content?oid=4526958 IV. REQUEST FOR SPECIAL CONSIDERATION
Chairman Walker called for a motion to hear the Request for Special Consideration from Carbon, Sevier, Emery and Sanpete Counties. Bruce Adams made and Naghi Zeenati seconded a motion to hear the Request for Special Consideration from Carbon, Sevier, Emery and Sanpete Counties. The motion carried unanimously. The applicant presented a funding assistance request for a $53,000,000 loan for 30 years at 2.0% interest for an infrastructure project for the purpose of through-put capacity in Oakland, California consisting of the construction of a 330 acre multi-commodity deep draft marine terminal for the export of Utah goods to the Pacific Rim economies. The terminal would provide a single line service from the Western part of the United States. This project includes $200,000,000 in other local cash. The applicant indicated that Utah goods could be transported internationally. The Board acknowledged other large infrastructure projects they have funded to include $56,000,000 for the Seep Ridge Road in Uintah County and $29,000,000 for the Victory Pipeline in Duchesne County. Both of these projects have been beneficial to the areas where they were constructed as well as the rest of the state. The Board expressed concern over the size of the project and other projects which may be presented to the Board as a result of this project. The applicant indicated the rail spur linking existing rail lines to facilitate the land transportation is nearing the completion of NEPA and permitting. The Board expressed concern about the legalities of the project. The applicant stated that there have been and will be attorneys reviewing the process and concerns about utilizing this funding source. The project is contingent on a clean legal opinion to include the attorney generals’ office. It is ultimately dependent on working out the details. It was further indicated that the project has the support of the Governor, but there are no tax dollars going toward this project. The Board counsel suggested there might not be sufficient specificity to authorize funding. The applicant again indicated that there are many questions and there will be legal certainty prior to utilizing this loan. The counties cannot proceed in the process without a contingent commitment of funding and further indicated that the potential of this international market for the State as a whole is profound. The Board asked about the availability of this significant project to Utah. The applicant indicated their group was the first to discuss this project which has been 8 years in the entitlement phase working with 28 different agencies. Bruce Adams made and Naghi Zeenati seconded a motion to suspend the rules and fund this project as a $53,000,000 loan for 30 years at 2.0% interest from the Major Infrastructure Set Aside Fund contingent on legal authorization. The motion carried with McKee and Winterton opposed. Mike McKee, Naghi Zeenati, Gregg Galecki and Bruce Adams left the meeting. |
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