Utah legislators just doubled down on a risky venture to use Utah taxpayer dollars to fund a coal export facility in Oakland, California. This deal has been troubled from the beginning, when our state’s Community Impact Board (CIB) rushed through approvals of a $53 million investment in the out-of-state port, intended to ship coal mined in Utah.
The CIB has a mandate to distribute royalties from fossil fuels mined on federal lands in order to support projects that enhance the safety, security and quality of life in local communities affected by mineral extraction. How can this public agency justify spending $53 million in public funds that are meant to be spent on Utah schools, hospitals and other public facilities on a port in California, as part of a deal that will primarily benefit private coal companies? The answer is they can’t.
The investment faces legal challenges from environmental groups and taxpayer advocates. That’s why, at the last possible moment of the current legislative session, Sen. Stuart Adams proposed a bill that would essentially launder the CIB money through the state budget. This shell game would use Utah state transportation dollars to fund the California port and then pay the money back using CIB funds.
This scheme was created by the then-current Utah Transportation Commission chairman and former CIB member, Jeff Holt, who helped broker the deal while simultaneously wearing his hat as a BMO Capital investor. BMO Capital and Mr. Holt may gain a substantial profit off this deal, as the Los Angeles Timesreported in December. Following the revelation about his financial interest in this deal, Mr. Holt resigned abruptly from his role as chairman of the commission, citing a recent move to New York. Mr. Holt was present at the committee hearing this week when the bill was voted through, however. Before this bill moves forward, this obvious conflict of interest must be resolved.
This fig-leaf approach doesn’t change a thing about this project. The CIB revenues — royalty money dedicated by law for a very specific and narrow use to help local Utah communities — are still being used for a project the CIB itself may not legally fund. Interposing Utah taxpayers as a middleman doesn’t change the illegality of the project.
Utah taxpayers should have the opportunity to weigh in on whether they want to send $53 million to California through a risky investment that’s predicated on the success of a declining coal industry. By forcing this bill through at the last possible moment, legislators have denied the public that opportunity.
Whether funded directly by the CIB, or through this elaborate money laundering scheme, this investment is still a risky use of Utah public resources. Given a highly volatile energy market and the rapid rise in alternative energy around the world, a project to subsidize coal exports demands a thorough investigation. Unfortunately a thorough risk analysis was never undertaken by the CIB, nor has it been undertaken by the Legislature or Gov. Gary Herbert, who may view $53 million as chump change.
This is a $53 million loan to be repaid over 30 years using anticipated, and perhaps imaginary, revenues from coal shipments. What happens if the pending federal review of the Bureau of Land Management’s coal leasing program results in significantly higher royalty rates? What happens if Bowie, the company producing the coal this port would ship, follows the example of so many other American coal companies in recent years and files bankruptcy? The coal industry is by no means stable.
The deal is likely to fall apart on California’s end anyway, so why are Utah legislators so determined to force this funding through at the last minute? Far better to refocus their energy on investing in our own local communities rather than chasing what looks like a high-risk gift to private coal companies.
David Irvine is a Salt Lake attorney and a board member of the Alliance for a Better Utah.
See the OpEd in the Deseret News here.