Portland, Ore., ahead in region competition for coal-export facility
Construction of a $60 million coal-loading facility in Portland is on target. It will be ready to load Western coal aboard ships bound for buyers on the Pacific Rim of Asia on July 1.Skip to next paragraph
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The coal loader being built on a 100-acre port site is the sole facility to get into the construction stage among a half dozen or so proposed for the Northwest over the past three years. Other proposed sites include Astoria and Coos Bay in Oregon and the ports of Kalama and Vancouver, as well as several locations in the Puget Sound area, in Washington.
The Portland facility is being built by Pacific Coal Corporation, a subsidiary of American Guaranty Corporation, a Portland-based insurance company. American Guaranty has guaranteed $65 million of the $100 million revenue bonds to be issued shortly after Jan. 1 by the Port of Portland to help finance the project. Issuance of the revenue bonds was delayed in anticipation of lower interest rates after the issue was approved late last year.
When in operation, the coal facility will pay the Port of Portland an annual rent of $750,000, or about $20 million over the life of the facility. The port will also receive about $40,000 a year in dockage fees charged ships arriving to load coal for Pacific ports.
In a recent discussion about the future of the facility, James Anderson, chairman of American Guaranty, was optimistic.
''Just recently,'' he said, ''we have had a firm quote on the movement of 15 million tons of coal from Utah and Colorado, and we know we have an advantage of at least $5 a ton on the cost of moving coal by rail into Portland over shipments to any port in the Puget Sound area.'' Mr. Anderson declined to name the source of the quote.
The biggest concern today of potential Pacific Rim coal buyers is the question of the costs of moving coal from mine to buyer, according to Mr. Anderson. He said that was especially true of Japanese coal buyers.
Japanese buyers, he explained, want take-and-pay firm contracts with no escalation clauses to cover possible rising rail rates. He said, too, that such contracts possibly would run from five to 15 years.
In the uncertain economic climate, potential buyers in Taiwan and South Korea also have shown reluctance to make coal-purchase commitments. In some quarters it has been suggested that perhaps potential Pacific Rim customers are waiting for completion of the Portland coal loader, in order to see exactly what services will be available.
Asked about this, Mr. Anderson agreed that it was a possibility. Another executive who said he saw some merit in this explanation was Joe Presley, president of Westmoreland Resources Inc., of Billings, Mont., a subsidiary of Westmoreland Coal Company, of Philadelphia.
There has been talk, too, that Japanese firms interested in buying coal from mines in the American West might seek partnership agreements with American coal firms in order to control purchase costs.
Mr. Anderson said one such agreement has been reached with the Dorchester Coal Company of Fruita, Colo. The overseas companies are the Coal Development Corporation of Japan and Sumitomi Company, Anderson says. They are said to expect to be shipping coal in 1986, and apparently have a shipment target of 4 million tons a year by 1988.
Westmoreland Resources Inc. is actively preparing for possible construction of a coal loader in Vancouver. Mr. Presley said recently that this project would not be started until firm contracts are signed for movement through the port of at least 1.5 million tons a year. No contracts have as yet been signed.
''The drop in oil prices and the low level of the economy are minus inputs,'' Mr. Presley observed. Meanwhile, all but one required permit for construction in the Vancouver port have been received by the prospective builders.
A study done for the Public Ports Association of Washington State by the Portland-based engineering firm of CH2M Hill estimated Washington ports would have an annual coal-export potential of 25 million short tons by the year 2000.
Today, however, no coal moves out of Washington ports to buyers on the Pacific Rim of Asia.
As for the proposal for a coal port at Astoria, at the mouth of the Columbia, Anderson said he did not expect any such construction in the foreseeable future. The Astoria site would be for supercolliers of 100,000-ton capacity, which would require considerable dredging to provide the deep-water harbor necessary to take such ships.
Anderson cited the high cost of dredging as a severe restriction on Astoria construction. By contrast, the Port of Portland facility would load Panamax ships of some 60,000 tons with no water-depth problems.
A study of the Astoria situation by Soros Associates, of New York, has estimated the port construction cost between $65 million and $70 million, with a two-year construction time.
The study was made for a consortium called the Astoria Coal Terminal Project. The project includes Northern Energy Resources Inc. (NERCO), the coal-mining subsidiary of Pacific Power & Light Company, of Portland; Burlington Northern Inc., which had rail trackage to Astoria; and Pan Ocean Bulk Carriers Ltd., of South Korea, which is interested in grain shipments.
The Astoria project has had the strong support of NERCO, which has huge reserves of coal in Wyoming and Montana.
However, Gerard Drummond, NERCO president, said that not until the very late 1980s or some time in the 1990s could coal be expected to move out of Astoria ''given sluggish industrial growth, (current) low demand for coal, and high availability of other fuels.''
What NERCO would like, he added, is to be ''in the best competitive position to respond to this market as it develops.''