Three years after its last shipment, Seward coal terminal remains closed

Nearly three years after it went dark, the future of the Seward Coal Loading Facility is still unclear.

The conveyor-belt loading dock extends out into Resurrection Bay from a yard near the Alaska Railroad Corp.’s terminal in Seward. From 1984-2016, it was used to load export shipments from the Usibelli Coal Mine near Healy.

At its peak in 2011, the railroad moved about 200 coal trains back and forth to supply export demands, and the operation employed about 100 people between operator Aurora Energy Services, the railroad and Usibelli, according to information from the Alaska Railroad Corp.

That changed in 2016, when the railroad decided to shutter the facility indefinitely after years of coal export declines. By that time, exports had decreased about 95% from a peak of 1.1 million metric tonnes in 2011 to 68 tonnes in 2016, only serving one ship as opposed to the 18 required in 2011.

Cheaper coal from Indonesia and Australia pushed down the market price, cheaper natural gas entered the scene and the U.S. dollar was very strong, making it harder for Usibelli’s export business to pencil out.

With that little volume, the railroad corporation operated the facility at an approximately $1.2 million deficit, according to the 2016 document announcing the closure. The facility isn’t useful for much else, but would remain intact for now, according to the announcement.

“While unsuitable for unloading passenger vessels or cargo ships, the SLF dock can provide mooring services,” the announcement stated. “In light of the railroad’s mission to foster economic development, the facilities will be left intact for now to facilitate resumed operations in support of our customer if new opportunities arise.

That meant Usibelli’s coal would be kept in Alaska to supply the state’s six coal-fired power plants. At its peak, about half of the mine’s production was being exported, so the operations took a hit when the export market disappeared.

The company still views it as a temporary halt in its exports and is constantly looking for ways to reenter the market, according to Lorali Simon, the vice president of external affairs for Usibelli. However, the railroad corporation’s decisions about its coal operations have made that a higher threshold, she wrote in an email.

“The Railroad, who has experienced tough financial circumstances for many years, made certain decisions regarding the Seward Facility that make it difficult to respond quickly to export opportunities,” she wrote. “The Railroad sold the coal cars used for the export business; (and) the Railroad put the facility into ‘cold storage.’ It will take capital (both time and money) to get the facility back up and running.”

In 2016, the railroad corporation estimated that it would cost about $200,000 to bring the facility back online, take a 30- to 90-day lead time and require about eight shiploads annually to break even.

However, that was before some of the coal cars were sold. In its 2016 announcement, the railroad corporation stated that it offered the aluminum coal hoppers to Usibelli for purchase, but the coal company declined. The railroad corporation does still maintain a fleet of coal cars.

Though the railroad corporation does not have updated figures, it’s likely more expensive than that to get the facility online again, said Tim Sullivan, the director of external affairs for the railroad.

“It’s probably a little bit more than that now,” he said. “If you leave it to lay fallow for a while, the costs go up.”

Sullivan didn’t have an estimate available for what it would cost to dismantle the facility. At this point, the railroad’s plans for the coal loading facility haven’t changed, he said. Though it can’t be used for much else, ships can moor to it if necessary although that has been infrequent.

The railroad has been reevaluating its facilities in Seward in recent years, aiming at repairing the passenger and freight docks, but those plans don’t really affect the coal loading terminal at present.

The loss of the coal exporting business hit both companies in the wallet. Usibelli, which in 2011 employed 150 people, today employs about 100 people. Most of those employees have been lost through attrition rather than layoffs, Simon said.

“Since roughly 30 percent of our employees are second-, third-, and fourth-generation employees, and the average tenure was close to 15 years in 2011, many folks naturally retired,” she wrote.

The railroad corporation has taken hits in several markets in recent years, with a decline in the coal export business and in the oil field. Freight makes up the majority of the railroad’s revenue, with much of that coming from shipping materials north for oilfield explorations.

Though the oil patch has been rebounding with increased exploration on the North Slope and potential new exploration in the Arctic National Wildlife Refuge, the last few years have still been financial tough on the railroad; its workforce has declined by about 100 to 150 year-round employees, Sullivan said.

“We’re focused on the services that we continue to provide,” he said. “We saw the export coal market reduced and went away, and at the same time we were seeing the refined jet petroleum coming down from the North Pole refinery … decline and then disappear as well. It was a couple big hits for the Alaska Railroad. We’ve taken measure of those issues and we think we’ve gotten to a point where we can continue to weather what’s going on.”

Since the beginning of the year, average coal prices on the market have declined, with production so far in 2019 about 7.2% behind the production at the same time in 2018, according to the U.S. Energy Information Administration.

The long-term projections are for coal’s share in the U.S. energy generation sector to decline between the present and 2050, giving way to renewables and natural gas, according to the EIA’s 2019 Annual Energy Outlook. The U.S. is expected to continue to be a net coal exporter, but the actual amount of coal exported is not expected to increase because of competition from other producers closer to global markets, according to the outlook.

At the same time, in the years since the Seward Coal Loading Facility closed, the federal administration has drastically changed to one much friendlier to coal. President Donald Trump’s administration has made several moves to change rules previously set in place during Barack Obama’s administration, including moving to reduce restrictions on emissions from coal-fired power plants. Congress also invoked the Congressional Review Act to repeal the Stream Protection Rule put in place during the Obama administration.

Simon noted the repeal of the Stream Protection Rule and said the reduction in regulations “has allowed the mining industry to get back to work.”

Elizabeth Earl can be reached at elizabethearl@gmail.com.