Canadian coal miners riled by US deal with Ridley Terminals (February 14, 2011)

British Columbia and Alberta coal producers have accused a federal Crown corporation of “putting American jobs ahead of Canadian jobs” after St. Louis-based Arch Coal (ACI-N) announced a five-year deal to ship Powder River basin coal from the U.S. into Pacific Rim markets through Ridley Terminals near Prince Rupert, B.C.

Don Lindsay, president and CEO of Teck Resources (TCK-T, TCK-N), made the accusation at an opening session of Mineral Exploration Roundup held here in late January, adding that “hundreds of B.C. jobs are on the line.”

Canadian coal miners are upset that Ridley Terminals, a Crown corporation since 1991, has allowed Arch and two other U.S. coal producers to lock up 40% of the port’s annual capacity. The facility can handle up to 12 million tonnes of coal each year, but hasn’t achieved full capacity since the B.C. coal mines it was built to service in the 1980s were forced to close owing to low prices and reduced demand in the 1990s.

The tide has since turned, driven by strong demand for coal from China and other populous emerging economies. The Coal Association of Canada says international trade in coal “has expanded faster over the last decade than trade in any other commodity.” Canadian companies now export 28 million tonnes of coal valued at about $2 billion annually, mostly to Asian markets through B.C. ports.

Ridley Terminals says it has potential to double its annual capacity to 24 million tonnes, which prompted a consortium of B.C. and Alberta resource companies to make a bid to acquire the under-utilized facility a year ago. The Ridley Terminals Users Group is dominated by coal producers in the process of boosting production or developing new mines, including Teck Resources, which has plans to revive its dormant Quintette coal mine near Tumbler Ridge in northwestern B.C.

But the consortium may have to fight for capacity with Arch Coal, America’s second largest coal producer, which views the deal with Ridley Terminals as “an important step” in its strategy of expanding Powder River basin coal sales into Asia.

Producers in this basin that covers parts of Wyoming and Montana already transport some coal by rail to the Pacific Coast. But the attraction at Ridley Terminals is reduced sailing time: by more than one day less from Westshore Terminals near Vancouver, and nearly three days less compared to Long Beach, Calif.

Earlier this year, Arch Coal announced that it had acquired a 38% equity stake in Millennium Bulk Terminals in Washington state for US$25 million, plus “additional consideration” upon completion of certain milestones. At the same time, the company said it was “continuing other terminal negotiations.”

A few days later, Arch Coal announced its five-year deal with Ridley Terminals, starting this year with capacity of up to 2 million tonnes of coal and up to 2.5 million tonnes annually for years 2012 through 2015. Ridley Terminals posted Arch’s press release on its own website, along with a brief comment recognizing “Canadian National Railway’s contribution in advancing the discussions for the movement of Powder River basin coal to Prince Rupert.”

Critics of the deal point out that the mandate of Ridley Terminals is “to facilitate export of vast reserves of metallurgical and thermal coal in northeastern British Columbia,” as stated on the corporation’s website.

Mayor Larry White of Tumbler Ridge, was one of those critics, but said he has since discussed the matter with Ridley Terminals chairman Stuart (Bud) Smith and Rob Merrifield, federal Minister of State for Transport. “They assured me that when the (Northeast Coal) mines up here are ready to go, they’ll have sufficient capacity to handle it. I’ve been assured of that, and if I can take them at their word, then there shouldn’t be a problem.” 

Ridley president George Dorsey could not be reached for comment in Vermont. Dorsey is also CEO of Vermont-based Edgewood Holdings, a private equity firm involved in various global industries including logistics, water delivery and energy.