New coal pier sits idle, calling for creative solutions

When Kinder Morgan Energy Partners LP spent $58 million building a coal-import facility in Newport News early this year, the company hadn't planned for it to sit idle for months at a time. Or handle export coal. Or unload ore to barges.

But that's exactly what Pier X has done.

Two years ago, Hampton Roads' coal imports were on the rise, and local terminals were looking to profit. Kinder Morgan responded by building Pier X. It opened in March, just as imports collapsed.

Since then, the terminal has serviced only one ship and several barges, and its schedule for 2009 is empty so far, said Joseph DeMatteo, manager of Pier X and its sister export facility, Pier IX.

"Imports remain quiet," he said. "It's a bit of a disappointment."

But Kinder Morgan's investment was not in vain. The energy company built the terminal based on guarantees from customers, which means they pay a sum regardless of how the import market fares, DeMatteo said.

"We're going to get an incremental amount of return on our investment each year regardless of the market," he said. "Otherwise, our investment would've been a waste."

To squeeze some additional business out of the largely idle facility, which features a 1,200-foot pier and enough ground storage space for 450,000 net tons of coal, Kinder Morgan is finding innovative uses in lieu of unloading long lines of coal ships.

In October, the terminal lifted 6,500 short tons of ore from a vessel bound for a steel plant in Sparrows Point, near Baltimore, DeMatteo said. With a full load, the ship exceeded the destination port's draft limitations and wouldn't have fit, he said.

So the Pier X staff took some off the top and loaded it onto two barges, which accompanied the vessel to Baltimore.

Such "lightering" jobs might be the future of Pier X, DeMatteo said.

"There have been several inquiries to lighter vessels via transload onto barges," DeMatteo said in an e-mail. "This business, we feel, may surface from time to time, especially while the pier is not being used exclusively for coal import as intended."

The terminal got some work again last month when three barges brought 18,000 tons of domestic utility coal from Norfolk Southern Corp.'s pier at Lambert s Point in Norfolk. The coal originally was intended for ports along the coast, but the owner decided instead to unload it at Pier X and then store it for eventual export from Pier IX, DeMatteo said.

It wasn't the ideal use for the terminal, but it worked, he said.

"It is certainly not the most efficient scenario for routing coal," DeMatteo said. "However, the move resulted in an ideal alternative to supplementing coal supply" at Pier IX.

"It makes sense if the demand is there," he said.

Pier X also could transition to importing other commodities, such as salt, because it's one of the only local terminals that can handle "capesize" vessels, giant ships that can carry more than 100,000 metric tons of cargo, said David Host, president and chief executive officer of Norfolk ship agent T. Parker Host Inc.

"You've got this great asset over there, for all practical purposes, sitting idle," he said. "You could get innovative."

Until the import market picks back up, Kinder Morgan is using Pier X's ground storage areas to store export coal, DeMatteo said.

Business has boomed this year at Pier IX, however. With help from Pier X, the export terminal will load a record volume of coal, 9.6 million tons by the end of the year, DeMatteo said. That beats the previous record, set in 1991, by 1 million tons.

"It certainly has been a phenomenal year," he said. "2008 has been historic in the terminal's 26-year existence."

And if global coal trends shift again, Pier X will be ready. It's capable of handling 9 million tons each year.

The United States' coal imports probably will increase by about 1 million tons next year because of the drop in ocean-shipping rates, said coal expert Frank Kolojeski, managing director of TransGlobal Ventures Corp., an energy-trading and logistics-consulting firm based in New Jersey. The United States has imported about 30 million tons in 2008, which is a slight drop from 2006 and 2007, he said.

"I don't think there's really anything out there that's going to increase it dramatically, short of a major event like a miner strike " in the United States, he said.

Imports eventually will pick back up, Host said.

"Things just change overnight," he said. "It's cyclical; it'll come back."

Kathy Adams, (757) 446-2583, kathy.adams@pilotonline.com