U.S. Coal Industry Eyes Overseas Market
(Editor's Note: This is the second blog in an ongoing series about proposed coal export terminals in the Pacific Northwest. Upcoming blogs will examine the potential impact coal export terminals could have on the region's health and environment.)
There are a whole lot of coal companies mining a whole lot of coal in Wyoming and Montana’s Powder River Basin. Although U.S. demand for coal is shrinking—thanks in part to Earthjustice’s successful campaign to shutter polluting coal-fired power plants—there are a whole lot of coal-fired power plants in Asia and a whole lot more planned for future construction.
You can probably see where this is going.
Considering the circumstances, it doesn’t take a trained economist to deduce that Powder River Basin mining companies are keen on selling Asia as much coal as possible. The only problem, from industry’s perspective, is how to transport the coal to the continent. Obviously, American coal will sit on a big boat during the last leg of the trip, but it’s the process leading up to the voyage across the Pacific that’s proving to be the sticky wicket.
After being mined, the coal must be transported by rail to coastal shipping ports. Right now, on the western coast of North America, there are two coal export terminals in British Columbia (Vancouver and Prince Rupert) and one small terminal in Seward, Alaska. There simply isn’t enough capacity at these terminals to ship the amount of coal that Powder River Basin mining companies want to send overseas. As a result, the coal industry is frothing at its proverbial mouth to build new export terminals in Washington and Oregon.
Oregon Public Broadcasting's environmental news outlet Ecotrope recently posted a fascinating interview with coal industry analyst Darren Epps. Epps discusses the economic factors driving the push to export American coal to Asia, the logistical issues with railroad shipping, and the struggle of constructing coal export terminals in the Pacific Northwest. He sums up the situation thusly:
There’s really nowhere to ship Powder River Basin coal right now. The terminals in Vancouver (BC) and farther north near Alaska near Prince Rupert in British Columbia are at capacity. They’re expanding as fast as they can, and it’s really not economical to ship it by rail all the way up to Prince Rupert in British Columbia. So, the economics of transportation—and it’s not cheap to haul this coal—make it really difficult to earn any money at all by shipping it that far. What would be much cheaper, much more economical, is to ship it off the U.S. West Coast. And…domestic consumption has lowered. I think domestic coal is closer to 40 percent now of U.S. generation. So exports are the real market for coal right now.
To be sure, Asia’s growing demand for coal is shaking up the global market. As Sightline Daily’s Eric de Place reports, China is responsible for burning about half of the world’s coal supply and its rate of use is growing at a rapid, exponential pace. China’s soaring demand is today’s reality, but de Place asks a vital question: “Is China’s coal import growth an indication of a radical but fundamental shift in the global coal trade? Or do the trends in China indicate an unsustainable economy with severe risks of volatility?”
As de Place is well aware, this isn’t the first trip around the block for coal export terminals on America’s West Coast. Back in 1982, Portland, Ore. was swept up in coal export hysteria. Demand in Asia was strong and the Port of Portland decided to construct a coal export terminal to get a piece of the supposedly lucrative action.
The port and investors shelled out $25 million to build a terminal and subsequently inked a 25-year lease with Pacific Coal. After only two years, the project went the way of the dodo bird. The Asian coal market turned out to be unstable and prices took a nose dive. In the end, with taxpayers left holding the bag, the Port of Portland never shipped a single ounce of coal across the Pacific.
The Portland boondoggle cooled excitement over West Coast coal export for about 10 years. But during the early 1990s, the Port of Los Angeles decided it would try to accomplish what The City of Roses could not. A coal export terminal was constructed in Los Angeles, but problems were abundant from the get go. Due to excessive coal dust, two fires broke out at the terminal, further fueling the fears and concerns of surrounding communities. And, once again, the Asian market proved to be less robust than expected. So, just six years after it opened, the Port of Los Angeles coal terminal was shuttered.
But that couldn’t happen again, right? Emerging Asian economies have an insatiable appetite for coal…right?
Well, this past spring Reuters reported that three Chinese companies deferred or defaulted on a series of iron ore and coal imports. According to the news agency:
China is the world's biggest consumer of iron ore, coal and other base metals, but recent data has shown the economy cooling more quickly than expected, with industrial output growth slowing sharply in April 2012… Some analysts said they were bearish regarding China's prospects of steeply ramping up coal imports any time soon.
But past failures and a potentially fickle market might be ignored by a coal industry facing falling share prices and shrinking profits. According to Grist’s David Roberts, “The health of the U.S. coal industry hinges on its ability to increase exports to China and India.” If Roberts turns out to be right, then we’re in for one hell of a fight. One side will be struggling to keep an antiquated, polluting technology alive, while the other will be fighting to protect the health of Pacific Northwest communities and prevent runaway climate change. Let’s hope that the good guys win.