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King Coal’s Comeback

8 minute read
Bryan Walsh

The Powder River Basin in southeastern Montana and northeastern Wyoming can be as beautiful as its name suggests, but that’s not why mining companies call it home. The region has one of the richest deposits of coal in the world, enough to yield more than 400 million tons last year–nearly half the coal mined in the U.S. There’s enough coal in the Powder River Basin to keep American lights burning for decades, except for one thing–the U.S. is using less and less of the stuff. Thanks to bargain-basement natural gas prices and tougher air-pollution regulations, coal-fired power plants are closing down, and the Energy Information Administration expects coal consumption in the electric-utility sector to drop by 14% this year. That’s good news for the environment–coal is a major polluter and contributor to climate change–and bad news for companies that mine coal.

But across the Pacific Ocean, the demand for coal has never been hotter, with China burning 4.1 billion tons in 2010 alone, far more than any other country in the world. That insatiable demand forced China in 2009 to become a net coal importer for the first time, in part because congested rail infrastructure raised the cost of transporting coal from the mines of the country’s northwest to its booming southern cities. In April, Chinese coal imports nearly doubled from a year earlier. Right now Australia and Indonesia supply much of China’s foreign coal. U.S. coal from the Powder River Basin could be a perfect addition to the Chinese market. Montana and Wyoming are just short train trips to ports on the Pacific Northwest coast, and from there it’s a container ship away from Asian megacities where coal doesn’t have to compete with cheap natural gas and air-pollution regulations are far weaker than in the U.S. To a wounded Big Coal, China is a potential savior. “We feel U.S. coal is an outstanding product to export to the Asian market as they continue to increase their coal demand,” says Vic Svec, a senior vice president at St. Louis–based Peabody Energy, the world’s biggest private coal company.

(Not) A Burning Issue

There’s just one hitch: right now, ports on the West Coast lack the infrastructure needed to transfer coal from railcars into container ships. (Just 7 million of the 107 million tons of U.S.-exported coal left the country via Pacific Ocean ports last year.) That’s why coal companies like Peabody and Ambre Energy are ready to spend millions to build coal-export facilities at a handful of ports in Washington and Oregon. If all those plans go forward, as much as 150 million tons of coal could be exported from the Northwest annually–nearly all of it coming from the Powder River Basin and headed to Asia. Even if the U.S. kept burning less and less coal at home, it would have a reason to keep mining it.

To environmentalists, though–and to many residents of port towns–those plans sound like the outline of a nightmare. There are the local costs of shipping millions of tons of coal via uncovered railcars: the traffic congestion and the air pollution from spilling coal dust and diesel tractor trailers. Valuable waterfront land would be set aside for transporting coal to China, even as the Northwest weans itself off coal power altogether. (The last coal-fired power plant in Oregon will shut down early in 2020.) Residents of small towns like Cheney, Wash.–which sits near heavily trafficked railways–would endure most of the disruption caused by the increased rail traffic without reaping much of the economic benefit. “What’s happening to us here is that we’re bearing really unacceptable costs,” says Cheney Mayor Tom Trulove.

The local environmental and livability concerns are serious enough that the governor of Oregon called in April for the federal government to take a closer look at the proposed port projects under the National Environmental Policy Act. That won’t do much to hold back Big Coal. The Army Corps of Engineers would need to approve at least four of the projects, but there’s no single lever the White House can use to stop the port construction–which means the decisions will mostly fall to local officials over the next few years. For their part, the coal and rail companies pushing the projects are hyping the economic benefits of new construction and shipping while promising to take steps to reduce any local environmental impact from coal transportation. The Morrow Pacific project in Oregon, developed by Ambre, would off-load coal from trains in an enclosed area to minimize dust, then ship it down the Columbia River in enclosed barges to the port of St. Helens. In addition, Ambre would donate hundreds of thousands of dollars a year to public schools in the area. “There’s a tremendous economic benefit here for Oregon,” says Liz Fuller, a spokeswoman for Morrow Pacific.

A Global Coal Conundrum

Nimby feelings alone will make any of these projects a difficult sell, especially in the ultra-green Pacific Northwest.

But the larger environmental question isn’t about the local impacts but rather the global ones. Environmentalists worry that by making it easy for the U.S. to ship cheap coal to Asia, the port projects would keep American mines humming even as coal use dwindles domestically. They might also encourage China and other rapidly growing Asian countries to burn more coal than they otherwise would by lowering the global price of the product. (One recent study found that a 10% reduction in the cost of coal in China would lead to a 12% increase in consumption.) By exporting coal to Asia, the U.S. would be responsible for further increasing global carbon emissions. “Will China and India have unlimited access to some of the cheapest and most plentiful coal on the planet?” says K.C. Golden, policy director for the Seattle-based NGO Climate Solutions. “That’s the most important question.”

How to act on the answer is another issue. The fact is, no one knows if increased U.S. exports would actually add to the total amount of coal burned globally. Coal companies like Peabody–as well as some economic analysts–say cheap U.S. coal would simply displace more expensive domestic Chinese coal or imports from Australia and Indonesia. If overall coal consumption won’t actually increase, why not let U.S. companies–and taxpayers–get the economic benefit of those exports? If the U.S. decides not to build the port facilities, China’s hunger for coal will just be met by another dealer.

Some argue that if increasing demand in Asia pushes up global coal prices, it could actually help the environment by forcing more coal-burning countries to start looking for cheaper energy alternatives. In the U.S., higher coal prices could accelerate the switch from coal to natural gas, especially in parts of the Midwest that remain heavily dependent on coal. But that will depend on how Asian markets respond to the potential avalanche of U.S. coal. Chinese demand for coal has been inelastic in recent years, meaning that prices–high or low–haven’t had much impact on how much coal China burns. That’s partly because the Chinese government exerts control over the energy market, says Richard Morse, director of coal- and carbon-market research at Stanford University, making the effect on emissions of cheaper coal from the U.S. “a complex question. And it’s not just about China,” he says. “You have to net out the global impacts against the U.S. impacts.”

Of course, that kind of modeling is easier said than done, which is why no one’s done it. What’s clear is that the global rate of consumption of coal–the dirtiest fossil fuel there is–will help decide how fast the planet warms. For their part, environmentalists remain convinced that stopping coal exports to Asia is a must-win battle in the war on climate change. In a fiery speech at a Portland, Ore., protest against the proposed ports last month, environmental activist Robert Kennedy Jr. urged the crowd to fight back. “[Coal companies] are coming to ship their poison, so they can poison the people in China, and that poison is going to come back here,” he said. “So don’t let them.” It’s a fight for the people of the Pacific Northwest, but the results will matter to the entire world.

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