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Coal to Asia Emerges as New Front in Battle against Global Warming

Experts and environmentalists question whether shipping U.S. coal to China can be reconciled with the need to combat climate change
coal train



Flickr/Randy Slavey

PORT WESTWARD, Ore. -- This 900-acre industrial park features a horseshoe-shaped dock of timber and steel that juts out into the Columbia River, an hour's drive north of Portland. During World War II it shipped bullets and bombs across the Pacific. Now it's providing ammunition for a new battle: whether to export substantial amounts of coal from the western United States to Asia.

"The channel runs deep here. It's self-scouring, so you don't have to dredge it," explained Craig Allison, operations manager for the port, gesturing toward the dark water off the edge of the dock. "That makes this one of the few sites in the Northwest where you can handle oceangoing freight."

The site is one of five proposed export terminals for U.S. coal, mined from the inner mountain regions of Wyoming and Montana and bound for markets in energy-hungry Asia.

Taken together, the scattered projects offer a kind of lifeline to a U.S. coal industry being squeezed by low natural gas prices and tougher environmental rules, a combination that has eaten into domestic demand. At least three of the Powder River Basin's largest coal companies -- Peabody Energy Corp., Ambre Energy and Arch Coal Inc. -- have stakes in one or more of the five terminals.

Should all the projects come to completion, their combined shipping capacity of 150 million tons per year could more than double current U.S. coal export levels.

But the scale of the projects has also drawn strong push-back from environmental groups, Northwestern tribes and dozens of communities along the coal's 1,200-mile route to the ocean. Worried about the localized impacts these terminals' traffic could have on their quality of life, these groups have lobbied aggressively for more stringent and comprehensive environmental reviews that could delay the projects by months, even years.

After a year of tumultuous weather extremes, the export terminals raise difficult questions about what exports of carbon-heavy coal would mean for the United States' climate commitments. The country's carbon emissions stabilized last year, thanks primarily to the combined influences of natural gas use and a warm winter -- essentially, because the country is burning less coal.

"If you're just shipping that coal to China, have you really made any gains?" said Brett VandenHeuvel, executive director of Columbia Riverkeeper, a member of the Power Past Coal coalition, which opposes the terminals. "There's no doubt that China is going to keep burning coal for the next 30 years, but we're looking past that. The plants they build today in an era of cheap coal will keep them locked in for decades."

High-tonnage routes to the coast
Bulk commodities can reach Port Westward by two routes -- overland by rail or down the Columbia River by barge. Both options are currently under review.

Kinder Morgan, the largest terminal operator in the country, is conducting due diligence on plans to move between 15 million and 30 million tons per year to Port Westward by rail, there to be loaded onto oceangoing vessels.

Australian-owned Ambre Energy, meanwhile, is further along in its plans to move some 8 million tons of coal per year down the Columbia River by barge. After entering the river at the Port of Morrow, that coal would not touch land again until it crossed the Pacific but would be transferred directly onto freight vessels off the dock of Port Westward.

Aside from the terminals at the Port of Morrow and Port Westward, three more sites are currently passing through various levels of due diligence and permitting. Two are in Washington -- the Gateway Pacific Terminal near Bellingham and the Millennium Bulk Logistics Terminal near Longview -- with one more near Coos Bay, Ore.

Though more modest in scope, Ambre's Port of Morrow project is the furthest along of the five in terms of permitting and could come online as early as 2014, said Ambre Energy spokeswoman Liz Fuller.

"Logistically, most of our infrastructure challenges have been overcome at this point," she said. "We operate a little bit differently out here because culturally, the Northwest has very high standards for environmental safety, and we've incorporated those standards into our design."

The Army Corps of Engineers is currently conducting an environmental assessment for the Port of Morrow site and weighing the need for a lengthier, site-specific environmental impact statement (EIS).

So far, it has resisted calls from environmental groups, U.S. EPA, the governor of Oregon and a host of other environmental and civic groups to conduct a broad-gauge EIS for all five of the proposed projects.

Such a review would consider the combined effects of all five terminals on the Northwest and could even consider the climate impacts of burning U.S. fossil fuels abroad.

Price signals promote exports
This approach is rejected by proponents of the terminals, including the coal companies themselves. "A cumulative EIS would not be in keeping with what the Army Corps has required for similar projects in the past," Fuller said. "It would slow our project down by years."

Time is not something U.S. coal can afford. Thanks to low gas prices and stringent new EPA regulations, coal use in the United States has entered a steady downward trend, and production is following suit. The Energy Information Administration's most recent quarterly coal report puts production at 5.8 percent below the same quarter last year, and 14 percent below the same quarter in 2008.

The declines have been partially offset by a rise in exports, particularly to Europe (ClimateWire, Nov. 8, 2012). That trend may reverse, however, if slumping prices for European carbon credits rally this year, as many analysts expect.

And with many U.S. coal-fired power plants slated to retire over the coming decade, only Asian demand offers the kind of security energy companies need to make long-term investments in infrastructure (ClimateWire, Nov. 13, 2012).

Offshoring emissions?
Yet that reorganization is exactly what environmental groups opposing the coal terminals hope to block. Though proponents of the coal terminals say Asia's consumption is unlikely to be influenced by the absence or presence of additional U.S. supply, opponents insist that the United States has to be held accountable for the carbon it exports as well as the carbon it burns.

"Opening up huge new supplies of coal to China from the Powder River Basin would lead to lower prices -- it's a simple function of supply and demand," said Power Past Coal's VandenHeuvel. "There's the rational economic answer, but there's also a moral consideration: Do we really want to be driving down prices for coal at a moment where we should be trying to phase it out?"

How much an additional 150 million tons of coal per year would shift China's demand is difficult to determine. The country currently burns around 4.8 billion tons of coal per year, 96 percent of which is supplied domestically.

The picture is further complicated because policy, not demand, is the primary driver in setting coal's price in China, said Richard Morse, a partner at the energy consulting firm Supercritical Capital.

"Let's say you grant the argument that 150 million tons can have an influence on a 4-billion-ton market. Then you have to assert that Chinese energy planning is highly sensitive to coal prices," he said. "If you look at Chinese energy targets, or how the power sector is run, you see that it's actually fairly insensitive to power prices."

"China has been losing money on coal plants for years, but it keeps churning them out because that's the political directive from the state-owned energy companies," Morse said. "They don't have a lot of good alternatives."

Where the supply-and-demand argument makes more sense, he said, is in countries like Japan, which is seeking alternatives to nuclear power. The energy-hungry economies of Korea, Taiwan and to a lesser extent India, which rely on less regulated energy markets, will want a share of U.S. coal. These countries have few domestic energy alternatives of their own, Morse added.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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