Hurdles mount for Northwest coal exports

How high are the stakes for Western coal producers?

 

The U.S. coal industry has had little to celebrate in recent years. Domestic demand for the energy rich, black rock is declining. A surge of renewable energy has come online. Natural gas is absurdly abundant, and thus cheap. And now, state and federal environmental regulations to shrink the carbon footprint of electricity generation are poised to tighten the squeeze.

All of which has left coal companies searching for "some story," says University of Wyoming energy economist Rob Godby, "to say, 'we're sitting on an asset that's still worth something.' " The story they've seized upon is the insatiable hunger of developing Asian countries for coal, and the incredible moneymaking potential markets in China, India, South Korea and Vietnam offer – if only U.S. mining companies could get their product across the Pacific.

Coal trains in the Wyoming's Powder River Basin.
Logistically, the easiest way to do that is to build new railroads from Montana and Wyoming to ports in Oregon and Washington, perhaps the worst states politically to try to build new projects having anything to do with coal. As recently as last year, six coal export terminals were being proposed in the Pacific Northwest. The projects met with unprecedented public opposition, and now only three are still on the table. Soon, the number may be down to two.

Last month, Oregon denied an application from Ambre Energy – an Australian company that also mines in the Powder River Basin – for a permit to build a dock at the Port of Morrow on the Columbia River, effectively nixing the project. The company, the port and the state of Wyoming are now suing over the decision, arguing that the state improperly rejected the permit application not because of the impacts the dock would have but because of its distaste for the product to be shipped from it. 

How much does the ultimate outcome matter for Montana and Wyoming, home of the Powder River Basin, the largest coal producing region in the U.S.? The Port of Morrow project was the smallest of the three remaining export terminal proposals. It would shepherd about 9 million tons of coal a year overseas, while the two others, both in Washington, could ship a combined 90 million tons. When you consider that the Powder River Basin produces some 400 million tons of coal annually, export via the Port of Morrow represented a fairly small opportunity. 

The Washington ports, however, would be much more meaningful, conveniently allowing Powder River Basin producers to export about the same amount of coal they're expected to lose demand for domestically when carbon regulations take effect, says Godby. 

"It’s a tremendous growth opportunity for U.S. coal producers, particularly in the Powder River Basin," adds Andrew Moore, managing editor of Platts' Coal Trader, a daily newsletter covering domestic coal markets. Even though China is beginning to grapple with the extremity of its coal-driven pollution problems, and is preparing to launch the world's largest carbon market, Moore says coal demand in Asia is still likely to rise in coming years: "The hope of increasing and improving quality of life in those developing countries is likely to trump environmental considerations."

Still, there are no guarantees that Asian markets could absorb a large influx of Powder River Basin coal says Godby. U.S. producers would have to compete there with coal coming from Australia and Indonesia, two of the world's powerhouse producers who enjoy much closer proximity to the coal-hungry countries and existing infrastructure to deliver it. "And the big port projects have a lot of uncertainty," he adds. Building out the infrastructure to get the coal over big, rugged mountains to the coast is no simple task. It will require a huge investment from the railroad companies, and will confront opposition, no doubt, from communities that might have to endure multiple trains an hour. (Godby estimates that, owing to the mountainous geography, each train could only carry about 6,000 to 6,500 tons at a time.)

And then there's the competitive market U.S. coal would face in Asia, he says. "Which will make the rate of return on those projects relatively low. If you’re an investor, do you want to take on a project that long term with so many risks?"

Maybe not. So why go to all the effort, in the face of such challenges? "(Coal companies) don’t want to see the door closed now," explains Godby. "And they want to keep positive news in play, so that, longer term, they have a second option" – beyond the declining domestic market. 

Cally Carswell is a High Country News contributing editor.

High Country News Classifieds
  • STAFF ATTORNEY
    The Southern Utah Wilderness Alliance (SUWA), Utah's largest conservation organization, has an immediate opening in its Salt Lake City office for a staff attorney. SUWA's...
  • DEVELOPMENT & COMMUNICATION SPECIALIST
    Idaho Walk Bike Alliance seeks a lover of bicycling, walking, and all modes of active transportation who willingly puts the car in the garage and...
  • COMMUNICATIONS DIRECTOR
    Friends of Inyo - the Communications Director is a full-time permanent position that reports to the Executive Director and utilizes communication strategies and production skills...
  • INDIGENOUS AFFAIRS EDITOR
    High Country News seeks an editor to oversee the work of our award-winning Indigenous Affairs Desk. This individual will lead a team of passionate journalists...
  • HIKING TO THE EDGE:
    Confronting Cancer in Rocky Mountain National Park. Poetry and photos on survival thinking. E-book and paperback available at Amazon.com.
  • OPERATIONS MANAGER
    Founded in 1936, the National Wildlife Federation has grown into America's largest and most trusted grassroots conservation organization with 53 state/territorial affiliates and more than...
  • IPLC RIGHTS AND EQUITY PROGRAM ASSOCIATE
    A LITTLE ABOUT US Founded in 1951, the Nature Conservancy is a global conservation organization dedicated to conserving the lands and waters on which all...
  • EXECUTIVE DIRECTOR FUTURE WEST
    Future West seeks an executive director to lead this dynamic organization into the future. Based in Bozeman, MT this well-respected nonprofit provides communities in the...
  • PART-TIME EXECUTIVE DIRECTOR
    Mitchell Museum of the American Indian Location: Evanston, IL Salary Range: $45,000 @ 24 hours per week. send resume: [email protected] www.mitchellmuseum.org
  • COMMUNICATIONS LEAD
    Southeast Alaska Conservation Council is hiring! Who We Are: The Southeast Alaska Conservation Council (SEACC) is a small grassroots nonprofit based out of Juneau, Alaska,...
  • SENIOR POLICY ADVISOR
    Since 1989, The Nature Conservancy in Alaska has been doing work you can believe in protecting the lands and waters that all life depends on....
  • OUTDOOR PROGRAM - ASSISTANT DIRECTOR
    St. Lawrence University seeks to fill the position of Assistant Director in the Outdoor Program. To view the complete position description, including minimum qualifications required,...
  • PUBLIC LANDS DIRECTOR
    Job Announcement Conserve Southwest Utah is seeking a dedicated advocate for conservation and public lands Public Lands Director a "make a difference" position Conserve Southwest...
  • FOR SALE
    Yellowstone Llamas Successful Yellowstone NP concession Flexible packages
  • DIRECTOR OF DEVELOPMENT & MARKETING
    Grand Staircase Escalante Partners is seeking a full-time Director of Development & Marketing. This is a senior position responsible for the development of all marketing...
  • LEGAL DIRECTOR
    The Legal Director will work closely with the Executive Director in cultivating a renewed vision at NMELC that integrates diversity, equity, and justice. Black, Indigenous,...
  • WE'RE LOOKING FOR LEADERS!
    As we celebrate 50 years of great Western journalism, High Country News is looking for a few new board members to help set a course...
  • WIND RIVER WRITERS AND PHOTOGRAPHERS RETREAT BY THE NATIONAL BIGHORN SHEEP CENTER
    Enhance your writing or photography skills with world-class instructors in the beautiful Wind River Mountains. All skill levels welcome. Continuing education credits available.
  • EARTH CRUISER FX FOR SALE
    Overland Vehicle for travel on or off road. Fully self contained. Less than 41,000 miles. Recently fully serviced Located in Redmond, OR $215'000.
  • ENVIRONMENTAL GEOPHYSICS
    identifies suspect buried trash, tanks, drums &/or utilities and conducts custom-designed subsurface investigations that support post-damage litigation.