Is Sending Wyoming Coal to China Smart Economics?

Controversy growing over plans to build docks in the Pacific Northwest to export Western-mined coal to China

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China has roared into clean technology markets to lead the global race to make green energy. Its manufacturing dominance has distressed many in the U. S. government, but not enough to upend longstanding energy priorities that favor fossil fuels.

Now some observers are warning that as Beijing clings to more coal to construct its new economy, America may become a key provider of the fuel source—at its own economic peril.

“What’s China going to do with [U.S.] coal?” said K.C. Golden, policy director of Climate Solutions, a Seattle-based nonprofit group. “They’re going to burn it to make the steel that we don’t make anymore. They’re going to manufacture the things we don’t make anymore.”

“Is this a good jobs strategy to become the resource colony for the development of the Asian economy?” he asked.

Chinese energy demand will soar 75 percent by 2035, according to the influential International Energy Agency (IEA), and coal will remain its fuel of choice.

The world’s mining giants are keen to leap into the supply hole. Several are eyeing docks on the Pacific Northwest to export Western-mined coal to ports in China and other Asian countries for the first time.

Analysts are not surprised. “Obviously the mining companies are in the business of making money,” said Matthew Preston, principal North America coal analyst for Wood Mackenzie, an energy consulting firm based in Edinburgh, Scotland. “[In] the Asian markets, there’s a growing demand for coal. They’re just trying to take advantage of that marketplace.”

Australia-based Ambre Energy is the furthest along in development. The company has proposed a coal-export terminal on a 460-acre site at Longview Port along the Columbia River in Washington state.

If it wins approval, more than five million tons of coal from the Powder River Basin in Wyoming and Montana would travel each year on trains through the Columbia River Gorge to Southwest Washington before sailing to Asia. That’s roughly equivalent to double Washington’s yearly coal use, and would account for some six percent of the estimated 80 million tons the U.S. will export this year, according to U.S. Energy Information Administration figures.

Cowlitz County commissioners will decide as soon as next week whether they will grant shoreline development permits—the first in a long line of state permitting decisions expected on the controversial plan.

Conservation Groups Fight Project

Environmental groups are gearing for a fight.

They claim, among other things, that the terminal would damage a fragile salmon spawning habitat, spew coal dust and boost global warming emissions, undermining benefits advocates expect from their efforts to shutter the Northwest’s two remaining coal plants in Oregon and Washington.

 “We’re charting a different course than a coal-based power system,” Golden told SolveClimate News. “The purpose of all that was to keep that Wyoming coal in the ground, not to have it burned in Asia.”

Dan Serres, conservation director of Columbia Riverkeeper, an Ore.-based watchdog group, said they want a “hard look” into ecological impacts. “Currently [the county commission] is not proposing to do any environmental analysis of these permits,” he told SolveClimate News.

Serres and others also foresee potentially serious economic implications from “uncorking” U.S. coal reserves.

While China corners the lucrative market for low-cost cleantech products, observers fear the U.S. could get trapped in its coal mining past and miss out on economic benefits of the burgeoning green export sector.

“That’s a possible future,” said Jesse Jenkins, director of climate and energy policy at the Breakthrough Institute, a Calif.-based think tank.

“Given U.S. coal resources and the absence of a real clean economy policy strategy from Washington, the U.S. could easily wind up simply auctioning off our mineral wealth to China while losing the chance to become the world’s leading exporters of high-tech, Made-in-the-USA, clean energy technologies,” Jenkins told SolveClimate News.

Golden said: “We’ve got the specter of standing at the mouth of the Columbia River—the main artery of the Great Pacific Northwest—watching ships sailing out full of coal, passing ships sailing in full of solar panels and manufactured goods and lithium-ion batteries.”

China Leads Green Export Sector

China became the world’s largest producer of solar photovoltaic panels in 2009.

Most of those goods are getting shipped abroad, according to a new analysis from Worldwatch Institute, a Washington D.C.-based research organization. China’s wind turbine and solar water heater industries also boosted their exports dramatically, with no slowdown in sight.

Still, the world’s largest energy user and carbon emitter is hardly a poster child for clean power. Around 70 percent of its electricity is coal fired. In the past nine years, consumption of coal nearly doubled, the report says.

The IEA says energy imports will be crucial to fuel China’s economic future, with long-term effects on the global energy sector.

“[China’s] growing need to import fossil fuels to meet its rising domestic demand will have an increasingly large impact on international markets,” the agency said in its World Energy Outlook report.

In 2009, in a sign of things to come, China’s coal imports tripled from the previous year to 130 million tons, according to government customs figures.

“They have an internal demand that’s been growing very, very fast,” Preston told SolveClimate News. “It’s about a three-and-a-half billion ton demand, and it’s growing.”

Indonesia, Vietnam, Russia, Mongolia and Australia—the world’s biggest exporter of coal—have been China’s biggest suppliers. But with ports increasingly congested, among other factors, America is being targeted as a prime source of backfill.

Coal Exports Bad for U.S. Growth, Say Advocates

On the West Coast, millions of tons of metallurgical coal for steelmaking, or coking coal, are exported through Vancouver in British Columbia each year. From the U.S., coal exports are funneled through the East Coast’s Atlantic Basin, with a small but increasing amount going to China.

From April to June 2010, China’s coking coal imports from the U.S. shot up to about 1.2 million tons, according to EIA data, accounting for five percent of the total 22 million tons exported during the quarter. During the same period in 2009, China imported barely 2,500 tons from the U.S.

Critics contend that the boom is just beginning and caution that deeper U.S. involvement in the Asian coal trade will boost the cost of coal as domestic prices get increasingly linked to global commodity prices. They also claim it would produce few American jobs.

Ambre Energy did not return phone calls from SolveClimate News seeking comment, but the company told the Oregonian this week that its terminal would support 70 permanent jobs. Columbia Riverkeeper puts that figure at closer to 20.

“This is about the least you can do with this type of prime economic asset—just pile coal on a big slab and ship it off,” Serres said. “We would much rather see these port sites if they were developed, targeted much more along the lines of clean technology, or light industrial use.”

A recent report by the World Wildlife Fund, a conservation group, found that if the U.S. can snag 14 percent of cleantech exports in smart-grid equipment, solar panels, wind turbines and mass transit, it would create 850,000 jobs.

More Coal Companies to Follow Ambre

Advocates admit an uphill battle awaits them.

Several coal companies with stakes in Western mines are said to be following Ambre’s lead in expanding terminals for coal exports along the Columbia River, including Peabody Coal, Union Pacific and Cloud Peak Energy.

Peabody and Union Pacific declined to comment when reached by telephone and email. A spokesperson for Cloud Peak Energy told SolveClimate News that it would not confirm specific plans but hinted they may be underway.

“We have noted previously that we believe increased West Coast export capacity is a potential growth opportunity for [Powder River Basin] coal that is supported by longer-term demand trends,” Aaron Hunt wrote in an email. “Cloud Peak Energy would be supportive of initiatives to either expand existing facilities or construct new terminal capacity.”

Preston said the Powder River Basin has “plenty of capacity to mine coal,” but he questioned the potential for Asian exports to deliver considerable business to Western miners. “In general, we’re skeptical that it could be a major portion of their business. It will be an important portion, but relatively small compared to their production.”

(Photo of the Russian coal port Nakhodka, on the Sea of Japan, by Peruanec)

See also:

China’s Global Dominance in Green Jobs Growing, Report Says

West Virginia Coal Industry $100 Million Budget Drain, Report Says

Policy and Rhetoric Ignore Real Limits of Nation’s Coal Reserves