When you look at the facts it is undeniable that the Obama Administration has declared war on the coal industry. This is an industry that is based on our Nation’s most abundant natural resource for energy; America is the “OPEC of coal”. In addition to providing the country almost half of its power, the coal industry also provides our country with 1.5 million stable, long term and much needed jobs. The Obama administration has chosen and deployed its weapons for the attack; including the EPA, the Bureau of Land Management, national and local environmental groups of activists and attorneys all of which serve to “shock and awe” the coal industry. These government and environmental groups allied with the President are staging protests and filing lawsuits with local Governments where coal companies have requested permits to build coal export facilities or new coal mines. The Federal Government indirectly pays for many of these legal bills through reimbursements to the activist organizations of legal expenses. Despite this formidable multiple wave attack on coal, the industry that appears to be fighting for its survival in the United States, has a bright and profitable future.
Obama’s main assault has three fronts: the first is mining of coal in Appalachia and especially Kentucky and West Virginia. In locations where the coal is near the surface it is accessed by removing the surface layer of dirt and rock to access the shallow coal seam. Nearby, creeks and small rivers passing through the area of the mines may pick up minute amounts of salt. Although, perfectly suited for human consumption, the EPA declares this water to be dangerous and established new water guidelines. Permits are already extremely difficult to get for any coal mines, however the new EPA guidelines have blocked all new surface mining permits in that region. The EPA fails to mention or promote that the reclaimed lands when the coal companies are finished look better and return the land to standards when the land was unsettled.
The result of this regulation is that surface mining coal production in Appalachia region will end as the current permits expire. In September 2011 the EPA denied 19 surface mining permits in Kentucky causing regional production to drop by 126 million tons of coal and eliminating thousands of jobs. In contrast the Bush and Clinton administrations granted permits for 511 surface operations.
The second wave of the assault is substantially delaying permits on Federal lands. When permits are submitted they mysteriously get caught up in a red tape run around where permits are left to die. During the Bush administration coal production from Federal land averaged 515 million tons/year but in three years under Obama it is only 272 million tons, a reduction of almost 50%.
The third wave of the assault is on the American consumers of coal and the power producers that operate coal-fired power plants. The EPA has issued new regulations that will require 70% of capacity to be retrofitted with environmental equipment over the next three years. Consequently, quite a few plants will be shut down if these regulations are not overturned immediately. The Institute for Energy Research evaluated two of the four regulations and predicted that they will result in the shutdown of at least 10% of coal-fired capacity by 2018.
In response to Government and market forces the U.S. domestic coal industry has mobilized to diversify their customer base by exporting coal to international markets with less regulatory risk, higher prices and long term contracts. China and India are building coal-fired power plants as their main source to provide cheap and reliable electricity to their growing and increasingly prosperous citizens. The US has been exporting coal for over a hundred years, mostly from the East Coast and by today’s standards in relatively small numbers. In order to supply coal hungry China and India, several companies have proposed building export facilities on the west coast of the US. These ports are economically competitive despite the greater distance from ports in Australia and Indonesia. The latter ports are at capacity and ships must wait for weeks to be filled and thus incur massive demurrage costs paid by the buyers. Also, consistency of coal supply is imperative and so spreading around the suppliers diversifies supply interruption risks.
The Port of St Helens, Oregon recently approved two coal export project applications. Ambre Energy, an Australian energy company, received approval to ship 3.5 million metric tons of coal a year from their Millennium Bulk Terminal in Longview, WA with potential to ship 8 million metric tons. Arch Coal (NYSE:ACI) is a minority partner. Kinder Morgan (NYSE: KMP) received approval for a $150-$200 million project in Bellingham, WA. Peabody Energy (NYSE:BTU) is a partner in this deal to export 15 million tons in phase one.
Operations of these ports have been stalled by the Sierra Club and numerous local activists. They have protested against the new ports citing increased rail traffic, coal dust, noise and relatively few new jobs created.
Three new ports have been approved and/or in process of approval along the Gulf of Mexico. In June last year Canadian National Railroad sold their terminal in Convent, LA, about 50 miles upriver from New Orleans for $73 million. The Cline Group, a privately held coal operator with 3 billion tons of coal reserves in Appalachia and Illinois Basins, bought the property and said they will expand capacity to 8 million tons/yr. They state the transit time from LA through the Panama Canal to China is 33-37 days. Trafigura, the 3rd largest independent oil trader in the world with assets of $3.3 billion and based in Belgium, acquired an idle alumina terminal in Burnside, LA, about 60 miles upriver from New Orleans in June 2011. They will convert the facility to export coal and state they will spend $100 million at the site. Cline Mining Co, a Canadian listed company (Toronto: CMK) is developing a terminal in Corpus Christi, TX to export 2 million tons/yr. They will bring coal from their newly opened mine in Colorado.
These are successful first steps to expand coal sales outside of the US. However these port loading capacity barely scratch the surface when it comes to international demand. Also, Obama’s environmental army is still attacking the ports and delaying construction with Federal, Local and state legal battles.
The Obama administration has declared war on the coal industry with hopes to please their Global Warming donor base. However, the global coal industry, which America is just now beginning to supply, is having substantial growth. American Coal producers are developing higher paying customers in more regulatory friendly nations that are not drinking the global warming cool-aid. Someday, when Americans are paying much more (maybe 500%) for their power, a new solution may be able to repair and rebuild what has been destroyed in the war “the American consumer”.
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