Washington confronts coal trains

Pacific Northwest new front in fight over US coal exports and the industry’s future

The New York TimesJune 24, 2013 

A train hauling coal to British Columbia heads north out of downtown Seattle last month. The Seattle City Council unanimously opposes the development of coal-export terminals in Washington over concerns about increased train traffic and potential harm to health and the environment.

ELAINE THOMPSON/THE ASSOCIATED PRESS

CROW AGENCY, Mont. — Every few hours, trains packed with coal pass through the sagebrush-covered landscape in southern Montana, some on their way north to Canadian ports for shipment to Japan and South Korea. If the mining company Cloud Peak Energy has its way, many more trains will thunder across the prairie to far larger proposed export terminals in Washington state.

Trains hauling coal already rumble through Tacoma and Seattle several times a day, hauling their freight to ports in Canada for export.

It’s all part of a push by the nation’s coal industry, hobbled by plummeting demand as Americans turn to cleaner natural gas, to vastly expand what it sends to Asia and Europe. But the aggressive effort to rescue the $40 billion industry is running into fierce opposition from environmental groups, who say pollution caused by burning coal should not be exported to other countries.

The two sides have engaged in an increasingly pitched battle, in regulatory arenas and on the airwaves.

“The future of the U.S. coal industry is at stake,” said Richard Morse, managing director at SuperCritical Capital, an energy consultancy. “Their future domestically is dim and demand growth internationally is very robust, so it is fair to say that a resuscitation of the industry has to come overseas.”

This month, the Sierra Club and other groups opened another phase in the battle, filing suit in a federal court in Seattle against Burlington Northern Santa Fe Railway and several coal companies, saying that coal dust escaping from trains has polluted rivers and lakes in Washington. The new export terminals, they say, would only bring more trains carrying coal to the ports and increase the amount of dust.

The lawsuit came as the Army Corps of Engineers rejected pleas from dozens of groups and government entities to conduct a broad environmental review.

“Many of the activities of concern to the public, such as rail traffic, coal mining, shipping coal outside of U.S. territory and the ultimate burning of coal overseas, are outside the Corps’ control and responsibility,” the agency’s acting chief of regulatory affairs, Jennifer Moyer, said Tuesday in testimony submitted to the House Energy and Commerce Committee.

The Corps has decided to do more limited studies at two ports in Washington: Gateway Pacific Terminal near Bellingham and Millennium Bulk Terminal at Longview. Federal officials have not decided whether to do a study on a third terminal at Port of Morrow, Ore.

The controversy over coal exports parallels the debate over the proposed Keystone XL pipeline meant to take crude oil from Canadian oil sands to Gulf of Mexico refineries, where some of it would be exported. In both cases, local communities are struggling to balance the economic benefits of increased development of fossil fuels with the environmental damage that comes from extracting and burning them.

SHIFTING DEMAND

Coal’s share of electricity generation in the United States has fallen to less than 40 percent in the past decade, from 50 percent. Annual production dropped 7 percent in 2012 to just more than 1 billion tons, the lowest total in two decades, and the stock prices of many coal companies have been plummeting.

Cheap, abundant and cleaner natural gas produced in new shale fields has replaced much of the coal that U.S. power plants once burned, and regulatory pressures are mounting to curb greenhouse gas emissions from coal combustion. That has left exports as the only sure growth engine for the declining U.S. coal industry.

Last year, U.S. coal exports set a record of 125 million tons in sales, roughly double the volume in 2009, with most of that going to Europe. Exports fell this spring because of slower Chinese demand for steelmaking coal. Energy experts say, however, that the big potential market for U.S. coal remains in Asia, and several proposed Pacific Northwest export terminals would have the capacity to nearly double current exports.

The faceoff between the industry and environmentalists is playing out here in Montana, where Cloud Peak is poised to mine an Indian tribe’s enormous deposit of up to 1.4 billion tons of coal – more than the nation produces in a year – and send it to energy-hungry nations in Asia. First, however, they need more export terminals to be built in the Pacific Northwest, and those have been delayed or, in some cases, scuttled after investors grew weary of the continued opposition from environmental groups.

A BOON FOR TRIBE

For the Crow Nation, which is sitting on the reserves, and many coal companies like Cloud Peak, exports could make the difference between just getting by and prospering. While coal mining is the largest private-sector provider of jobs for the tribe, half the adult population is unemployed.

Last week, the Bureau of Indian Affairs approved an agreement between the Crow and Cloud Peak that allows the company to begin exploration work on the reservation.

The Crow stand to earn $10 million over the first five years, and potentially hundreds of millions of dollars more in royalties and other payments in future years.

Before any digging can start here, though, Cloud Peak needs to know that somebody is willing and able to buy the coal. “We know the coal is there,” Colin Marshall, Cloud Peak’s chief executive, said in an interview. “With the ports, I am very optimistic that it will be developed.”

To win approval, the Crow are quietly lobbying other tribes in the Pacific Northwest, who say that the terminals will harm their fishing and the environment.

“We understand the issue of global warming, but at the same time, because of the economy of the tribe, we are dependent on coal,” said Cedric Black Eagle, the former chairman of the Crow Nation, who began contract negotiations with Cloud Peak.

OPPOSITION

Environmental groups have made the terminals a central focus in their campaign against the coal industry.

Investors have dropped out of three of the originally proposed six terminals, including Kinder Morgan, which withdrew from a proposed terminal on Oregon’s Columbia River last month.

“We are getting close to putting the stake through the heart of the beast of coal exports,” said Cesia Kearns, a Sierra Club “Beyond Coal” campaigner in Oregon.

Gov. Jay Inslee of Washington and Gov. John Kitzhaber of Oregon have expressed trepidation by urging President Barack Obama’s Council on Environmental Quality to assess the greenhouse gas emissions from the export of Powder River basin coal.

Gov. Matt Mead of Wyoming, where many of the mines that would benefit from the trade are situated, has countered that such emissions abroad should not be an issue.

ABOUT CLOUD PEAK

Cloud Peak, which is the No. 4 U.S. coal company and has three mines in the Powder River basin of Wyoming and Montana, produces 90 million tons of coal a year but is able to export just roughly 4.5 million tons annually through British Columbia ports. Cloud Peak is poised to expand those exports by negotiating deals for roughly 21 million tons of export capacity with the builders of two proposed Washington state terminals.

The Powder River basin produces more than 500 million tons of coal a year, nearly half the country’s total, but only about 15 million tons are exported every year, mostly because of the lack of export outlets.

Coal experts say the basin could export 10 times what it does today if the Pacific Northwest terminals were approved, producing thousands of jobs and bolstering the economies of several states.

Environmentalists want to keep the coal in the ground. More coal on the international market, they say, reduces coal prices and discourages the transition to cleaner energy sources like solar and wind.

For the 6,500 or so Crow Indians living on the sagebrush-covered reservation, the deal is seen as a way out of a life with few economic prospects.

The Crow Nation chairman, Darrin Old Coyote, insisted that coal was a gift to his community that goes back to the tribe’s creation story.

“Coal is life,” he said. “It feeds families and pays the bills.”

The Associated Press contributed to this report.

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