Coal Could Suffer Major Setback In The Deep South


With the battle over coal exports now in a lull in the Pacific Northwest, where four of six proposed shipping terminals have fallen by the wayside, the front line in the fight has shifted to an unlikely locale. Louisiana, a state where politicians and their constituents have long welcomed fossil fuel development, activists, citizens and local governments are now fighting a proposed export facility about 45 minutes south of New Orleans.

Armstrong Coal’s proposed RAM Terminal would ship an estimated eight million tons of coal a year from mines in Colorado, Wyoming’s Powder River Basin, and Illinois.

Opponents fear the facility, located next to a critically needed coastal restoration project, would bring coal dust and disrupt traffic in a rural community, along with contaminating sediments needed to rebuild wetlands in a state where its coastal lands vital to hurricane protection are rapidly disappearing.

Bryan Ernst, 63, built his retirement home a few miles downriver from where the RAM Terminal would be built. He already has to cope with impacts from the existing International Marine Terminals, which has just completed a big expansion of its coal export capacity.

“My biggest concern, besides the aggravation, is health,” Ernst said. “Every time we have an east wind, we have dust coming over my property and you’re breathing that stuff. You can feel it on your skin, a coating like powder.” If the RAM terminal is built, Ernst said, “we’re going to be getting it from the north and the east.”

To the north in Gretna, just outside New Orleans, retired schoolteacher and school librarian Gayle Bertucci worries about the increase in train traffic right in front of her home, and the possible health impacts from coal dust, if the RAM Terminal is built. Bertucci says while many in her community are “apathetic” about the planned terminal, she thinks a broader coalition can be built around the possible impacts on coastal restoration.

“Nobody cares if Gayle Bertucci has trains coming down the middle of her street,” she said, “but [Hurricane] Katrina was so traumatic, even for those of us who had no damage.”

International Marine Terminals coal export facility on the Mississippi River near Port Sulphur, Louisiana.

International Marine Terminals coal export facility on the Mississippi River near Port Sulphur, Louisiana.

CREDIT: Gulf Restoration Network

Despite appeals from two local governmental bodies, the Jefferson Parish Council and the Gretna City Council, the Army Corps of Engineers on October 1 said it would not hold a public hearing on a required federal permit. A court challenge to a permit issued by the state Department of Natural Resources, however, is still pending.

“The industry has said the Gulf is their [coal export] plan B,” said Devin Martin, a Sierra Club organizer in Louisiana. Coal companies, he added, “are saying we have an unorganized populace and a corrupt political system they can take advantage of. We are here to show them that’s not true.”

The dispute in Plaquemines Parish, where two existing coal terminals and coal and petroleum coke debris have been found contaminating other coastal restoration projects, is part of a larger regional struggle against coal exports stretching from Texas to Alabama.

While a number of existing terminals in the region have recently expanded, including facilities in Convent, Devant, and Darrow, Louisiana, proposals for new terminals have not fared as well.

Three proposed terminals in Corpus Christi, Texas that would have had a combined capacity of about 25 million tons a year have been cancelled, another facility proposed for coal exports in Mobile, Alabama has been sold to the state and will be re-purposed for container shipments, and two new proposals in Louisiana appear to be on hold, according to a market report document prepared by T. Parker Host and obtained by opponents.


CREDIT: Jeffrey Dubinsky/Louisiana Environmental Action Network

The key takeaway from all this activity: Big coal’s export lifeboat isn’t looking so seaworthy right now.

With a steady decline in coal’s share of the domestic electricity market, driven by a big shift to natural gas, the growth of wind and solar, and emerging federal limits on carbon pollution, U.S. coal producers have for the past few years been bravely talking up exports abroad as their salvation. To get their product to markets in Asia and Europe, they have supported plans to build or expand about a dozen and a half export terminals at U.S. ports.

But four of the six proposed terminals on the West Coast to serve Asian markets have foundered. And the remaining two, in Washington State, are only at the beginning stages of long environmental reviews and face strong political opposition from an energized public and leading political figures in the Pacific Northwest.

Perhaps more surprising is that proposals to enlarge export capacity in the Gulf Coast region are also running into heavy weather. There, as many as a half dozen plans have fallen by the wayside, and political opposition to others is building, even in fossil fuel friendly states like Texas and Louisiana.

At the same time, the price of what is known as seaborne thermal coal used in electricity production has plummeted, driven by a flood of exports from
Australia and Indonesia, and there are signs of a dramatic slowdown in consumption of foreign coal in China, which just recently renewed an import tax on foreign coal. The September Newcastle spot price of export coal from Australia was just half what it was in 2011. And as analysts increasingly predict a grim future for coal, the stock prices of U.S. producers have plummeted.

Clark Williams-Derry, deputy director of Seattle think tank Sightline, concluded simply: “The market is dethroning king coal.”

The outlook for exports is detailed in analyses conducted by the federal Energy Information Administration. In its most recent quarterly report on October 8, the EIA noted that in the second quarter of this year, U.S. coal exports fell 11.4 percent from the first quarter and were 16.5 percent below the second quarter of 2013. In a separate report on October 7, the EIA projected that exports this year would fall about 19 percent below last year, to 96 million short tons.

The coal export bubble, driven by Chinese demand, “has almost completely deflated,” said Williams-Derry, attributing the development to China investing in making improvement to its own coal industry and transport capability, to a big jump in supply by Australia and Indonesia, and a decline in demand by China.

“The coal companies are telling analysts this is a temporary phenomenon and international prices will rebound,” said Ross Macfarlane of Climate Solutions, a clean energy nonprofit in the Pacific Northwest. “But the ones we’ve been reading are telling a very different story …You are seeing the markets for seaborne coal declining precipitously.

Private reports, prepared by a number of analysts and obtained by ThinkProgress, paint a grim picture for the future of coal exports. Investment banker Jeffries, for instance, said “we believe coal prices will never materially recover … We believe coal demand has more or less peaked in China.” Similarly, Citi concluded that “thermal coal is facing twin challenges of cyclically strong supply growth and a structural decline in demand growth.”

As far as demand for U.S. coal overseas is concerned, investment research firm Morningstar said, “we believe China has reached two inflection points — one economic and one political — that lead to a decidedly different outcome: no growth at all.”

Goldman Sachs elaborated on that point by noting, “with Chinese demand for imported coal past its peak, and barring any major policy changes, we expect the seaborne market to grow at an average annual rate of [approximately] .2 percent over our forecast period to 2018. In our view, this will not be sufficient to tighten the market and lift prices above the level of marginal production cost.”

Thus, it’s little wonder that major producers are seeing precipitous declines in their stock prices. Arch Coal is trading around $2.00 per share, down from above $30 in 2011. Peabody is trading at less than around $11; it was above $50 in 2011. Alpha Natural Resources is trading around $1.60; it was above $60 in 2011. And Cloud Peak Energy, is trading around $11, down by about 50 percent since April.

In Louisiana, meanwhile, a state where former Senator John Breaux once famously said “my vote can’t be bought but it can be rented,” the environmentalist sector is feeling it may be getting some traction with the public.

“We have been tremendously successful in mobilizing people given the attitudes and stereotypes about what Louisiana people care about,” said the Sierra Club’s Devin Martin. “The stereotype is that folks in Louisiana don’t care about the environment because energy industry is so big. There is a sliver of truth to that, especially with oil and gas.”

“But,” Devin continued, “there are several things that have happened. The BP oil spill woke people up. Hurricane Katrina woke people up to the fact that coastal restoration is not just about pelicans. It’s about saving our butts. We need a healthy coast to protect us from hurricanes. That is now part of everyday conversations in Louisiana.”