Will West Coast exports be the salvation of coal?

My little piece on coal the other week (go here) generated a flood of responses. I’ve enjoyed the dialogue it fostered. Let me throw a few more shovels of incendiary into the discussion. Several of you, in company with BNSF Railway chief executive Matt Rose, think there is a rosy future for western coal. Ship it to China and India, you say. Maybe so, but you can’t just say that and wish it to happen.
 
First, international coal markets are fickle. The end users love you until they hate you and buy elsewhere. Mines flood in Australia and suppliers elsewhere rush to fill the void; when those mines reopen, the new suppliers will be spurned. Exporters become importers and vice-versa. In 2009, China went almost overnight from being a major coal exporter to an importer. In fact, China by itself is expected to import 150 million tons of the stuff in 2011, the New York Times reports. And virtually none will come from the United States. China’s big coal supplier is Indonesia, which is relatively close by (2,000 miles from Shanghai, versus 5,000 for Seattle). Next comes Australia, where a company recently inked a $60 billion contract to supply coal to Chinese power stations starting in 2013 from a vast network of mines in the Outback. The lesson from all this: You can spend vast sums on infrastructure to export coal, only to see markets move away from you.
 
Second, to buttress that last statement, the last two attempts to export coal from ports on the U.S. West Coast were almost instant failures. One, in Portland, Ore., opened and closed in the decade of the 1980s, its equipment barely used. The other, a $150 million terminal at the Port of Los Angeles, failed almost as soon as it opened in 2006. The only three functioning Pacific Coast coal ports are in Canada. The largest is Westshore Terminals at Roberts Bank, B.C., near Vancouver, which shipped about 26 million tons of coal in 2010, most of it earmarked for Japanese steelmakers. Neptune Bulk Terminal in North Vancouver also loads coal, along with other bulk commodities. The third coal loader is Ridley Terminals, far up the coast, at Prince Rupert.
 
Third, East Coast ports aren’t the answer, at least for steam coal that utilities use; they are too far removed to be competitive. Besides, if you believe eastern coal producers, CSX and Norfolk Southern have enough trouble handling the business that’s already theirs. (The two railroads expect to haul a staggering 55 million tons of coal to eastern ports this year.)
 
Fourth, what’s on the drawing boards on the West Coast is a drop in the bucket. The only coal terminal even close to being built is that of Millennium Bulk Terminals in Longview, Wash. If it survives new legal challenges to its licensing, construction won’t even start until late next year. In any event, a single train a day of Powder River Basin coal will eat up its entire 5 million ton annual capacity. For the Pacific Rim countries to be meaningful markets for western U.S. coal, we need 10 or 20 more Longviews.
 
Lastly, good luck opening 10 or 20 more Longviews. The opposition by greens to exporting our coal anywhere is fierce, determined, unyielding, and bitter. Speaking of possible West Coast coal exports, Sierra Club spokesman David Graham-Caso exclaimed to the Times: “This is a worst-case scenario. We don’t want this coal burned here, but we don’t want it burned at all. This is undermining everything we’ve accomplished.” Sierra Club claims to have helped block 139 proposed coal plants in the U.S. in recent years. It brings to mind Whack-a-mole. Let a coal port be proposed, and the greens will try to hammer it to bits. The Millennium port in Longview got a taste of this last month, when an obscure agency in the State of Washington, the Department of Ecology, intervened to join the challenge to the licensing. According to the Times, the agency said Longview authorities had “failed to take into account the question of greenhouse-gas emissions outside the immediate vicinity of the port.” In other words, Washington state thinks it’s a crime to sell coal to Asia. And where is the good governor of Washington? She has yet to intervene. What developers will risk their money with this sort of governmental hostility?
 
I’m all for exporting coal. Better that China burn our low-sulfur stuff than the gunk from its own mines. But any significant accomplishments in that regard will take another decade and maybe two or three, and require multiples of the determination I’ve seen up until now.
 
So when I said in the title of that earlier piece that the outlook for coal is dimming, I really meant it. — Fred W. Frailey