Increase in coal exports on the horizon

Apr 20, 2012

There are more new ports designed for coal export being proposed in the U.S. and Wyoming’s Powder River Basin coal producers are training their eye on the developments. With some of the most efficient economies of scale in the world, a larger percentage of PRB coal could be making its way across the ocean soon. What would that mean for Wyoming and the global community? Irina Zhorov reports.  

IRINA ZHOROV: In 2000 the United States relied on coal to produce 52% of its electricity. In 2010, that number was down to 45%. The Energy Information Administration predicts that the percentage of coal-supplied electricity will continue to fall in the next couple of decades.

In addition, the EPA released new rules last month that significantly lower allowable carbon dioxide emissions from any new power plants. Coal-fired power plants cannot, yet, meet the new standard.

No wonder, then, that the coal industry is scrambling to find new markets for their product. And some of those markets – like China and Japan – are very far away.

Marion Loomis is the Executive Director of the Wyoming Mining Association.

MARION LOOMIS: World-wide there is a huge demand for affordable, reliable electricity. And coal is certainly one of the commodities that countries around the world are looking at used to provide that electricity. So where there’s demand, certainly the industries in this state and other states that mine coal will be looking to supply that demand. 

ZHOROV: Loomis says that less than 2% of Wyoming coal went abroad in 2010, mostly out of Canadian ports. Last year WPR reported on two new proposed ports in the Northwestern U.S.  Now, Loomis says, there are three ports proposed in that region and another on the Gulf Coast. More ports will not only expand the quantity of coal that can be shipped but competition will help drive transportation prices down, as well.  

The issues surrounding coal exports are both local and global. Globally, environmental groups like the Sierra Club and Columbia Riverkeeper out of Washington state, say the work to get coal use down in the U.S. shouldn’t be dismissed by just sending it elsewhere. A University of Wyoming expert agrees.

JASON SHOGREN: When you think on a global scale, when you think of things like climate change, a molecule of carbon released here in Laramie has the same effect on the climate as one released in Mongolia. So it becomes really a global public good. It’s probably the world’s biggest coordination problem. Everybody has to take a step in the same direction in terms of less fossil fuel use to really make a difference.    

ZHOROV: That’s Jason Shogren, the Stroock Professor of Natural Resource Conservation and Management. 

SHOGREN: It’s business as usual. You’re just transferring the risk elsewhere.

ZHOROV: But, the number of power plants going up in China shows that places like China will burn coal regardless. China relies on coal for 80 percent of its power. Tim Considine, professor of Energy Economics at U-W, however, says new plants in China are better in terms of carbon capture than many of the functioning, older plants in the U-S.

TIM CONSIDINE: And if you look at the immediate damages that are associated with coal burning, it’s particulates and sulfur dioxide that are the big sources of damages in terms of human health.

ZHOROV: The reason Wyoming coal may be preferred is because it’s low sulfur.

CONSIDINE: They can cut a lot of their sulfur emissions by just switching from Chinese to Wyoming coal. That’s essentially how the United States reduced sulfur emissions under the Clean Air Act amendment in 1990. We shifted to Wyoming coal. And that was the low cost solution. 

ZHOROV: Economics professor Jason Shogren adds that this is good for Wyoming’s economy.

SHOGREN: The good aspect of course is increasing the demand for Wyoming coal, which brings more revenues to Wyoming, which brings more potential jobs, which brings more of everything we like. 

ZHOROV: However, another professor of economics at UW and trade expert, Sasha Skiba, said that if coal exports become a significant part of the state’s income the state would rely more closely on other countries’ economies.

SASHA SKIBA: It might be the case that if we rely on exports then if the Chinese economy tanks or Canadian economy tanks or whoever the other economy that goes into recession, then if a greater share of our revenues is coming from exports, then we’re going to lose more revenues from those exports. And then of course on the good side, as soon as the economies recover, then it’s going to be a much bigger spike. 

ZHOROV: Marion Loomis says that shouldn’t happen since coal contracts tend to be long term. But in an interview last year, Energy Information Administration economist Mike Mellish said that the amount of coal moving on the international market varies significantly in short periods of time, depending on the needs of the buying countries.

For now, this is all theoretical. Coal exports make up a tiny percentage of domestic production and the ports are still in just the permitting stage of the long process.

But as countries like China grow their hunger for cheap, reliable energy, Considine says there’s this to keep in mind.

CONSIDINE: Apart from maybe some shallow gas reservoirs in the Middle East where the natural gas is coming out like 25 cents per million BTU, PRB coal is probably one of the cheapest sources of energy on the planet.

ZHOROV: And that’s what coal producers are banking on.

For Wyoming Public Radio, I’m Irina Zhorov.