Coal: U.S. exporters face West Coast challenges

By Eric Watkins

LOS ANGELES, June 1 – U.S. exporters of coal are finding it difficult to get their products to Asian markets, a difficulty underlined this week when the Seattle city council declared its opposition to moving coal through the city.

“The City of Seattle opposes the establishment of coal export terminals in Washington State,” reads the text of Resolution 31379, which passed by a unanimous 9-0 vote earlier this week.

Seattle’s council warned that for any coal-loading facilities in Seattle, the city “will fully enforce public nuisance and municipal land use restrictions … require any piles of coal stored on the property to be fully covered, and require that the facility use a covered loading process to reduce health and safety impacts.”

Seattle’s vote took aim at several firms desirous of opening of coal-export terminals in Washington and Oregon, not least the Burlington Northern Santa Fe railroad, which handles much coal from Wyoming, the nation’s leading producer.

The vote targeted a company that already is aware of coal-dust issues, too.

OTHERS’ NEEDS TARGETED

The Seattle vote also targets countries abroad with a need for coal.

Last year, according to the Energy Information Administration, the U.S. saw a 53.8% increase in exports of coal to Asia, with most of the increase going to Japan. Indeed, Japan saw its volume of U.S. coal imports rising by 118.8% last year.

The rise in Japan’s imports of U.S. coal has been occasioned by the shut down of its nuclear-powered generators in the wake of last year’s meltdown at the Fukushima Daiichi reactor.

In the absence of nuclear power, Japan has been ramping up imports of substitute fuel, including oil and natural gas – as well as coal.

A similar situation exists in South Korea which last month said it may expand imports of power-station coal as a nuclear-plant failure that was hidden for a month stokes opposition to atomic energy a year after Japan’s Fukushima disaster.

State-owned Korea Electric Power Corp. (KEP) said it might increase its purchases of coal to replace nuclear power generation if its Kori 1 reactor remains shut and the government fails to extend the lifespan of a second reactor.

CONSIDERABLY CHEAPER

The cost of generating electricity from coal is twice as much as from nuclear power, but is considerably cheaper than oil or natural gas, according to the Korea Energy Economics Institute and independent analysts.

“Economically, coal is the best,” said Osamu Fujisawa, an independent energy economist in Tokyo who told Bloomberg News that coal imports may gain as much as 2.45 million metric tons a year if both South Korean reactors are closed.

“If you’re trying to increase summer power generation, coal is the best in terms of cost,” Fujisawa said.

South Korea’s imports of thermal coal were a record 94.5 million tons last year, up from 87.8 million in 2010, according to shipbroker Simpson Spence & Young Ltd., while a report from Bank of America said South Korea will buy 103 million tons of seaborne thermal coal this year.

NOT MERE NIMBYISM

The vote that took place in Seattle last week stands in opposition to the efforts of those countries to secure alternative fuels in the wake of a nuclear disaster. Possibly the Seattle City Council did not consider that point. 

Then, again, possibly it did.

The vote in Seattle was not just another case of not-in-my-backyard thinking or nimbyism. No, the Seattle Council wants to legislate for everyone’s backyard, a point made clear by one councilman.

Council member Mike O’Brien, chair of the Energy and Environment Committee and prime sponsor of the resolution, said: “Seattle has a commitment to fight climate change and become a carbon neutral city by 2050.”

The citizens of Seattle, of course, have every right to determine matters for themselves, and there is no requirement for them to have coal trains passing through their fair city. But the vote attempts to go well beyond that.

NO EFFECT

The vote in Seattle targets suppliers in other states, transport systems that serve many interests in Seattle and beyond, and markets on the other side of the world – to say nothing of industries that produce goods that are shipped back through the Port of Seattle.

The vote by Seattle’s City Council will have no effect on the international coal trade. Suppliers will continue to supply coal. Trains and ships will continue to transport coal. Markets in Asia will continue to demand coal.

The vote in Seattle simply means that nine council members in the Emerald City have attempted to cross their city off the map of international coal commerce.

Saner heads will surely prevail. If not, coal will move without Seattle.

© Glamma Productions Inc. 2012

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About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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