Coal Tattoo

About that coal deal with India …

About two dozen protesters opposed to coal development in Montana occupy the state Capitol Rotunda on Monday, Aug. 13, 2012, in Helena, Mont. Protesters plan a week-long sit-in at the Capitol. (AP Photo/Matt Gouras)

This week’s announcement of a deal to ship about 9 million tons of Appalachian steam coal to power plants in India certainly got a lot of media attention, in part because the story was promoted by the office of Kentucky Governor Steve Beshear, who said of the arrangement:

It’s no secret that the coal industry is in a state of flux in America, what with erratic market conditions, the uncertain regulatory atmosphere and the ever-changing energy picture. But international markets need coal, and this private partnership is a great example of a new market for Kentucky resources. My administration has worked hard to strengthen ties with India, and we’re looking forward to a long and successful partnership with many more economic opportunities.

For those who might have missed it, here are the basics of the story, as reported by Platts:

Kentucky and West Virginia coal mines will sell 9 million short tons of Central Appalachian steam coal annually to India for 25 years under a $7 billion deal unveiled Wednesday.

A significant portion of the coal will be produced by privately owned Booth Energy, which operates mines in both states, according to Ed Hatfield, president of Cincinnati-based River Trading.

 New Jersey-based FJS Energy LLC signed the long-term coal sales agreement with India’s Abhijeet Group. Although India produces coal, domestic production cannot keep up with demand.

Anand Kumar, executive director for Abhijeet, said during a news conference that the partnership “is an example of the strong potential between American producers and Indian customers. We see a significant growth of our mutually rewarding relationship.”

Obviously, this is good news for the companies involved and for the men and women who work for them, at mines like the ones that Booth Energy operates in West Virginia under the name Argus Energy. But how big of a deal is this really, what does it mean for the coal market in Appalachia, and what is perhaps the more important part of the story — the potential impacts on global warming — that nobody is giving much attention?

Well, consider that in the most recent year for which data is available (2010), Kentucky exported just 5.5 millions of the 101.4 million tons the state’s operators produced.  West Virginia, which leads the nation in coal exports, shipped 23,8 million tons (out of a total production of nearly 135 million tons) overseas.  So this deal alone will increase annual exports from the two states combined by nearly a third. That’s pretty big.

But does the deal live up to the hype that some are giving it, in newspaper stories that say stuff like this:

That’s a significant announcement for Appalachian mining companies, which have seen layoffs because of low demand for power-generating coal, and for India, which needs fuel to feed its growing hunger for electricity.

“I think that’s very, very confidence building to know that other countries depend on us,” said West Virginia Coal Association President Bill Raney.

Well, consider what Erica Peterson over at public radio in Kentucky explained in her initial story (Erica also did a fascinating follow-up story about the connections between this deal and one Kentucky lawmaker):

But is it a big enough deal? Over the past decade, Appalachia’s coal industry has been struggling. And energy analyst James Stevenson of IHS says this deal won’t quite close that gap.

“You’ve lost sort of 50, 60 million tons of production,” he said. “This is nine million, obviously that’s a small percentage of that. But probably the better upside here is that this could be the first of a number of deals.”

The most recent United Mine Workers of America Journal (it’s not online yet, sorry) list nearly 16 million tons of production cuts announced by Appalachian state mine operators since November 2011 alone.

Lowell Chandler, right, and Bryan Nickerson of the Missoula-based group Blue Skies Campaign hold a sign Monday Aug. 13, 2012, in protest of coal development in the state. Protesters plan a week-long sit-in at the Montana Capitol. (AP Photo/Matt Gouras)

Coal exports are indeed on the rise, as we’ve reported here before, and mine operators are very eager to try to continue that trend. Here’s what Alpha Natural Resources said about exports in its most recent financial report:

In light of the burgeoning utility inventories in the U.S., producers, traders and some utilities have attempted to move thermal coal onto the seaborne market. As a result, U.S. exports are on pace for a record year, with thermal coal exports in the first five months of 2012 up approximately 77 percent to 25 million tons. Given this significant increase in supply, primarily into the Atlantic basin, seaborne prices for thermal coal have fallen, and opportunities for additional near-term export business have diminished. Metallurgical coal export volumes have remained relatively healthy by historical standards but are down approximately 6 percent year-over-year through May at 28 million tons. Alpha’s metallurgical coal exports during the second quarter of 2012 increased to just over 4 million tons, a 17 percent increase from the first quarter.

But keep in mind, Alpha also told us:

While export volumes have held up reasonably well, the global market for metallurgical coal has been softening across the board recently. Spot pricing for benchmark quality coals in Asia has disconnected from the third quarter benchmark of $225 per tonne and is reportedly under the $200 per metric tonne mark due to slowing steel production in China and the expected recovery of Australian export volumes following the reported resolution of recent labor disputes. In the face of European economic weakness, year-to-date European steel production is down approximately 4 percent compared with 2011. Given the challenging conditions in Europe, metallurgical coals are being contracted at a discount to similar qualities sold into Asia, and the market is awash with lower-quality metallurgical coals, placing significant downward pressure on pricing. In the near-term, Alpha has pared back production of its lower quality metallurgical coals, but the company believes it is well-positioned to capitalize on improving global market fundamentals for metallurgical coal with up to 30 million tons of export terminal capacity and the ability to rapidly increase metallurgical coal shipments in the future.

 In short, it’s far too early to say whether the export market is going to save the Appalachian coal industry from the declined projected by government forecasts — and certainly the trend thus far doesn’t seem to justify the continued refusal by most political leaders to face these forecasts head on and start looking for ways to speed up the diversification of the coalfield economy.

And what about the way that the Associated Press touted this deal, writing:

A private-sector agreement could help India avert future power outages by importing 9 million tons of coal a year from Kentucky and West Virginia.

OK … well, here’s what the Christian Science Monitor recently had to say about coal’s role in the recent power outages in India:

But reliance on coal has blackened lives and landscapes, and it hasn’t always kept the lights on.

This week, some 600 million people were plunged into darkness across India in what is reportedly the world’s largest power collapse. Coal experts like Justin Guay say it exposes the failure of a coal-fired grid to address the real problem: peak power shortages.

“Coal operates at a steady output 24 hours a day – it’s baseload,” says Mr. Guay, the Washington Representative of the Sierra Club International Climate Program. “But coal can’t be ramped up quickly to accommodate quick peak surges in demand.”

He says solar energy, improved efficiency, and natural gas are much more plausible solutions for delivering energy when India needs it – at peak times, such as when millions flip on their air conditioners.

Finally, perhaps the most important issue in this whole story is the part that got the least attention in the media coverage: The potential impacts of increased coal exports from the U.S. on greenhouse emissions and global warming. This wasn’t mentioned in the Platts story, or in Erica Peterson’s coverage, by the Lexington Herald-Leader or by the AP.

Kentucky Gov. Beshear certainly didn’t mention global warming in his press release about the India deal, though the issue did get attention high up in the Courier-Journal story:

But environmental groups say the deal will only worsen the earth’s pollution problems.

“Strip mining Kentucky to cause pollution in India, and worsen global warming everywhere, is a big mistake,” said Jamie Henn, spokeswoman for, a group focused on curbing emissions. “The real solution to America’s economic challenges and India’s power shortages is a serious investment in clean energy infrastructure, not keeping up this dangerous addiction to fossil fuels.”

The Daily Mail’s front-page story by Ry Rivard relegated any question about climate change impacts to the last paragraph, which took a standard industry approach, using international emissions to question the importance of U.S. action on greenhouse gases:

If coal exports continue, there is some question about how effective U.S. regulations of coal-fired plants can be in addressing global warming if the coal is just being burned overseas.

Ry touted an International Energy Agency report about growing global demand for coal:

The International Energy Agency estimates coal demand will grow by 600,000 tons every day over the next five years, with most of the demand coming from China or India.

Folks over at the Daily Mail must be a little selective in which IEA reports they read and quote. For example, their story didn’t make mention of this conclusion from the IEA:

The way energy is produced and consumed must change if the world is to respond to wide-ranging energy security, economic and environmental challenges, the International Energy Agency’s (IEA) Deputy Executive Director emphasised in an interview for Switch, a documentary which explores what role energy will play in the future.

Ambassador Richard H. Jones warned that if energy policies do not adapt, enough carbon dioxide will be being emitted to reach 1,000 parts per million in the atmosphere. According to the Intergovernmental Panel on Climate Change that equates to 6º Celsius increase in temperature by the end of this century. “That’s basically Miami Beach in Boston,” he said.

Or consider other IEA conclusions, like these, reported by The New York Times:

Reducing carbon dioxide emissions by enough to prevent global temperatures from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) is “still within reach,’’ the International Energy Agency reported on Monday, but at the moment, trends in energy use are running in the wrong direction.

In the latest version of Energy Technology Perspectives, a report issued biennially by the agency, it said the technology to achieve that goal is available. But as Maria van der Hoeven, executive director of the agency, put it, “we’re not using it.’’ Since the agency published its first Energy Technology Perspectives in 2006, the evidence of climate change has only grown stronger, she said, but “if anything, it has fallen further down the political agenda.’’

Coal consumption, for example, is still rising around the world, and that is “the single most problematic trend in the relationship between energy and climate change,” the report said. Building more efficient coal-fired plants operating at higher temperatures could cut emissions by 30 percent per kilowatt-hour. But to reduce global carbon dioxide emissions by 2050, coal use would have to fall by 45 percent from 2009 levels, the report said.

Instead of educating readers about all of this, the Daily Mail’s denier editorial page pronounces:

On the ground that coal contributes to manmade global warming, the administration used regulatory power to marginalize the use of the fuel here, where sulfur dioxide and nitrogen oxide emissions have been regulated for 30 years.

The upshot is that it will be burned in India, which has no such restrictions.

Net result for the globe? Greater emissions from India, and a less competitive industrial environment in the United States.

So much for sensible policy.

But coal companies are adapting to this not-in-America policy.

In 2007, West Virginia exported $910 million worth of coal. In 2008, the state exported coal valued at $2.2 billion.

In the first six months of this year, West Virginia exported $3.83 billion worth of coal.

That coal will make energy less expensive overseas, while the United States pursues more expensive, less reliable ways to produce electricity here.

Isn’t the sensible policy direction more like the one being pushed now by West Virginia Sen. Jay Rockefeller? Sen. Rockefeller has finally recognized that coal’s impacts on the environment and public health need to be addressed. And while he has yet to publicly concede the serious damage being caused by mountaintop removal, Sen. Rockefeller is pushing for a renewed effort to figure out if carbon capture and storage can work.

Some in the environmental community oppose any increase in U.S. coal exports. They’ve begun legal actions and direct action protests out west focused on the issue of coal’s impact on global warming.  But while many questions about CCS remain — and I’m as skeptical as anybody else about it — one of the best reasons to pursue this technology is the likelihood that developing nations like India and China are going to burn coal, and we would probably prefer that they do it without cooking the planet.

The Daily Mail’s friends at the International Energy Agency, for example, have this to say about CCS:

CCS technology is of fundamental importance in the effort to reduce global emissions and avert dangerous effects of climate change. It will need to evolve from a largely untested technology to deployment at scale around the world, possibly at unprecedented speed. Policy for CCS needs to be flexible, yet able to provide investors with enough certainty to make substantial financial commitments. Balancing these competing interests will be a substantial challenge.

And the Union of Concerned Scientists, in a must-read report called Coal Power in a Warming World, tells us this:

As risky as the potential expansion of the U.S. coal industry is, it pales in comparison with expansion in the developing world, especially in China and India.

China is reportedly building the equivalent of two new 500 MW conventional coal plants per week,141 and the country already consumes far more coal than the United States.

Unless developing countries begin aggressive emissions reductions soon, it may become impossible to avoid the worst consequences of global warming regardless of actions taken in developed countries. Our analysis shows that if emissions in the developed world peak in 2010 and are followed by sustained and aggressive reductions of at least 80 percent below 2000 levels by 2050, the developing world’s emissions will need to peak between 2020 and 2025 (followed by significant reductions). Therefore, coal plants without CCS should not be built in any part of the world. CCS technology may be essential to emissions reductions in the developing world, especially if China’s economy continues to grow so quickly that meeting its electricity demand requires building new power plants of all types This potential need for CCS in developing countries is further reason for the United States to accelerate its own demonstration program, and to do so at a large enough scale to explore a range of different technological approaches. Such a program will yield valuable information over the next few years about CCS relative to other options available to both the developed and developing worlds.

And not for nothing, but the Union of Concerned Scientists also says in that same report:

Finally, the United States must put a market price on CO2 emissions by adopting a strong cap-and-trade law designed to ensure the necessary emissions reductions from existing coal plants. Revenues from the auction of pollution allowances can be used to accelerate the transition to cleaner energy technologies and alleviate any financial hardships that may be faced by miners and mining communities as a result.