Northwest coal ports face major obstacles

Environmental worries, politics complicate plans

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WASHINGTON -- Growing environmental objections to exporting coal from Washington state and Oregon have begun to endanger the coal industry's hope to restore its flagging fortunes by shipping much more of the embattled fossil fuel to China and India.

Port officials last week dropped plans for a terminal in Coos Bay, Ore., just days after the governors of Oregon and Washington urged the White House to scrutinize the global impact of greenhouse gas emissions in Asia before approving exports from Northwest ports.

The Coos Bay cancellation follows last year's abandonment of a proposed coal storage and export facility in Grays Harbor. And the Sierra Club announced plans week to sue over alleged water contamination from trains spilling coal dust and fragments. That could further complicate matters for advocates of shipping coal by rail to U.S. Northwest ports for export to the Far East.

The challenges mean the four remaining proposed Northwest coal terminals could face delays or denial of permit applications, according to Kevin Book, an analyst at Washington, D.C.-based ClearView Energy Partners. That would deal a serious blow to efforts by the coal industry to take advantage of the growing Asian market for the fuel and potentially leave U.S. coal resources stranded, Book said.

"Oregon and Washington aren't the only doors to fast-growing Asian demand, but they are the best doors, especially for lower-rank

Western coals," Book said in a Tuesday research note.

The surviving four proposals call for coal exports from the Gateway terminal near Bellingham; the Millennium Bulk Terminals of Longview; the Morrow Pacific Project at Port of Morrow, Ore.; and the Port Westward Project at Port of St. Helens, Ore.

The coal industry's goal is to ship Powder River basin coal from Montana and Wyoming by train to the Washington and Oregon ports to ship overseas.

That's where the markets are. Environmental rules and America's glut of cheap, cleaner-burning natural gas are pushing out coal use in the United States, according to the International Energy Agency, which expects coal demand to grow in every region of the world except for America.

China's use examined

The global growth in coal use is projected to be driven by increasing demand in India and particularly China, a nation that accounted for a whopping 87 percent of the 374 million-ton increase in worldwide coal burning in 2011, according to U.S. energy data.

China now is burning almost as much coal as the rest of the world combined, according to the data compiled by the U.S. Energy Information Administration.

The coal export proposals have proven particularly controversial in Bellingham, where opponents cite concerns about the increase in coal train traffic through the region and the resulting impacts on air, water and quality of life. The governors of Washington and Oregon waded in with a letter to Nancy Sutley, chairwoman of the White House's Council on Environmental Quality.

"Coal is the major source of global greenhouse gas emissions, and its share is increasing rapidly. Increasing levels of greenhouse gases and other pollutants resulting from the burning of coal … are imposing direct costs on people, businesses and communities in the U.S. and around the world," wrote Washington Gov. Jay Inslee and Oregon Gov. John Kitzhaber.

The governors wrote that expanded coal leasing from federal lands and export of that coal are likely to result in long-term investments in coal generation in Asia. The consequences of that are "air quality and climate impacts in the United States that dwarf those of almost any other action the federal government could take in the foreseeable future," they wrote.

The governors, both Democrats, urged the White House to scrutinize the greenhouse gas and other air quality impacts before authorizing the exports.

That has the coal industry concerned. Lauri Hennessey, spokeswoman for the Alliance for Northwest Jobs and Exports, which promotes the coal export projects, said factoring in what happens when the coal is burned overseas would set a huge new precedent.

"We don't do that now for airplane parts; we don't do that now for anything out here. We don't look at where those products are going to end up and how they are going to be used when we do an environmental review," Hennessey said in an interview Wednesday.

She said the environmental reviews for the projects are already rigorous. It's not clear whether the White House will agree to the governors' request.

"Is it going to happen? I don't know; I don't know. But we think it's a bad idea," Hennessey said.

'Further complicate'

Hennessey is optimistic that the coal export terminals will be approved. She said cancellation of the Coos Bay project last week just shows it was more of a speculative proposal and should be judged differently from the four remaining ones, which are further along in the process.

The coal and railroad industries are dismissive of the Sierra Club's announcement that it plans a lawsuit aimed at the export terminals.

The environmental group intends to sue over spillage from trains already bringing coal through Washington state to export terminals in British Columbia. The BNSF Railway said it is a nuisance lawsuit that is more political grandstanding than anything else.

But ClearView Energy Partners analyst Book said the lawsuit could "further complicate the environmental review process" for the Northwest coal terminals and the increased train traffic they would bring.

There are also doubts about the economics. James Stevenson, a coal analyst with the economic forecaster IHS Global Insight, said in a recent interview that China has closer sources of coal and won't need shipments from four Northwest terminals. "I think one or two export terminals get built," he said.