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October 23, 2012

The Surging Coal Export Industry

Posted in: Uncategorized

Matt Stoller has an interesting set of charts showing the recent run up in investment in resource extraction, particularly from the oil and gas industry. Matt explains this mostly through the run-up of shale oil and natural gas extraction, which have both advanced significantly in the US. Renewables are increasing as well, but from an incredibly low base.

But he does not identify another area of the resource extraction economy that is actually sailing along: coal. We constantly hear Mitt Romney talk about the “war on coal,” and to the extent that exists, it’s being waged by chap natural gas which crowds out the profitability of coal extraction. However, this doesn’t mean that coal employment has decreased in the United States: in fact, West Virginia coal jobs have increased under Obama, as has coal employment nationwide.

How can this be true? How has coal employment risen despite far lower demand for its services domestically, higher price competition, and even restrictions from the EPA? The answer is that coal exports have surged. The Energy Information Administration reports that coal exports are forecast to reach highs not seen since 1981. You can account for this with two factors: increased global demand, and the ability to use coal abroad, particularly in emerging markets, in ways that we don’t in the US. With the global slowdown, demand has weakened for coal exports somewhat, but not to the extent that 2012 will not break the 1981 record.

Exports in August, the latest data available, reflect some of the weakening global demand for coal, falling 2 million tons from the record June levels. While declines in export levels inject some uncertainty, exports remain elevated with lower August exports still 13% above August 2011 levels. As a result, 2012 is still expected to surpass the 1981 record.

This increase in exports marks a significant reversal from the general downward trajectory of U.S. coal exports beginning in the early 1990s, which bottomed out in 2002 just under 40 million tons, the lowest level since 1961. Coal exports in 2011 rose 171% from 2002, with only a brief interruption by the global recession. Export growth accelerated after the recession, with consecutive post-2009 growth of more than 20 million tons per year, a level of growth not seen since the 1979-to-1981 export boom. Current data for 2012 (through August) show coal exports are growing even faster, and should more than double 2009 export levels, buoyed by growth in U.S. steam coal.

Over 1/4 of the exports go to four countries in Asia: Japan, China, South Korea and India. As demand for power in these countries emerges, they look to dirty coal as a cheap way to satisfy demand. And in this sense, the United States has become more of a petro-state than most of us realize. We’re a major exporter of our natural resources, even the ones we use less and less at home.

A ton of coal burned in China is as dirty (if not dirtier, given the lack of scrubbers and environmental safety equipment) as a ton of coal burned in Minnesota. And most of this stuff comes from federal lands, which means the taxpayer is selling off public assets for very cheap to coal companies making a fortune overseas. As Stephen Lacey explains:

So you get the situation we’re facing today: Americans are paying for large companies to dig up coal at bargain prices, sell it to other countries at market prices, and subsidize their global warming pollution.

In 2008, Joe Biden used to make the case for clean coal by saying that they still burn the stuff in China and India, so we’d better figure out how they can burn it cleanly and safely, and then sell them the technology. Instead we’re selling them the coal itself. Clean coal was always a chimera, but the fact that we’re selling the raw materials for other countries to burn negates this assumed urgency over stopping the release of global warming pollution.

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