Big Coal’s last stand

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from Fortune Magazine,

By most measures this is a bleak period for the coal industry. U.S. coal consumption fell in 2012 to its lowest level in a quarter-century. Shares in coal-mining companies have gotten hammered as Wall Street looks to more-sustainable forms of energy. Competition from abundant natural gas has eroded coal’s primary edge, its low cost, and new EPA rules on emissions from power plants threaten to bring to a close the century-and-a-half era of coal.

But anyone who thinks that the so-called war on coal is over and that the environmentalists and the federal regulators won should visit NARM, one of the dozen open-pit mines that pock the landscape of the basin. If the coal industry is expiring, it’s putting on a hell of a death scene here in eastern Wyoming.

Hunger for the world’s dirtiest fuel is growing, especially in the developing countries of Asia — particularly India and China, where coal consumption shows little sign of slowing, at least not yet. As gas prices have recovered, coal’s market share of U.S. electricity production has actually risen again, reaching 44% in January, about its historical level.

“New coal-fueled power plants and steel mills are rising along the coasts of India and China, where the populations are growing fastest, and those plants will take seaborne coal,” says Greg Boyce, Peabody’s chairman and CEO.

Peabody needs new Asian markets, and to supply Asian markets, Peabody needs new export terminals on the West Coast. That has led to a very public struggle.

A vocal and diverse coalition comprising Native American tribes, ranchers, environmentalists, and local officials has come together to block the construction of new export terminals on the West Coast. Three of the six proposed ports have already been shot down, and a series of contentious public hearings around the region in recent months has provided a highly visible stage for environmentalists and local officials to argue passionately against the economics and the ethics of shipping America’s coal to be burned in Asia. The U.S. has the largest coal reserves in the world, and the Powder River Basin has the largest reserves in the U.S. The question of whether we should ship that coal to developing countries to fuel their growing economies — and carbon emissions — is burning not only in Wyoming but in the cities of the coast and the halls of Congress.

“This is a line in the sand we cannot cross,” says Nilles. Do we really want to become the No. 1 carbon merchant in the world?”

… as the evidence for destructive climate change became incontrovertible, a subtle but powerful change in public opinion took hold: Coal, like tobacco before it, went from being an accepted and ubiquitous part of modern life to something to be avoided, even shunned. Led by the Sierra Club, environmentalists, emboldened by Barack Obama’s pledges to construct a new energy policy based on sustainable resources, began a well-financed public campaign against the demon rock.

But there’s no question that the developing world needs low-cost power. And the shale gas boom, the rapid fall of solar-power prices, and the long-delayed “nuclear renaissance” notwithstanding, coal remains the lowest-cost source of power in most regions, certainly in the booming economies of East and South Asia.

“The question is not whether Asia will import more coal,” says Boyce. “It will. The question is whether the jobs and economic benefits will accrue to the United States or to other countries.”

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