Big Coal delivered export blow in Pacific Northwest

The Pacific Northwest has for years been a hot spot in the battle between the coal industry and environmentalists. While the fossil fuel sector has pinned hopes on the region as an export hub for coal it is finding increasingly difficult to burn at home, green activists have fiercely fought that idea at every step.

Last week that struggle took what could be a significant turn when the state of Oregon denied a crucial permit for a proposed export terminal that activists and some politicians say would wreak environmental havoc on the western part of the state.

While the permit denial for the relatively small Morrow Pacific coal terminal is by no means the end of the fight in the region, it may be a sign of things to come for the coal industry.

As proposed environmental regulations for coal-fired power plants cause the coal industry to rethink its strategy in the U.S., companies have increasingly seen exports to burgeoning economies like South Korea, China and India as the answer to declining profits. The most logical and profitable route for those exports is through terminals in California, Oregon, Washington and British Columbia. But a steady stream of activism and an unfavorable local political climate has often delayed the building of export terminals.

Environmentalists say the terminals would not only encourage CO2-emitting coal to be burned elsewhere but would pollute local waterways and increase rail and truck traffic in once restful regions. Now green activists may have the first sign that politicians in the Pacific Northwest agree.

“It’s a big push, and we’re all superthankful and hopeful, because we felt that all these tiny towns and bigger towns were powerless,” said Arlene Burns, president of the Mosier City Council. Mosier rests 90 miles downstream from where the proposed Morrow Pacific facility would be built on the Columbia River. “The fight’s not by any means over, but we’ve shown we can stand up together.”

In its rejection of a key permit needed by Australian coal giant Ambre Energy to build the terminal, Oregon’s Department of State Lands (DSL) said last week that the project “would unreasonably interfere with the paramount policy of this state to preserve the use of its waters for navigation, fishing and public recreation.”

Ambre has 21 days to appeal the ruling, an action spokeswoman Liz Fuller said the company is considering. She called the decision politically motivated, saying the DSL caved in to environmentalists while ignoring those who supported the project.

“There’s been a lot of support of the project, but that doesn’t tend to be as loud as opposition,” she said.

The prospects for increased coal exports from the region have decreased in recent years. In 2012 there were at least six proposed projects in the works. That number now stands at three — two if the Morrow project is nixed.

Those two projects are much larger than Morrow, which would export about 8.8 million tons of coal annually. The Gateway Pacific project in Washington would export about 53 million tons a year, and the Millennium Bulk project, also in Washington, would export about 49 million tons annually. The fact that the smallest of the three was denied a permit has given environmentalists hope that the larger projects will face similar opposition.

“It’s not a done deal, but it certainly poses some serious questions for those other, much larger facilities,” said Clark Williams-Derry, director of research at the Sightline Institute, an environmental think tank.

The coal industry has been struggling not only with environmental activism but also with declining reserves in the Appalachian region, fierce competition from abroad and a surging natural gas industry in the U.S. Compounding those struggles is President Barack Obama and the Environmental Protection Agency, which issued draft regulations on carbon emissions this year that could drastically cut the viability of coal power plants in the U.S.

Because of those factors, it seemed one of the coal industry’s best options was to focus on mining from the Powder River Basin in Montana and shipping that via rail to the West Coast, where it could be exported to growing economic powerhouses in dire need of energy.

There are several other export terminals planned for California and Vancouver.

“This essentially just shifts the market,” said Williams-Derry. “The economics of it are broader than any one region.”

But even if those terminals are built, the U.S. coal industry might face an even more daunting challenge: declining demand elsewhere. In China and South Korea, two of the biggest markets for U.S. coal, the governments have been slowly shifting from their reliance on coal, as smog-covered cities make coal use less politically viable.

“There’s declining demand in China and strong activism here,” said Cesia Kearns, a campaigner with the Sierra Club in Oregon. “So it’s clear that exports are a rapidly closing window.”