Oil Check Washington

Announcement from China just dealt the biggest blow yet to Northwest coal exporters

It was just a few years ago that people “in the know” talked about China’s energy needs like they were a bottomless pit. "The middle kingdom's (China) appetite for imported coal seems insatiable," wrote researchers Richard K. Morse and Gang He in a 2010 working paper. A National Geographic story on the proposed Cherry Point coal export terminal referenced “energy-hungry China” as the motivator. In a 2011 CNBC interview, Greg Boyce, CEO of coal giant Peabody Energy confidently boasted that “We’re talking about a super-cycle for coal in the globe today, and we think that’s going to be for two, three, four decades.”

While China seemed like it couldn’t get coal fast enough, here in the US consumption was in rapid decline, currently down over 20% since its 2007 peak. Cheap natural gas and new pollution regulations had left companies like Peabody Energy and Arch Coal scrambling to find new buyers for the mountains of coal they were sitting on. With a skyrocketing economy and an energy system largely based around coal, China seemed like a shinning beacon of salvation for American coal exporters.

Today, China's energy story is drastically different. Pollution across the country of 1.2 billion is well documented. Living in Beijing when its continuously blanketed in an eerie fog of pollution or trying to grow food in a country-side covered in industrial waste have sparked some of the largest protests in modern Chinese history. The ruling party sees the writing on the wall and has responded by putting massive investments into clean energy, implementing protections for its domestic energy industry and even signed a climate agreement with the US at the end of last year.

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China’s need for foreign coal has since begun to drop, sending Pacific coal prices into “free-fall”. Then, late last week, Chinese Premier Li Keqiang, made an announcement that sent a massive blow to would be coal exporters. China is setting a goal to reduce energy intensity by 3.1% or roughly equivalent to 176 million tons of coal a year. "Environmental pollution is a blight on people's quality of life and trouble that weighs on their hearts," said Li. "We must fight it with all our might."

The Northwest has been locked in an enormous battle over coal exports for several years. There have been 6 proposed coal export projects, in Oregon and Washington, all sighting Asia, and specifically China as the coal's final destination. Today just 2 remain. Between the Gateway Pacific Terminal in Bellingham WA (48 million) and Millennium Bulk Terminal in Longview WA (44 million) they could ship 92 million tons of coal if fully built out. These projects will undoubtedly be fought over for some time. But the Premier’s announcement to vigorously reduce coal use by well above the terminals full capacity, may just have slammed the door on sending coal across the Pacific.

Far from a beacon lighting the way, early projections for China’s coal needs now look more like a siren song; giving false hope to an industry frantically searching for a way to survive.

Nick Abraham - editor and lead contributor of Oil Check Northwest

[email protected]

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