Analysis: Coal fight looms, Keystone-like, over U.S. Northwest

WASHINGTON (Reuters) - Call it the Keystone of coal: a regulatory and public relations battle between environmentalists and U.S. coal miners akin to the one that has defined the Canada-to-Texas oil pipeline.

Instead of blocking an import, however, this fight is over whether to allow a growing surplus of coal to be exported to Asia, a decision that would throw miners a lifeline by effectively offshoring carbon emissions and potentially give China access to cheaper coal.

Having long ago lost their bid to prevent the extraction of fossil fuels, environmental groups aim to close transport routes that bring those carbon fuels to market, pulling local and state politicians into the fight alongside regulators.

Mining interests won a battle last week when the Army Corps of Engineers called for a quick study of plans to open the first coal port on the west coast at Oregon's Port of Morrow on the Columbia River, a review that will weigh impacts of hauling coal, not burning it.

Coal port skeptics say the ruling is ripe for challenge in the courts and they foresee a drawn-out fight over the review.

"I'm afraid that by choosing to perform a less stringent analysis today, the Corps will ultimately create a longer delay," Oregon Senator Ron Wyden said in a statement. Wyden, who is due to lead the Energy and Natural Resources Committee if Democrats hold the Senate, has said he supports a full review of the project and is reserving judgment until it is completed.

Delay is something miners can ill afford.

Alpha Natural Resources Inc, one of the country's largest coal producers, said last week it is cutting 1,200 jobs, roughly 9 percent of its workforce, as increased use of natural gas for power generation dents demand.

While coal foes in the Pacific Northwest can stymie the projects, the federal government will have the final say.

If President Barack Obama wins a second term, the issue will likely test his determination to curb the use of fossil fuels blamed for climate change, especially since his policies are partly behind miners' yearnings for Asian markets.

Tough new Environmental Protection Agency limits on power plant emissions are often blamed, along with low natural gas prices, for the drop in domestic coal use, but burning the black rock in Asia will have the same impact on the atmosphere.

No matter who wins the election, the intensifying fight ahead over coal ports is raising Keystone-like questions about energy priorities in a time when traditional fuels are still abundant.

COAL ABOUNDS

About 40 percent of the country's coal comes from the Powder River Basin - a high, grassy plain in eastern Wyoming and Montana where the black fuel runs in seams near the surface.

With nearly 9 percent of U.S. coal furnaces set to go dark in the next four years and more utilities moving to natural gas, the 100 billion tons of coal still locked in the region need to reach new markets or face being frozen in the ground.

A Pacific Northwest coal port would aid mining giants such as Arch Coal and Peabody Energy Corp that dominate the basin and are in a worldwide race to meet Asian demand.

The United States holds the world's largest coal reserves, but China, with the world's third-largest share, is tapping more of its own reserves and boosting imports from Australia, Indonesia and even Colombia as its economy continues to grow. India, too, is hungry for coal.

U.S. coal exports have more than doubled in the past two years to reach a record nearly 29 million tons in the first three months of the year. Roughly a quarter of that already heads to Asia, mostly via Gulf Coast ports.

Analysts say Powder River Basin coal must cheaply reach Asia in the coming years to catch the strong demand in China, the world's No. 2 economy, and the rest of the region.

"The United States has no unique advantage in meeting the Asia coal hunger, and that demand will not exist forever," said Ailun Yang, a researcher with the World Resources Institute.

REGULATORY FIGHT

Last week's decision by the Army Corps was an important victory for miners since the big impacts of coal use will not be studied.

The Army Corps, which received more than 30,000 comment letters about the Port of Morrow plans, said on its website that it generally conducts narrow reviews, "in this case, the construction of the dock facility."

But the narrow study envisioned by the Army Corps could yet morph into a sweeping review if officials have a change of heart in light of a huge public outcry or if the courts step in.

Feeding Chinese furnaces with U.S. coal could add hundreds of millions of tons of carbon dioxide to the atmosphere, a cause of climate change that Obama has pledged to fight and one that anti-coal activists want considered by the Army Corps.

"They have to consider not just moving the coal but burning it," said Nathaniel Shoaff, an attorney with the Sierra Club, which wants officials to consider climate-change concerns before writing rules on shipping or issuing permits to mine federal land.

Those who oppose coal want the Army Corps to halt the handful of coal port plans until it studies the impact on the climate, a process that could take years.

LEGAL ISSUES

In a courtroom the fight could center on a reading of the National Environmental Policy Act from 1970, which requires federal agencies to study "all major federal actions that significantly affect the quality of the human environment."

Courts now expect climate-change consequences to be weighed under NEPA, so the question is how much Obama or his successor wants to consider the external costs associated with developing and burning coal, says Mark Squillace, who leads the natural resources law center at the University of Colorado.

"There is no doubt that officials have the authority, and I would say obligation, but it's not clear what will be the policy," he said.

Arch Coal and Peabody declined to comment about the coal port project.

If the Port of Morrow project is thwarted, miners may have luck at one of the handful of other projects on the table.

In the state of Washington, just north of Oregon, the governor has been more receptive to the idea of allowing coal shipments from the Longview docks.

Supporters of the coal port plans say they are prepared for a war of attrition against those who would stand in the way of energy companies' finding markets for U.S. energy abundance.

"Before the Civil War, (battlegrounds) like Antietam and Gettysburg were mostly unheard of," said Bill Kovacs, a senior energy advisor with the U.S. Chamber of Commerce, which is lending help to the mining sector.

"Now the fight for a sensible energy policy is being fought on the same scale in places like the Port of Morrow and Longview."

(Editing by Jonathan Leff and Prudence Crowther)

Source: http://news.yahoo.com/analysis-coal-fight-looms-keystone-over-us-northwest-141300393--finance.html

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