By John Stark
A coal terminal in Seward, Alaska is laying off some workers because managers say there has been a drop in demand for its coal in Asia and elsewhere.
In this report from the Seward Phoenix, Usibelli Coal Mine vice president Robert Brown says he expects the slowdown to be temporary. Usibelli oversees the coal terminal operation, according to the report.
But did you see yesterday’s companion piece from this same newspaper? “Drill Ship Joins others in Seward’s part”? According to the article, this bit of Seward, Alaska “prosperity” is brought to you by Shell Oil, which after its first season of exploratory drilling in the Arctic, has signed a local ILWU contract. This “offsets” the loss in coal shipping.
I have heard some people here speculate that it is not really coal that BNSF will be hauling but oil or fracked gas. Does anyone know more about this?
BP is taking tentative steps toward building a rail loop to haul in trainloads of Bakken Crude–for refining onsite, not for export, as far as we know.
The coal companies and terminal operators, of course, claim that Asia’s declining demand for imported coal is temporary. But the history of extreme swings in coal exports and the current economic pain being felt around the world by economies that have staked their future on being commodity providers for China creates a very bright warning sign for places like Whatcom County that are deciding whether to make this bet. Coal ports and mines in Australia, Indonesia and elsewhere are laying off workers. And both Portland and LA lost big on coal export gambles in recent decades. Doesn’t seem like a good bet here.
This week, Value Line rates coal 97th out of 98 industries and railroads 51st for timeliness. One and two are retail building supply and homebuilding.
This is very interesting. I am definitely going to have to pass it along!
Note to self: remember to submit a comment saying that before the terminal were constructed, if it were, SSA (NOT PIT) should be required to put up a bond sufficient to clean up the site when they abandon it when the coal bubble inevitably bursts, or SSA has dissolved PIT in bankruptcy to avoid a judgment. And SSA should agree to assume all liabilities of PIT. We know what these companies do with their subsidiaries. Coal miners are currently fighting desperately to save their health benefits plans and pensions after Peabody Coal transferred them to a subsidiary euphemistically named Patriot Coal, along with some marginal mines, and then filed for bankruptcy. http://www.facebook.com/home.php#!/FairnessAtPatriot?fref=ts. Ironically, the same week the miners filed to change venue from New York to some state with mining operations, some other subsidiary of Peabody was writing to Jack Louws telling him how proud they are to be contributing to job creation here. That’s who we’re dealing with.
If the coal bubble last 5 years after the projected coal port were put in operation (not likely) the terminal would have paid for itself. SSA>PIT>GPT or whoever owns that then would then be able to use the pier to import or export some other product at a much lower cost. Maybe they would chase bubble after bubble after bubble.
We are living in unusual times. Is everyone in a rush to sell everything we own before the order to abandon ship is sounded – The 1% will board the first planes to leave. We may be back for the rest.
I don’t KNOW anything, but I can tell you some things that I was told a year ago that would fit into that scenario.
First – I was told that the Chinese trade representative told the participants at the “grain growers’ conference” that SSA put together at the Silver Reef, that the Chinese market for PRB coal was extremely time limited, three to three and a half years at the outside and was also dependent on a weak US dollar.
The person who told me this said that he sat next to John Stark at the meeting, so John can verify everything that I said.
My source also said that “we” need the coal to get the port through, but that the hope is for other cargos to present themselves.
No one in their right mind would build a cargo terminal for a product that trades at $10.35/ton. That’s about one tenth of what real coal sells for. Most coal terminals are built to ship bituminous coal and the sub-bituminous coal is just an extra.
On the hand, the PRB coal could be the secondary product at Cherry Point as well. Shipping oil and coal from the same terminal is much more likely than shipping grain and coal.
I forgot to mention that the Chinese trade rep said that SSA should NOT depend on the Chinese market for the PRB coal to build this terminal.
I have been asking ever since, “So, why are we building it?”
Terry, a bond is a very good idea. I have been thinking about that too, ever since you informed us about the new company that SSA set up to build the terminal, but is that a subject for scoping?
One more question? What kind of coal is shipped from Seward and is that all they ship?
JG, I believe requesting the bond — and that SSA guarantee all of PIT’s liabilities from union contracts to coal fires, etc. — is an appropriate mitigation to request. The subject of comments is described on the co-lead’s website at http://www.eisgatewaypacificwa.gov/sites/default/files/content/files/GPT_CommGuide_110712.pdf#overlay-context=resources/project-library, but I find it easier to think in terms SEPA’s definition of scoping: limiting the scope of the EIS to only significant adverse impacts, and alternatives including mitigations. The alternatives the EIS must include are the proposal with or without mitigations, reasonable alternatives, and no action.
I’ve sent an e-mail to an activist in Alaska asking about the Seward terminal.
Oil and combustible coal. Boy, if the thought of that doesn’t age Elfo by about 10 years….
JG, Here’s the response from Alaska;
“It was designed and built for coal but during the first years long closure they did export some gravel through the facility. Higher demand and higher volume of coal going through supplanted any hope of developing a stable gravel export market. Gravel is a huge problem here as we have to keep dredging and removing the huge volume that comes down in floods, but luckily our gravel is high quality and with things developing as they are there should be a greater demand in the future. Usibelli Mine coal is low-grade sub-bituminous. Its only redeeming factor is that it is remarkably low in sulfur. Strangely we smell sulfur downwind of the coal facility even when dust isn’t visible. The state is developing a new coal port closer to the mine so ours is going to get phased out at some point unless demand does increase and bring on more exports enabling two coal export operations to survive.”
Thanks Terry. I wonder how the state of Alaska justifies the construction of another coal terminal for sub-bituminous coal when the coal is trading at $10.35/ton. It would never pay for itself. That isn’t even the low point for the sub-bituminous coal, either. It’s been lower.
Someone posted about the possibility that BP could be planning to ship Canadian tar sands oil out of the dock at Cherry Point and that got me to thinking. There is a pipeline from Canada to Cherry Point and shipping the Canadian crude to Cherry Point was proposed before.
http://seattletimes.com/news/local/exxon/series/06_pipeline.html
It makes sense because it would eliminate the need for the Canadians to build a new oil port on their west coast, or perhaps just add to it.
Anyway, it is an interesting possibility.
That’s it, that is how they are going to subsidize the cost of the shipping sub-bituminous coal from Whatcom County. They will also ship Canadian oil. I’ve been puzzling over the fact that sub-bituminous coal is worth less than the cost of the shipping and wondering how in the world they plan to pay for the terminal with sub-bituminous coal. They aren’t, plain and simple. The profit will be on shipping the oil, not the coal.
Good lord, if you are right….
Goldman Sachs also owns part of Kinder Morgan:(Kinder Morgan owns the pipeline that I was talking about)
Private-equity owned Kinder Morgan is slated to kick off life (again) as a public company. And a collection of investment funds, including Goldman Sachs and the Carlyle Group, are raking in about $13.5 billion from the deal.
In case you are unfamiliar with the Carlyle Group, they are another crony partner of the Obama administration which has been doing Obama’s bidding in regard to energy and RRs in return for special exemptions from EPA regulations. Both the CA and the NY public pension funds are heavily invested in the Carlyle Group.
So, will Whatcom County also lose out on any tax revenue from shipping the oil?
A little more information on the Carlyle Group, at the behest of the Obama administration, the Carlyel Group invested $800 million in the Genesse-Wyoming RR, a coal carrying RR which lost a lot of money due to the decrease in coal use in Mass. The interesting part is that the Genessee Wyoming RR also owns the track rights in Oregon where they want to build the coal terminals.
Anyone who thinks that, in the long term, Chinese demand for clean coal is going to diminish is dreaming. That demand will be moderated, of course, by economic conditions in China.
David, did SSA not invite you to the “Grain Growers” conference? I guess not, or you would know that the Chinese trade representative told the group that they should build this terminal, counting on the Chinese market for sub-bituminous coal, that the Chinese market was extremely time-limited and dependent on a weak US dollar.
Ask anyone who attended.
David, Why did you resign from the County Planning Commission? I missed that.