Report on coal and coal export
These are notes from a conference about coal that were emailed to me. Really great information
“Our ticking time bomb is the exports.” We could shut down every coal plant in the US and they can just send it overseas and still make a profit.
Notes from a workshop on coal prices. Pardon the shotgun nature of this—I want to get this information to mountain justice quickly. This is off the cuff I am horrified by much of what I just learned.
As I type write now I am in a break during about 16 hours in a 2 day session on financial issues and the future of coal.
Much of the emphasis is on people who are fighting coal fire power plant—but the experts they brought in are economic and financial experts from Moody’s, Fitch Ratings, Bloomberg energy finance, etc.
First observation. There is a tension in the tactical objectives of the folks fighting coal fired power plants v. those of us in the strip mine community. Folks fighting the plants like high coal prices—it undermines the construction of new coal fired power plants.
Those of us fighting the strip mining like low coal prices—it drives low level strip mine companies out of business—it slows stripping.
First takeaway on this—coal prices are going up. I am convinced. The potential is for them to go WAY up. After a zillion charts and numbers ground up and explained to me I walked away convinced. Those of us who fight strip mining better dig in. It’s coming.
Second takeaway—exports are the coal industries safety valve. No matter what happens here they can sell to Asia (NOT just China ALL of Asia) and even after transport cost can make at least $4 more a ton than selling in America. Coal producers know this—one company for every 42 tons they sell—2 tons are sold overseas—but overseas sales account for 12% of their revenue.
Third takeaway—we must fight exports. Exports are the ticking timebomb in our fight against strip mining which can completely unravel all the work being done to fight American coal fired power plants—and our work in the strip mine community.
4th takeaway—“Peabody and Arch are no longer American corporations—they are international corporations.” Eventually we are going to see international coal markets where Coal from Jakarta is bid for against coal from Appalachia. It’s already happening—but its going to accelerate.
They are going to ship our mountains overseas.
5th takeaway—the last speaker outlined the BLM leases of west coast mining lands. They in effect provided a 28.9 billion subsidy to coal producers and utilities by artificially keeping coal prices low. Over 9 billion tons of coal were mined. 12 billion more tons are slated to be mined between 2011 and 2035.
BLM is a complete coal whore—worse than OSM. This issue is dead now for me—I did not understand how bad BLM was. OSM is just an agency which fakes regulating coal mines. BLM regulates government land, the government owns the coal they are allowing to be mined. No oversight, no reviews for decades, they fight FOIA’s and refuse to allow folks to look at how they price the coal, nada.
6th the powder river coal reserves are vastly overestimated. The largest coal mine the country there is about to be shut down. The coal there is like a bowl—the deeper you get into the bowl the more overburden there is = higher cost. They are going into the bowl on almost all those site.
7th takeaway. The coal industry is in excellent health. The largest coal strippers have excellent debt to cash ratio’s, great bond ratings. They planned for this ebb in coal prices. To look at the health of a company look at the CFO/DEBT ratio. Peabodies is 43.5%. Alpha Natural Resources is 24.7%. Arch Coal is 19.8%. CONSOL energy is 44.1%. ANYTHING above 20% means you are considered stable and a sound investment. Across the board from Miners to transportation to independent power producers to affliated generating companies to regulated electric companies—they are all rated stable and have high debt to revenue ratios = they are healthy and in good shape. The coal industry is nowhere near collapse—they are doing great. Their balance sheets look great, and a strong record of returning cash to share holders.
8th—the coal companies are anticipating coal fired plants being shut—they believe the remaining plants will burn more, better and in the end make up for lost plants. They have planned on a full cap and trade system to be placed on them—and they do not believe it will effect them—any impact can be alleviated by shipping overseas.
9th—historically I believed that the price of oil impacted the price of coal. This might have been correct—but its natural gas which has lowered coal prices this round. Natural gas is THE major force behind low coal prices—that and the BLM selling coal at below market value.
10th—Appalachian coal prices are linked to European coal prices—and the Europeans will buy our coal—its not just Asia.
“…concern about new environmental regulations and an abundance of inexpensive shale gas harming coal’s future growth are unfounded. ‘In reality, coal is very much a global commodity. Substantial investments are being made in port infrastructure to export U.S. Coal.'” industry analysis.
“DYNAMICS AND IMPLICATIONS
Long term: The greater the integration with global markets (and more intensified mining), the less responsive coal prices are to domestic utility needs (CAPP coal as an example). Coal remains competitive if general price of electricity rises—no subsides for alternatives and more regulation of natural gas.
Long term: The greater the integration with global markets, greater likelihood for technological clean coal breakthrough.” Coal industry analysis.
So here are my takeaways. Our ticking time bomb is the exports—they are building the infrastructure at the ports as I type.
a. Mountain Justice is MORE relevant and important NOW than when we started. The non profit staff model is not going to successfully address this. Much of the motivation and moves (and the hundred plus people I see in the room I am in right now) came from Mountain Justice when we helped blow the lid off the isolation and helped make the MTR (and mountain middle and bottom removal) a national issue.
One function of MJS which is VERY important is our camps = raw numbers. Cranking out a few hundred new people a year with training and awareness is cummulative and in this long term battle lifeblood. This needs to continue and even be ramped up.
b. Tree sits need to happen in more than WVA. They charge the movement and motivate. We need more trainers. We need a trainers camp to train people to train—not just an open general MJS camp—but a closed week long camp which is just to make trainers throughout Appalachia.
I am leaving this training filled with funders, lawyers, huge non profits, experts from Moody’s investors service, experts from FitchRatings, experts on coal and coal prices with one huge takeaway.
Mountain Justice—this model to intake and train new people and to work outside the bounds of the industrial non profit complex is MORE important in the fight than I had thought.
Its just started. The fight has just begun. The economic forces at work are going to drive coal prices so damn high they are going to try to strip mine Lexington and graveyards its going to be so profitable.
All respect—I am typing this information fresh—along my my speculations—right now while they are fresh. I am in two days of education here in New York in my suit and tie, and its cause almost a spiritual crises in me reading all these charts, listening to these speakers (many cold blooded investment people who are not interested in big non profit ra ra about how wonderful we are doing).
It leaves me realizing that we are not at the end of this fight—but at its start. It also redoubles a realization that Mountain Justice—its model, appears to be one of the best tools we have. We cannot turn this tide—win this fight, with paid staff. Its MUST be normal folks—we must have more firepower than paid staff can offer.
For the mountains, always until I die all the way end to the grave in this fight—then bury my body in a graveyard on a mountain if it helps in this epic struggle.
- Chris Irwin