The War on Coal has so many subtle fronts and off-the-radar developments I almost feel like I could write one of these every other day.
So let’s start where we always do: the price. Thermal Coal is currently trading at $59.53 per short ton, down from its $139/short ton peak in 2008. This a slight uptick recently which can be ascribed mainly to transport issues where rail congestion is causing utilities to run down their on-hand supply and scramble in the spot market to get quick shipments from nearby while their contracted supply shipments struggle to make their way to the sites.
And remember, LOW PRICES are good. We’ve had comments in previous diaries about people wanting to see price spikes or something that will make coal expensive relative to other fuels. No. We want LOW prices; bottoming-out, cratering, floor-dropout prices. We are trying to eradicate this market. You don’t destroy a market by limiting supply or spiking demand (which is what a price increase would signify). You do it by over-supply and withering demand. I have linked many stories about coal mines being idled and new BLM Coal Leases failing to generate a single bid for mining. All of that would be reversed if suddenly there was profit to be made in the Dirty Black Rock Industry.
If the price were to go up it would resurrect the incentive to mine more coal and get it to market. Right now the biggest reason why major producers, miners, utilities, investors and haulers are walking away from coal is not some newfound climatological awareness and a sense of stewardship for our planet. No; it’s the simple one-line profit-based business assessment of “It Just Ain’t Worth It”.
Let’s keep it that way. Jump the fold for the new stuff.
Where to begin? For background, we’re seeing more consistently gloomy coal-black forecasts for the coal industry as a whole. OilPrice.com had a cheerful analysis of Outlook for Coal Darkens. Here is a piece from Montana Public Radio about how the US retreat from coal is actually a sound business decision.
it is not surprising that electric utilities are retiring existing coal-fired plants and investors are not interested in building new ones. But this is not because electric utilities are being imprudent or because Wall Street investors have become rabid environmentalists, quite the contrary. In a clear-headed and hard-nosed way these business people have evaluated the costs and risks associated with burning coal and made a rational business decision.Following up on that “rational business decision”, Cargill decided to close its coal trading desks and withdraw from the market entirely. That article also mentions that Bank of America and Deutche Bank AG have also shut down coal trading units.
We all heard about Obama’s commitment to stop US financing of any coal project in the world, quickly followed by the World Bank, the Ex-Im Bank and the UK. We can also add Scandinavia based on this joint statement from Denmark, Finland, Norway, Sweden and Iceland saying they will join the US to stop coal funding. And now The Netherlands has joined this coalition to starve coal development. And to add to this the European Bank for Reconstruction and Development announced they too will stop coal funding and shift investment to renewable energy.
So what’s this mean for coal mining companies? Nothing good. Nothing at all.
UK Coal is closing its last 2 deep-pit coal mines because It Just Aint Worth It.
Mr Fallon said directors of UK Coal had approached the Government at the end of January to report that a falling coal price, exchange rates and other factors meant that "the viability of the business was potentially in doubt".Asia Resource Minerals, a major producer in SE Asia is closing its largest mine because It Just Aint Worth It.
[ARMS], Indonesia’s fifth-biggest exporter of the power-station fuel, is considering closing its largest pit where almost half its production last year was sourced. The world’s biggest exporters, Glencore Xstrata Plc, Rio Tinto Group and BHP Billiton Ltd., have either halted coal operations or shelved expansion plans amid the price decline.Mongolian Mining Corp, the largest exporter in that country, is seeking debt extensions.
Mongolian Mining Corp. (975) is looking to extend the maturity of a note due today as expanding supplies of coking coal push prices to record lows.Glencore Xstrada Plc, the world’s fourth largest mining company, idleed one of its major mines because It Just Ain't Worth It.
“It’s still not finalized but definitely we will not be paying on the current maturity date,” Chief Executive Battsengel Gotov said, speaking on March 28 about a promissory note issued to QGX Holdings Ltd. in November 2012. “They understand our position and we’re telling them that ‘OK, one day we’ll pay but maybe not today.’”
Operations at the underground mine, which began output in 2007 and employs 130 people, are “no longer viable,” the Baar, Switzerland-based company said today in an e-mailed statement. Ravensworth produced 2.1 million metric tons of saleable semi- soft coking coal last year, equivalent to about 1 percent of total metallurgical coal shipments last year from Australia, the world’s biggest exporter.Here in the US, the James River Coal Co. filed for Chapter 11 just this week.
And we are about to see the one of the largest Chapter 11 filings in US history when Energy Future Holdings (Formally TXU Corp) file in the coming weeks.
Many coal-fired power plants have struggled in recent years as the economics of electricity generation changed. New drilling technology set off a domestic energy boom, reducing natural gas prices and eroding coal’s cost advantage. Falling gas prices have in turn depressed prices for wholesale power, forcing generators like Edison Mission Energy of Santa Ana, Calif., to file for bankruptcy.Oh, and China announced that it is closing 1,725 mines by the end of 2014. This is part of their published goal of getting coal down to 65% of its energy generation by December. …but we’ll talk about China later. (like we always
The company’s anticipated collapse is a rare black eye for private equity firm KKR & Co., which led the $45-billion buyout in 2007 along with Goldman Sachs Group Inc.’s private equity arm and TPG Capital Management. The firm’s investment in EFH is likely to be wiped out.
Interesting ripple-effect came out of Volvo starting making a public statements about its needs/plans to aggressively expand out of the mining sector as a way to keep its huge truck business viable.
Oh, and Black Hills Corp shut down the Neil Simpson coal unit in Gillette, Wyoming, and will be shutting down another one in Wyoming and one in Colorado later this year. Appalachian Power also announced it will be converting the two coal plants in southwest Virginia at its Clinch River Plant to natural gas by the end of the year.
Another key front-line of the War on Coal is the courtroom, and it’s been a good three weeks in that arena as well.
First, the SCOTUS rejected Mingo Logan Coal Co.’s appeal of EPA’s permit rejection for Spruce No.1 Mine (which would have been one of the largest mountaintop removal operations ever proposed). The coal industry had lost in lower court and was hoping for a reversal from the SCOTUS, but the court refused to take the case.
We also saw the North Carolina Dept of Environment and Natural Resources walk away from settlement talks with Duke Energy and will now join the EPA to seek full prosecution and remediation for the recent Dan River coal ash spills. Duke had offered a $99,000 settlement/fine for the spill. FTR: Duke is a $50 Billion company.
Speaking of avoiding responsibility, it turns out that the single largest tax delinquent in Kanawha County, WV is Florida-based coal mining company Keystone Industries. Or at least they were. The cash-strapped county in Southwest WV will be receiving a $408,000 check from the equally cash-strapped Dirty Rock Digging conglomerate.
The Illinois Attorney General Lisa Madigan filed a new suit last month against KCBX Terminals Company alleging all sorts of pollution and dumping infractions related to their coal storage. This is her second suit after suing Beemsterboer Slag Corp last year for similar transgressions. Take a hint Chicagoan Coal Companies: It Just Ain’t Worth It!
And on the permitting side, Ambre Energy, an Australian company deserpately seeking permission to build an export terminal in Boardman, Oregon had to request a delay as they are struggling to provide adequate documentation for their Environmental Impact Study. The company does not expect to be able to file the report until late this year, giving Oregonians more time to organize their mounting protest against this already controversial Columbia River project. GO OREGON!
And so to wrap up, lets talk about India and China since that is always what is brought up in comment about why these victories, victories the environmental movement tried to win in the US for DECADES, really don’t matter.
First, I keep saying, this is a long war and we are winning. Not ”have won” but ”are winning”. Present Tense. In Progress. Work to be Done. Ie, Stop being a dick.
Second, the US is a MAJOR player in coal. We are 2nd only to China. China is WAY above us now with their development, but outside of China we are the LARGEST coal producer in the world. Killing coal here is not a small by-blow in the world energy market. This isn’t like breaking news that the Hungarian Coal Industry is struggling or mining is slowing down in Mexico. The generational infrastructure, regulatory insulation, baked-in subsidies and political dependencies make the US Coal Industry almost unconquerable and we a CONQUERING it!
Third, China is already coming around on its own. Not out of some impotent peer-pressure from the International Community, but from its own internally enforced mandates. I linked earlier their plans to close almost 1800 mines THIS YEAR. Not some gradual “by 2030” goal like we set in the US. No.. they are talking about 1800 small mines by December as in within the next seven months.
I linked in my last diary a PDF File from Oxford University talking about the coming developments on the global coal industry when (not if) China cuts its demand.
One of the things driving China to do this is actually water usage. Coal mining takes a lot of water and China doesn’t have enough water as it is, particularly as it tries to expand its agricultural output. Greenpeace recently used this as an opening to challenge the largest state-owned coal company in China. And won.
And one thing I haven’t been focusing on in these diaries is China’s jaw-dropping progress in solar and wind. These diaries are about coal so I didn’t want to get off track, but when China says it wants to reduce its coal dependency, you can look at what it s already doing and the speed at which they are doing it, and see that they actually mean it. If they continue to meet their coals, we may see a World CO2 Emission Peak before 2020.
So to end, as always, on a positive note, how cool is this?
Blight to Bright – a 120 acre superfund brownfield and former home of Reilly Tar & Chemical that has been being processed and cleaned for the past 20 years is now the home of the Maywood Solar Farm, a 10.86 MW utility-scale generation site.
Hanwha Q Cells, a joint Koren-German venture, developed a specialized construction methodology that reduces any soil disturbance by 93% in order to comply with EPA mandated restrictions on anything that can be done on superfund sites.
And if this first-ever facility accomplishment doesn’t seem like a big deal, let me add a little perspective: If this works and proves viable at scale there just happens to be 14 million more acres of classified EPA sites that could be similarly used. …Green jobs anyone?