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Collection: Northwest Coal & Oil Exports

Exploding Death Trains in Our Midst: Should We Worry?

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It’s been scarcely three months since an oil train in Quebec exploded catastrophically, killing 47 people and leveling several blocks of a town. Then, last weekend, another oil-bearing train derailed resulting in another huge explosion:

Residents for miles around saw and heard a “large fireball” shortly after 1 a.m., [fire chief] Phelan said. “There’s been no explosion or similar event like that since.”

As before, local emergency responders were unable to put out the fire because it was simply too dangerous:

Fire officials say they have little choice but to let the fuel burn itself off, resulting in a dark, billowing cloud of smoke that remained hanging over Gainford throughout the day.

“…it’s safer just to let it flare until the product is consumed,” said Phalen, estimating the time required for burn-off to be between 24 and 72 hours.

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Peabody Would Lose Money on Coal Exports

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Today, Sightline is releasing a new report: Peabody Energy, Gateway Pacific, and the Asian Coal Bubble. The report shows that at today’s prices, there’s no way for Peabody to make money shipping coal to Asia. Peabody’s strategy is now to hope that the Asian coal bubble re-inflates—which is an increasingly risky bet, given the collapse of Asian coal prices, recent steps by China to curb coal demand, and the oversupply of coal from other Pacific Rim exporters.

In case you don’t happen to check the price of Australian coal every day, you might not have noticed that the price of coal in the Pacific Rim export markets has collapsed over the past year or so. In fact, it’s looking very much as if the meteoric rise in coal prices that enticed so many companies to enter the Northwest coal export game was simply a bubble.coal_prices_redux-092013-150ppiC

And perhaps no Powder River Basin coal company has more at risk from this collapse than Peabody Energy.

Peabody has plans to export up to 24 million metric tons of coal each year through the proposed Gateway Pacific terminal in northwest Washington. It announced those plans in February 2011—about two years after Pacific Rim coal prices started to spike but a month after they peaked.

Since Gateway Pacific was launched, Pacific Rim coal markets have fallen almost as quickly as they rose. At today’s prices, Peabody Energy would lose roughly $10 per ton selling coal through the Gateway Pacific terminal.

Sightline’s new report, Peabody Energy, Gateway Pacific, and the Asian Coal Bubble, tallies the costs for Peabody to ship its coal from the Powder River Basin to Asia—including the cash costs of mining coal, rail shipping fees, handling fees at coal terminals, shipping costs on ocean-going vessels, and adjustments for the low energy content of Peabody’s Powder River Basin coal.

The conclusion is clear: in today’s market, there is literally no chance for Peabody to make a profit on coal exports. 

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Coal Money in Politics: Whatcom County

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The race for the Whatcom County Council may turn into one of the nation’s most important votes for climate change. That’s because the county is home to Cherry Point, the site of a massive proposed coal terminal—which, if constructed, would be the biggest coal terminal in North America, allowing 48 million tons of coal from the landlocked western US to reach Asian seaborne coal markets.

In Whatcom County, local authorities have a direct say over the land use and permitting decisions that will allow the project to go forward—or not. In other words, the composition of the Whatcom County Council matters a great deal to the future of the US coal industry. And as it happens, four of the seven members of the Council are up for re-election, which means that the races have become a virtual referendum on the highly controversial coal port.

As KUOW’s Ashley Ahearn reported last week, the candidates thought to be opposed to the port were handily out-fundraising their opponents. Then, just after Ahearn’s story and other similar coverage was published—and just days before a key fundraising deadline—a tsunami of coal money flooded into a two-month-old local PAC, Save Whatcom.

Here’s how suddenly the cash arrived:

timeline coal PAC

And here’s where Save Whatcom’s money comes from:

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Millennium Backers In Dire Straits

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The last public “scoping hearing” on the proposed Millennium coal export terminal is tomorrow in Tacoma. But there’s a fascinating story that’s unfolded as these hearings have progressed: the companies promoting the Millennium project have found themselves in increasingly dire financial straits.

Let’s start with Arch Coal, which owns 38 percent of the Millennium project. Just last week, Moody’s, a bond rating agency, downgraded Arch’s debt—a move that is likely to increase Arch’s borrowing costs. Here’s what Moody said about the downgrade:

The rating action was prompted by recent deterioration in performance due to continuing weakness in the coal industry, and our expectation that…the potential for material recovery in demand and pricing is limited.

And yesterday, Morgan Stanley piled on, downgrading Arch stock on concerns about the domestic coal market. The move prompted a sell-off in which Arch lost between 5 and 6 percent of its market capitalization.

As tough as things are for Arch, Ambre Energy—the owner of the remaining 62 percent of Millennium—has it much, much worse. I reported yesterday that Ambre has filed its financial statements in Australia, but hasn’t made the document available on its website. Well, surprise, surprise: a faxed copy of Ambre’s financial statement landed in my inbox last night.

The following chart summarizes the news for Ambre: the company is now paying 16 percent interest on some of its loans.  Sixteen percent. That’s over two and a half times worse than “junk” bonds.

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What’s Hiding in Ambre’s Financials?

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It’s hard to imagine a company with a greater need for financial transparency than Ambre Energy.

In the midst of a global downturn in coal markets, the firm is trying to move forward with two controversial coal export projects in Oregon and Washington, for which it will have to raise about a billion dollars in start-up capital from increasingly skittish investors. The company is also hoping to win the public’s confidence and support for its export plans—an especially critical need, given that the company misled the public about the scale of their export ambitions in their initial permit filings. After that kind of start, the company just can’t afford to look like it’s hiding something now.

Yet for the past year, Ambre has been remarkably secretive about its financial situation. A few weeks ago, a reporter from The Australian uncovered evidence that Ambre had failed to disclose its 2012 year-end financial results. This may have put the company in violation of Australian securities law, which requires unlisted public companies, such as Ambre, to publish their financials within four months of the end of the fiscal year. For Ambre, that meant that they’ve been in violation of the disclosure rules since May 1.

But the website of the the Australian securities regulatory agency shows that Ambre has finally submitted its financial report for the 2012 fiscal year. Better late than never, right?

Well, sort of.

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Big Tesoro Pipeline Spill in North Dakota

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From the same folks who want to build a gargantuan oil-by-rail facility on the Columbia River, comes this news today: More than 20,000 barrels of crude oil have spewed out of a Tesoro Corp. oil pipeline in a wheat field in northwestern North Dakota, the state Health Department said Thursday. State environmental geologist Kris Roberts … Read more

Look Who’s Ashamed to Be Taking Coal Money

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Well, that was satisfying. Yesterday, DeSmogBlog caught coal PR flak Lauri Hennessey laughing about people worried about climate change. After that, I publicly asked whether we should begin a targeted divestment campaign that would encourage Northwest clients to stop working with her private consulting firm.

Today, all that’s left of the Hennessey PR website is smoking rubble. The subpages are 404 errors, and this is all that’s left of the front page:

Coal Export PR Flak Caught on Tape

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As far as gotcha journalism goes, you’re not going to do a lot better than Mike Stark’s takedown of coal industry PR flak Lauri Hennessey.

Hennessey loves to posture as an environmentalist, often citing her roots in the Northwest or her former employment at the EPA. Yet she’s the spokesperson for a major coal industry front group—one that’s pushing huge export terminals in order to ship hundreds of millions of tons of low-grade coal to Asia.

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