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The Ironies of Shipping U.S. Coal From B.C.

The Ironies of Shipping U.S. Coal From B.C.

Jeff Rubin was the former Chief Economist at CIBC World Markets (for almost 20 years), is a frequent columnist for The Globe and Mail, and is the bestselling author of Why Your World Is About to Get a Whole Lot Smaller, and The End of Growth. This week, Jeff writes for The Globe and Mail about the irony of the US government slashing coal emissions at home, while promoting exports abroad, and where BC fits in the equation:

The latest battleground for U.S. President Barack Obama’s so-called war on coal isn’t even in the lower 48 states. It’s across the border in British Columbia’s densely populated lower mainland where a recent proposal to expand Port Metro Vancouver’s Surrey operation could offer a backdoor exit for U.S. coal to escape to Asia.

Environmental groups have lauded the Obama administration for its work in slashing emissions from dirty coal-fired power plants in the U.S. Less well known are its efforts to sell mining leases on federally owned land to promote coal exports abroad. Some 40 per cent of U.S. coal production comes from government land, much of it found in wide-open western states such as Montana and Wyoming.

In theory, the U.S. Department of the Interior, through its Bureau of Land Management, is supposed to auction mining leases to federal lands to the highest bidder. In practice, though, the Bureau ends up giving them away for a relative song. The green lobby argues that the full cycle environmental costs from combusting this coal should be accounted for in the prices paid for mining leases. Such costs are part of what the U.S. State Department is trying to get a handle on as it deliberates on the cross-border Keystone XL pipeline project.

When it comes to climate change, the fact that U.S. coal will be burned in Asia doesn’t change its carbon footprint. Coal that’s mined in Wyoming’s prolific Powder River Basin has the same atmospheric impact whether it’s burned at home or in a power plant outside of Shanghai.

As the coal industry is finding out, however, getting U.S. coal to Asia is becoming a taller order. Before any buyers and sellers can come together, the coal must first make it to tidewater where it can be loaded on a ship and moved across the Pacific. Like landlocked Alberta bitumen, coal from the Powder River Basin is a long way from the coast. If geography was the only issue that would be one thing, but it’s not. Just as Nebraska doesn’t want the Keystone XL pipeline running through its backyard, coastal states such as Washington and Oregon don’t want to see an endless string of coal trains hauling millions of tons of coal to export terminals on the Pacific.

In Oregon, a proposal to ship 8.8 million tons of coal a year from an export terminal at the mouth of the Columbia River was rejected by state regulators last month on the grounds that it would damage marine ecosystems, as well as pose a threat to traditional fishing grounds of the region’s Native American tribes. Plans for similar terminals in neighbouring Washington State are expected to meet a similar fate at the hands of like-minded regulators.

Enter the Fraser Surrey Docks outside of Vancouver. As doors to export coal close in the U.S. northwest, the industry is prying another one open north of the border. Despite opposition from local environmental groups, a few weeks ago Port Metro Vancouver approved a proposal to develop a coal-loading facility with a capacity to handle 4 million tons a year. The operation would transfer coal from rail cars to barges, which would then carry it to nearby Texada Island where it would be loaded on ships and transported to Asia. Mining companies in the Powder River Basin couldn’t be happier about this development, since most of the coal that will be passing through Canada will be coming straight from Wyoming.

The ironies here are abundant. If Mr. Obama is committed to reducing carbon emissions from burning coal on the one hand, why is his administration so busy promoting coal exports on the other? Why also is eco-friendly British Columbia, home of a provincial carbon tax designed to reduce the use of fossil fuels, being such a willing conduit for transporting U.S. coal to Asian markets? Isn’t this the same B.C. that doesn’t want to allow Alberta bitumen to flow through the proposed Northern Gateway pipeline to Kitimat? It’s also hard to miss the irony of Canada being used as an escape hatch for coal exports when the U.S. won’t play a similar role for oil sands crude via the Keystone project.

Seeing B.C. so willing to handle Wyoming coal is somewhat disconcerting given the province’s environmental credentials and the reluctance of Oregon and Washington to do the same. Without export terminals, much of the Powder River Basin’s coal reserves will stay in the ground. Isn’t that what the Obama administration – despite the mixed messages of its war on coal – is after in the first place?

By Jeff Rubin/The Globe and Mail/September, 2014