Alaska Dispatch News contributor Tim Bradner recently penned a piece here highlighting the virtues of coal for Alaska's clean energy future. I'm not sure where Mr. Bradner got his information, but based on my experience researching coal and coal markets across the globe, he couldn't be further off the mark.
Mr. Bradner, also a writer for the Alaska Journal of Commerce, starts with the false but often-repeated notion that coal is "cheap." While coal companies have done an excellent job evading the true costs of their product, there's nothing cheap about coal. From asthma and water pollution to habitat destruction and climate change, coal is one of the most expensive fuels on the planet. And, in the current market, Alaska's coal does not compete at all on the global market.
Yet Mr. Bradner touts experimental technologies — such as underground coal gasification in Cook Inlet — as examples of "real innovation" and possible "game changer(s)." There's only one problem with that pitch: Underground coal gasification in Cook Inlet doesn't have an economic leg to stand on; it's simply not viable with existing and anticipated gas supplies in the basin. It's fine to dream big, but at some point reality has to set in.
Next, Mr. Bradner applauds the proposed Chuitna coal strip mine on the west side of Cook Inlet for "pursuing innovative ways of restoring salmon streams that would be disturbed by mining."
I'm a money person, not a biologist, so I won't get into details about salmon streams. That said, what Mr. Bradner labels a mere disturbance would actually include mining down 350 feet through more than 14 miles of wild salmon habitat. That's more than a mere disturbance. Restoration on the scale that would be required if this project gets the go-ahead has never been done in salmon streams, and experts on these issues say it simply cannot be done. You don't need to be a scientist to understand you can't put Humpty Dumpty back together again.
The most disturbing part of Mr. Bradner's booster piece, however, is the notion that a new coal mine in Alaska is a financially sound investment. It is not. The fact is, the world does not need another coal mine; the market is already oversupplied. The force behind the Chuitna project, Delaware-based PacRim Coal, has promoted it as a source of economic development, jobs and royalty payouts for Alaska. The truth is, the financial model on which PacRim bases its Chuitna coal project is wrong — and preserving the Chuitna River as a salmon fishery and for other public uses makes far more economic sense.
For example, PacRim says the coal that would come out of Chuitna would boast superior low-sulfur content, when in fact its sulfur content is no different from that found in coal produced in the Powder River Basin in the Lower 48. This point is worth emphasizing because every Powder River Basin coal producer today is stopping their export businesses because there is no market. Chuitna coal would face a similar uphill battle, and market forecasts offer little demand growth for U.S. coal exports into the foreseeable future.
PacRim would also face competition from non-U.S. coal producers. Indonesian and Russian coal products are of similar low-sulfur content and of similar heat content. Coal produced in each of those countries more often than not has a transport-cost advantage because it is mined closer to China, India, Taiwan, Japan and Korea, which is where the coal-import action — such as it is — can be found. The entire market is oversupplied and coal producers from South Africa, Australia, Indonesia and Colombia are also looking to ship coal to already crowded Asian markets.
The Chuitna mine, in the meantime, is being promoted as a feeder mine to those same markets, which are all wrapped up inextricably, for better or worse, with China and India. These are the two most populous countries in the world, and even before the recent climate talks in Paris, they both moved toward deliberate and aggressive policies aimed at reducing coal imports. China and India, to put it bluntly, don't want Chuitna coal, and neither does anybody else.
The truth is that the seaborne thermal coal market has entered a steep structural decline, not a cyclical one, and even established producers — including Usibelli Coal Mine, Inc., the sole coal producer in Alaska — have been unable to retain market share.
Today, Alaska is staring down the barrel of a fiscal crisis. Hard facts and good thinking are the tools to manage a fiscal crisis. Imaginary markets will not.
Tom Sanzillo is director of finance for the Institute for Energy Economics and Financial Analysis, a clean energy think tank that works with Cook Inletkeeper and other Alaska groups on coal market issues.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.