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Tuesday, Apr 10, 2012 3:15 PM UTC

Coal exports surge to highest level since 1991

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Topics: From the Wires,

BILLINGS, Mont. (AP) — Government data show U.S. coal exports reached their highest level in two decades last year as strong overseas demand offered an outlet for a fuel that’s falling from favor at home.

U.S. Department of Energy data analyzed by The Associated Press reveal that coal exports topped 107 million tons of fuel worth almost $16 billion in 2011. That’s the highest level since 1991, and more than double the export volume from 2006.

Much of the increase went to slake the thirst of power-hungry markets in Asia, where rapid development has sparked what mining company Peabody Energy calls a “global coal super cycle” that heralds renewed interest in the fuel.

The AP’s analysis showed coal exports to South Korea leapt 81 percent last year to more than 10 million tons. India saw a 65 percent jump, to 4.5 million tons. And Japan bought almost 7 million tons — a 119 percent increase — as the nation sought alternatives to nuclear power after an earthquake and tsunami prompted the Fukushima nuclear complex meltdown.

King Coal faces a tougher outlook in the U.S., where competition from cheap natural gas and costly new rules for power plants are eroding its historic dominance in electricity generation.

Coal’s share of the domestic power supply has dipped by more than 20 percent in the past several years, forcing companies to search out new customers overseas or risk having to cut production from U.S. mines that produced almost 1.1 billion tons last year.

“There’s no question that our supplies of coal are adequate. The question is, how do we find new markets for coal to keep the share of electricity generation strong?” said Luke Popovich with the National Mining Association. “While its use is relatively declining here, it is absolutely soaring in most other places.”

Exports also are up to Brazil, China and several European nations seeking high-quality coal for steelmaking, according to the Energy Department data.

The Energy Department forecasts exports to drop slightly over the next two years, to about 99 million tons a year.

Companies including Arch Coal Inc. have offered more optimistic scenarios under which exports continue to grow. Arch has predicted export capacity could reach 245 million tons by 2015.

To make that happen, companies want new or expanded coal ports on the West and Gulf coasts. Pending proposals in Washington state would add tens of millions of tons of port capacity in coming years for coal that would be mined from the Powder River Basin of Montana and Wyoming.

Port expansions also are envisioned along the East Coast and in Texas, where Kinder Morgan Energy Partners plans to invest $140 million to expand a coal terminal in Houston. But many of those port plans are being challenged by the coal’s industry’s long-time opponents.

Environmentalists who filed dozens of lawsuits over the last decade to block new coal plants in the U.S. have turned new attention to export proposals in recent months. They fear any reduction in pollution from reduced domestic coal use will be cancelled out if the fuel is simply burned elsewhere.

The industry faces another challenge from coal-producing countries such as Australia, which has tapped into the new demand from Asia.

Over the last two years, flooding and other problems hampered Australia’s coal exports and provided an opening for U.S. companies. As Australia works past those problems, it’s uncertain how much room will be left for American competitors.

“High demand by China has rippled through the markets. It’s really an issue of how long this demand is going to last,” said Bill Watson, an analyst with the Energy Information Administration. “The prices have been very high, so anybody who can mine and ship coal certainly has a lot of incentive to do that.”

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