This is a guest post by Nick Abraham, originally published on Oil Check Northwest
Peabody Energy, the largest private coal company in the world, is one of the last remaining coal majors to still be floating above the bankruptcy tidal-wave that has hit the industry. But it now looks like that even this coal behemoth will likely go under. Languishing under the same over capitalization and changing market structures that have plagued the entire industry (more on that below) Peabody's stock has dropped 30% just since the final fiscal quarter of last year.
Peabody is now $6.3 billion in debt. Its Gateway Pacific terminal, just north of Bellingham, WA, (which if built would be the largest facility of its kind in North America) has been in a holding pattern as local communities weigh whether a project like this is in the collective interest.
Coal's demise has been well-reported. Once the standard bearer of our power grid, coal has dropped from providing a substantial 50% of the nation’s electricity to 29%. Just last week, the Oregon legislature passed a bill to transition off coal power completely. The result of this downturn is that many domestic coal companies were becoming heavily dependent on exported coal (and exports have been falling since 2012)—carried by train through American cities and towns—to make up the difference.
This is a guest post by Nick Abraham, originally published on Oil Check Northwest
The U.S. Senate failed to get the necessary 60 votes to approve the northern leg of TransCanada's Keystone XL pipeline, but incoming Senate Majority Leader Mitch McConnell (R-Ky.) already promised it will get another vote when the GOP-dominated Senate begins its new session in 2015.
Though the bill failed, one of the key narratives that arose during the congressional debate was the topic of whether or not the tar sands product that may flow through it will ultimately be exported to the global market. President Barack Obama, when queried by the press about the latest Keystone congressional action, suggested tar sands exports are the KXL line's raison d'etre.
Obama's comments struck a nerve. Bill sponsor U.S. Sen. Mary Landrieu (D-La.) and supporter U.S. Sen. John Hoeven (R-ND) both stood on the Senate floor and said Keystone XL is not an export pipeline in the minutes leading up to the bill's failure.
“Contrary to the ranting of some people that this is for export…Keystone is not for export,” said Landrieu, with Hoeven making similar remarks.
But a DeSmog probe into a recent merger of two major oil and gas industry logistics and marketing companies, Oiltanking Partners and Enterprise Products Partners, has demonstrated key pieces of the puzzle are already being put together by Big Oil to make tar sands exports a reality.
Coal, the fossil fuel that largely sparked the industrial revolution, may be facing the beginning of the end — at least in terms of generating electricity.
There are increasing signs of the demise of the world’s dirtiest fossil fuel, from a global oversupply to plummeting prices to China starting to clean up its polluted air.
Last week, the Carbon Tracker Initiative published an analysis — Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures — identifying major financial risks for investors in coal producers around the world.
Saying the demand for thermal coal in China, the world’s largest emitter of toxic greenhouse gases, could peak as early as 2016, the analysis also highlights $112 billion of future coal mine expansion and development that is excess to requirements under lower demand forecasts.
Just over a month before the United Nations convenes on September 23 in New York City to discuss climate change and activists gather for a week of action, the Obama White House Council on Environmental Quality (CEQ) argued it does not have to offer guidance to federal agencies it coordinates with to consider climate change impacts for energy decisions.
It came just a few weeks before a leaked draft copy of the Intergovernmental Panel on Climate Change's (IPCC) latest assessment said climate disruption could cause “severe, pervasive and irreversible impacts for people and ecosystems.”
Initially filed as a February 2008 petition to CEQ by the International Center for Technology Assessment, the Sierra Club and the Natural Resources Defense Council (NRDC) when George W. Bush still served as President, it had been stalled for years.
Six and a half years later and another term into the Obama Administration, however, things have finally moved forward. Or backwards, depending on who you ask.
NEPA and CEQ
The initial February 2008 legal petition issued by the plaintiffs was rather simple: the White House's Council for Environmental Quality (CEQ) should provide guidance to federal agencies it coordinates with to weigh climate change impacts when utilizing the National Environmental Policy Act (NEPA) on energy policy decisions.
Magna Carta; Photo Credit: Wikimedia Commons
CEQ oversees major tenets of environmental, energy and climate policy. It often serves as the final arbiter on many major legislative pushes proposed by Congress and federal agencies much in the same way the White House's Office of Information and Regulatory Affairs (OIRA) does for regulatory policy.
Greenpeace USA has released a major new report on an under-discussed part of President Barack Obama's Climate Action Plan and his U.S. Environmental Protection Agency (EPA) carbon rule: it serves as a major endorsement of continued coal production and export to overseas markets.
“Leasing Coal, Fueling Climate Change: How the federal coal leasing program undermines President Obama’s Climate Plan” tackles the dark underbelly of a rule that only polices coal downstream at the power plant level and largely ignores the upstream and global impacts of coal production at-large.
The Greenpeace report was released on the same day as a major story published by the Associated Press covering the same topic and comes a week after the release of another major report on coal exports by the Sightline Institute that sings a similar tune.
The hits keep coming: Rolling Stone's Tim Dickinson framed what is taking place similarly in a recent piece, as did Luiza Ch. Savage of Maclean's Magazine and Bloomberg BNA.
But back to Greenpeace. As their report points out, the main culprit for rampant coal production is the U.S. Bureau of Land Management (BLM), which leases out huge swaths of land to the coal industry. Greenpeace says this is occurring in defiance of Obama's Climate Action Plan and have called for a moratorium on leasing public land for coal extraction.
“[S]o far, the Bureau of Land Management and Interior Department have continued to ignore the carbon pollution from leasing publicly owned coal, and have failed to pursue meaningful reform of the program,” says the report.
“Interior Secretary Sally Jewell and others in the Obama administration should take the President’s call to climate action seriously, beginning with a moratorium and comprehensive review of the federal coal leasing program, including its role in fueling the climate crisis.”
In a classic instance of the revolving door between government and industry, Governor Inslee has decided to hire Matt Steuerwalt as the director of his policy office effective May 1. In recent years, Steuerwalt has acted as a lead lobbyist for coal-fired power in Washington, as well as for a now-defunct coal export proposal. The news was first announced by Steuerwalt in a mass email sent last night.
The state is now wrestling with two major policy issues connected to coal: whether to permitlarge-scale coal export terminals and whether to phase out coal-fired electricity imported from other states. Given that Steuerwalt has recently been a paid lobbyist in support of coal in Washington, the move raises question about whether he will use his influence in the Inslee administration to advance an agenda more favorable to the coal industry.
Steuerwalt was formerly Gov. Gregoire’s top advisor on energy and climate issues, but he left the Gregoire administration to go to work for Strategies 360, a well-connected lobbying and PR shop. He then led negotiations against his former employer on behalf of TransAlta, a giant Canadian energy company that was wrangling with the Gregoire administration over plans to ramp down coal-burning at its power plant in Centralia. He also lobbied on behalf of TransAlta in both the House and Senate.
On Tuesday, the Government Accountability Office released a much-anticipated report about the Bureau of Land Management's coal leasing program, revealing it has stiffed taxpayers over $200 million.
The GAO blames a lack of competition in the bidding process, reliance on outdated and incomplete methods to determine “fair market value” of the coal reserves, a disregard of coal exports and their impact on fair valuation, and a blatant lack of transparency in the leasing program.
Senator Edward Markey, who had requested the GAO investigation in 2012 while he still served in the House, responded immediately to the report's findings. The GAO didn't address specifics on how much public revenue might have been lost by mismanaged leases and auctions.
Senator Markey explained that based on an examination of the report and other coal leasing documents that were not made public, his staff figured that the the BLM could have earned at least $200 million more for the American public if managed properly.
Unfortunately, the coal leasing documents investigated by Markey's staff aren't available to the public, which the GAO claims is because of the inclusion of private business information. According to Ned Griffith of the GAO, the information in the report was labeled “sensitive but unclassified” by the Interior Department.
In other words, even though one of the major findings of the GAO report was a troubling lack of transparency, the office itself is shielding from public view these detailed documents about coal leases on public lands.
The Bureau of Land Management is having a hard time getting rid of our publicly owned coal. For the second time in two months, a federal coal lease auction resulted in no sales.
On Wednesday, the BLM announced that it was officially rejecting the lone bid on the Hay Creek II coal lease tract in Wyoming. The lone bidder, Kiewit Mining Properties, had offered a measly $0.21-per-ton of the estimated 167 million tons of mineable coal in the Hay Creek II tract. The BLM declared that the bid “did not meet fair market value” and rejected it.
Hey, at least we can’t accuse the BLM of literally giving away coal on public lands.
This failure to secure a suitable bid comes on the heels of last month’s stunning news that there were absolutely no bids for the auction of the Maysdorf II tract, also in the Powder River Basin in Wyoming.
If these two failed auctions represent a larger trend, it is that the market for coal has gotten so bad that even the BLM’s bargain bin prices are too high for industry to pay. And, yes, the BLM’s prices are cheap, as they’ve leased over 2 billion tons of coal in the Powder River Basin alone since 2011 at an average of around $1-per-ton.
That price point was criticized in a recent report by the Interior Department’s own Inspector General, which accused the BLM of failing to factor international markets and coal exports into their “fair market values,” and which calculated that for every cent that publicly-owned coal deposits are undervalued, American taxpayers get stiffed by $3 million.
Update Aug 23: In a stunning development, there wasn't a single bid at the BLM auction, with Cloud Peak Energy passing up the chance to bid out of fear that it would not be profitable.
Tomorrow, the Bureau of Land Management will sell off roughly 148 million tons of coal. The BLM is opening the sealed bids for the so-called “Maysdorf II” tract in the heart of the Powder River Basin in Wyoming. The coal will likely be sold to Cloud Peak Energy, which operates the adjacent Cordero Rojo mine, one of the nation's largest strip mine operations.
Cloud Peak Energy's Tesoro Rojo mine, soon to be expanded. Video by Greenpeace.
According to Joe Smyth of Greenpeace, who penned a great post putting this sale (and another, even larger coal lease scheduled for next month) in the context of President Obama's recent climate announcements, the coal will be sold for roughly $1-per-ton. That represents a deep discount below market rates, which is what you'd expect from a lease auction with only one bidder.
Warren Buffett - the fourth richest man on the planet and major campaign contributor to President Barack Obama in 2008 and 2012 - may soon get a whole lot richer.
That's because he just bought over half a billion bucks worth of Suncor Energy stock: $524 million in the second quarter of 2013, to be precise, according to Securities and Exchange Commission filings. Suncor is a major producer and marketer of tar sands via its wholly owned subsidiary Petro-Canada (formerly Sunoco) and this latest development follows a trend of Buffett enriching himself through dirty investments and deal-making.
So far in 2013, Suncor (formerly Sun Oil Company) has produced 328,000 barrels per day of tar sands crude.
Though he receives far less negative press than the Koch Brothers, Buffett's no deep green ecologist. Not in the slightest.
Referred to as one of 17 “Climate Killers” by Rolling Stone's Tim Dickinson in a January 2010 story, Buffett owns the behemoth holding company, Berkshire Hathway. It's through Berkshire that he's making a killing - while simultaneously killing the ecosystem - through one of its most profitable wholly-owned assets: Burlington Northern Santa Fe (BNSF).
Buffett purchased BNSF for $26 billion and was “the largest acquisition of Buffett's storied career,” Dickinson wrote.
BNSF hauls around frac sand for the controversial horizontal oil and gas drilling process known as “fracking.” The rail company also moves fracked oil from North Dakota's Bakken Shale basin, tar sands logistical equipment and tar sands crude itself and tons of coal. And not only does Buffett's BNSF haul around ungodly amounts of coal, he actually owns coal-burning utility companies, too.