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Coal on a Roll

THE LONG HAUL A coal train sets off from Wyoming’s Powder River Basin, headed for a power plant in the Midwest.
Plundering America to power the Asian boom

When Warren Buffett and his fellow Berkshire Hathaway director Bill Gates visited the Black Thunder coal mine last November, they did their best to keep a low profile. This is not an easy thing to do, however, when a fleet of nine private aircraft touches down at a small county airport like the one in Gillette, Wyoming, which bills itself, not without reason, as the Energy Capital of the Nation.

In the age of Twitter and Facebook, nothing stays secret for long. Even as the two famous visitors were putting on their hard-hats, miners were spreading the word, forcing the Oracle of Omaha to face the local press. All he would say was that the visit had been "fascinating."

Investment analysts say that fascinating is Buffett-speak for a really, really big deal, and that his visit to Wyoming’s Powder River Basin, which produces almost 40 percent of the nation’s coal, cannot be seen in isolation. Just a year earlier, Buffett had wrapped up the $44 billion purchase of the Burlington Northern Santa Fe Railway, his biggest acquisition ever. Coal accounts for more than a quarter of the company’s revenues, and 90 percent of the coal it hauls is from the Powder River Basin. Ever since the nineteenth century, coal and railroads have thrived on this symbiotic relationship: a recent issue of Trains magazine called coal "railroading’s ultimate commodity and the industry’s best friend from start to now." Buffett’s holdings also include 90 percent of MidAmerican Energy, a utility that operates four coal-fired power plants in Wyoming. Now he was taking a firsthand look at the biggest coal mine in the country. Join up the dots. In particular, join up the dots that lead north from Black Thunder along the railroad tracks to Donkey Creek Junction, 10 miles or so east of Gillette. Most of the coal trains turn to the right here, headed for power plants in the heartland, from Michigan to Texas. But if what Buffett calls his "all-in wager" on railroads and coal pays off, more and more of them will turn to the left, headed for ports in the Pacific Northwest, and from there to Asia. It’s a grotesque idea on the face of it, digging up Wyoming to provide Asia’s booming economies with the dirtiest of all fossil fuels. But will the plan come to fruition? And if it does, how high will it rank in the hierarchy of environmental crimes?

Going to Extremes

The Eagle Butte mine, which belongs to Alpha Natural Resources, is barely a mile north of the Gillette airport. It is one of a trio of virtually suburban mines that make up the northernmost of the three distinct mining clusters in the Powder River Basin. I arranged to take a tour of Eagle Butte, meeting my guide at the Flying J truck stop in downtown Gillette. She was a chipper junior high school P.E. teacher named Shannon, who said she had been working for Alpha for the past eight summers. It’s the third-biggest coal company in the nation, she told me proudly. (Peabody Energy is number one; Arch Coal is second.) She promised lots of other "fun facts," most of which seemed to involve extremes of size, weight, and volume.

Our first stop was a fenced overlook just off the highway. Below us was the huge west pit of the Eagle Butte mine. Brobdingnagian electric shovels had already scooped out about 250 feet of overburden -- the layer of dirt and rock that has to be removed to get at the coal seam -- and were now dumping bucketfuls of coal into red-and-gray haul trucks of formidable dimensions. When full, each truck lumbered off with its 240-ton load, grinding its way at walking pace up an incline that led to the railhead, a mile or so distant.

Standing upright by the wire fence was a tire from a LeTourneau loader: 13 feet high, six and a half tons, $38,000. A few yards away was a shovel bucket. You could have brought one of Shannon’s P.E. classes here on a field trip and fit them all comfortably inside, with room to spare for the teacher and a couple of parents. "That’s the baby bucket," she said. "The ones we use now are much bigger; they can scoop up 140 tons at a time."

NRDC: Why Coal Is So Cheap

Theo SpencerTheo Spencer

Q&A with Theo Spencer, a senior advocate with NRDC’s climate center, based in New York City, working to advance clean energy policies.

How can the largest coal-producing region in the country not be classified by the federal government as a coal-producing region?

The Powder River Basin in Wyoming was certified as a "Coal Production Region" between 1979 and 1990 because of the vast amounts of coal there and the extent of mining taking place. In 1990, the Bureau of Land Management decertified the region because mining activity had briefly decreased. But today it supplies more than 40 percent of our domestic coal and is home to the 10 largest mines in the country. So it was more than a little bizarre that the BLM earlier this year denied a petition from environmental groups to recertify the region. Certification would mean managing this public resource in the public interest, with greater environmental review, more competitive bidding for leases, and, one would hope, a livelier public debate about where more mining is appropriate. Makes sense, right? In denying the petition, the BLM said that the current system provides an "optimum" public return and need not be meddled with.

Read the rest here.

We drove off to see the rest of the mine. More trucks were dumping their loads into an underground crusher, which reduces the lumps of coal to pebble size. From there the coal passes to a conveyor belt that slants upward at a 30-degree angle to feed a towering storage silo. The silo is 210 feet tall, Shannon said, continuing with the fun facts. A train was inching its way through a gap in the base of the silo, loading up. Each car carries about 117 tons of coal, she said. A "unit train" can have as many as 140 cars, hauling more than 16,000 tons in all. Between 70 and 85 of these mile-and-a-half-long centipedes leave the Powder River Basin each day, carrying enough coal to supply almost a quarter of the nation’s electricity. The words China and India never passed her lips.

Commitment to "Clean Coal"

Last December, barely a month after their trip to Black Thunder, Buffett and Gates met privately with President Obama. The White House said they discussed the economy, few details given. A month later Obama gave his State of the Union address, in which he laid out a global energy strategy that some call "all of the above." Nestled among wind, solar, nuclear, and natural gas was that uniquely slippery phrase "clean coal" (better to think of it as "slightly less filthy coal"). Then, in March, Secretary of the Interior Ken Salazar flew to Wyoming to announce that the Bureau of Land Management (BLM) would hold four "competitive" sales for new leases on 758 million tons of Powder River Basin coal. These would be the first of a dozen such auctions over the next three years, with as much as 3.7 billion tons of coal eventually up for grabs.

Very little of this, however, would be for domestic consumption. Although worldwide energy-related CO2 emissions rose more last year than at any time since 1969, and the use of coal grew faster than that of any other fossil fuel, U.S. demand has actually flatlined. In 2000 coal accounted for just over half of our electricity supply. By 2010 it was down to 45 percent. Large banks and insurance companies, uncertain about a future carbon-constrained world, are increasingly reluctant to underwrite the huge investment -- as much as $3 billion -- required to build a new coal-fired power plant, which can have a lifespan of 50 years.

Asia is a different matter. Historically, the global coal market has been famously volatile. But companies like Peabody and Arch Coal are convinced that Asian demand has triggered a "supercycle" that will last at least 20 years, and talk in the industry is of exporting more than 100 million tons annually. The pivotal moment came in 2008, when China, which now uses almost half of all the coal burned on the planet, became a net importer for the first time. Demand in India, though starting at a much lower point, is rising even more rapidly and is likely to go on rising long after China’s appetite for coal levels off, which is predicted to happen sometime after 2030.

To many people, Obama’s "all of the above" sounded like a capitulation to King Coal after climate legislation came to grief last year in Congress. But the strategy has deeper roots. First of all, the federal bureaucracy is notoriously prone to inertia, and the wheels of the BLM, which is responsible for granting mining leases, grind more slowly than most. The leases announced in March were not a new idea: the coal companies had applied for them at least five years ago. So the Obama administration didn’t push the plan forward; it simply chose not to pull it back.

Nor is the commitment to "clean coal" anything new. In 2009, when the Nobel Prize-winning clean-energy guru Steven Chu was nominated to be secretary of energy, there was great excitement at his statement that coal was his "worst nightmare." This eminently quotable phrase sat well with environmentalists, but the corollary did not. Given coal’s abundance, Chu went on, India, China, the United States, and other major consumers were not going to stop burning the stuff any time soon. And so, he said, "it is imperative that we figure out a way to use coal as cleanly as possible." That means working closely with China (and increasingly with India, too) to minimize the harm done by burning coal that is going to be burned anyway.

One quirk of this story is that Warren Buffett has no more love for coal than does Steven Chu. What appeals to him about railroads, he told Charlie Rose a week after buying BNSF, is that they are so environmentally friendly -- "far, far more attractive in terms of global warming than using trucks." But what about all the coal they carry? Rose asked. "We will wean ourselves off coal over time," Buffett answered. "We can’t change that next week or next month or next year, but we will reduce it over time, and we should reduce it over time."

An odd set of stars have come into alignment here, in other words, and the muscle power of those involved is formidable: the federal government, which sees coal as an unpleasant but inescapable reality; the country’s leading investor, sitting on assets of $372 billion, who dislikes coal but won’t turn up his nose at a 20-year windfall for his shareholders; the big coal companies, which want to sell as much of their product as they can; and the world’s two most populous countries, which also happen to be the world’s two fastest-growing economies.

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George Black has reported from five continents, chronicling civil war in Central America, the democracy movement in China, and climate change in countries from Bangladesh to Peru. His most recent book, Empire of Shadows, is about the 19th century exp... READ MORE >
Dear George Black, Undoubtedly, this is the best coverage I have read to date of the coal issue. My compliments to you for a job well done. I live 2.8 miles east of the proposed coal export terminal at Cherry Point, WA. I am one of those citizens you wrote about -- passionately opposed to the invasion of coal transport in our rural community. Congratulations for a job well researched, well synthesized, well done.
Thanks, I appreciate your generous comments on the piece. I'm encouraged by the strength of public opposition in Bellingham, and I hope Keith (below) is wrong about this being "game over." You might be interested in my recent column for, The Edge, which talks about the potential for success in these fights even when the forces involved are so unequal.
Very informative, but somehow incomplete article. The proposed Cherry Point terminal (which carries the benign moniker of "Gateway Pacific") will be situated on or adjacent to wetlands in Puget Sound; eel grass which shelters the endangered Cherry Point herring, a critical species for salmon will be devastated; Cape-class coal tankers will be traversing the Sound and discharging contaminated ballast "at the 200 mile limit"; GPT-related propaganda in the form of slanted advertising has further polarized the communities in Whatcom County, WA pitting some elements of "organized labor" against homeowners and conservationists; consortium cash infusions have contaminated the political process (WA Senator Patty Murray, for instance, has an overt conflict of interest as her husband has substantial financial ties to SSA Marine, from which Murray also benefits in the form of a $500,00.00 retirement plan); industry funds have also gone to members of the staff of Gov. Chris Gregoire, WA State Congressmen Jason Overstreet and Rick Larson, all of whom enthusiastically support the Terminal, alleging it will provide "jobs" in Whatcom County, WA. The list continues, ad nauseum. Again, to emphasize the perfidy of the GPT consortium, it has willfully misrepresented its integrity and commitment to process. The consortium has, as the article notes, not only traduced the Terminal's purpose but also its size (will be constructed on or near 530 acres of protected wetlands,according to the US Army Corps of Engineers), which is totally outside the scope of the original permit. The GPT consortium also suggests in public forums and advertising that somehow "mitigation efforts" (none guaranteed, though many vague promises have been made) can undo the damage. The picture the GPT backers are attempting to convey is that of prudent "environmental stewards" who can somehow reconcile the tandem and irreconcilable goals of coal-fired energy plants with a nearly pristine environment. Yet, just recently, SSA Marine illegally cleared wetlands for "testing purposes", incurring only a trivial fine...and no WA State Department of Natural Resources or other injunctions against further depredations (excuse me; I meant "development"), even though the applicable code is quite lucid on this point. As noted in the article, BNSF intends to run 40 coal trains through Bellingham, WA, each 1.5 miles long per day, averaging 1 train/30 minutes daily. Effects on local businesses, property values, the tax base, the "boom or bust" cycle of the realty and construction required to house temporary workers and, indeed, the actual number of "good paying union jobs" has been exaggerated, downplayed or obscured as needs be. My worst and most cynical suspicions (that of a back-room deal between the Lords of Finance and the local, state and national government which will short-circuit the political process) were buttressed by the article's report of the Obama-Gates-Buffett meeting and the coal-friendly outcome of that meeting. I hope I am wrong, but I suspect (based on all this) that its already "game over".
Thanks for your very informative comments, Keith. Space limitations prevented me going into the Cherry Point issue in more detail, but I'm hoping I can follow up on this in my online column, The Edge. I do share your trepidation about the power of those involved in promoting the terminal.
George, Thank you for taking the time to read and to respond to my note. I understand the constraints imposed by allocated space for your article. I hope you have the opportunity to investigate GPT machinations in Washington State in depth in future publications. The situation in Bellingham is a microcosm of the emerging American tendency towards high-tension political polarization and the pernicious influence of national corporations on the community is most interesting. KAC
Mr Black, I am extremely impressed with your article. As a reporter in the midst of researching coal I find all of this information both fascinating and helpful. I share the same sentiment, sort of, about people's sincerity to do their part to make things right because coal is not going away. As a reporter I am always to be neutral and tell both sides, but I find that King Coal is a natural in telling its side. It's hard not to buy in... but it's hard to let the spin air. Anyways, I think you did a fabulous job. Thank you!
Thanks for the great information!
Mr. Black, I have to side with Mr. Morse on this one. You also didn't mention the fact that exporting PRB coal can help lead to a quicker transition in the USA towards natural gas. As much as so many of us would like, the coal is not going to sit in the ground. I think it is very naive to think that we could burn it for centuries at large quantities, but Asia cannot. You also failed to mention the success that has been accomplished in Gillette and other coal regions in the west because of their coal extractions.