COAL IS NOT DEAD: Running to Fight

THE U.S. HOLDS COAL FOR THE WORLD, AND IT CREATES JOBS.

Kinder Morgan Energy Partners (KMP) is investing dollars on coal exporting capacity.  Kinder announced on January 24 that they will be investing $140M to expand coal export facilities in the Gulf Coast. To help in meeting demand, Kinder also announced a throughput agreement with Arch Coal (ACI).  Kinder further expects expansion of East Coast exporting terminals, together with “upriver terminals” in Illinois. Kinder’s Deepwater terminal in Houston is expected to have a throughput capacity of 10M tons per year. The throughput agreement with Arch is expected to quadruple its export volumes over the decade.  Completion of the expansion is said to be expected for Q2, 2014, and immediately accretive to cash.

Compare this with LNG’s multibillion dollar infrastructure build.

On the West Coast, Kinder has joined with Australian Ambre Energy (due to post an Australian IPO this year) to export coal through the Northwest.  Commissioners of the Port of St. Helens, Oregon, approved proposals by the companies to export up to 38M tons per year.  The proposed terminal is the Port Westward Industrial Park in Clatskanie.

Ambre Energy is looking to initially run 3.5mmt/y out of Port Westward by loading barges first at Port of Morrow, then onto 50 seagoing ships per year at Port Westward. Kinder is looking to invest $150 to $200M in the venture and sees trains running through the Columbia Gorge making delivery to port locations.

Port commissioners gave preliminary approval to the project on a 4-1 vote, with an expectation of the project occurring in two phases, each being 15M tons per year.   The nay vote cited rail congestion.

Kinder’s interest in these projects come from their view of international coal demand volume over the decade. In a press release from the company dated January 24. They said that “a global coal supply shortfall will persist over [the next decade].” Arch’s interest and view is the same as Peabody’s. But why an Australian mining firm operating in the U.S.?

AUSTRALIANS BUY U.S COAL PROPERTY, BECAUSE IT’S CHEAP AND MARKETS WANT COAL.

Ambre states that their goal is to acquire and operate “idle production capacity in a relatively undervalued domestic market and utilize that idle capacity to service the booming export market, particularly Asia.” Ambre further explains that “The USA has the largest coal reserves in the world and the Powder River Basin (PRB) in Montana and Wyoming produces the cheapest coal in the world….” They say that “Mining conditions in this region can only be described as spectacular with massive seams under relatively low levels of cover.” See, http.//ambreenergy.com.au.projects/us-thermal-coal-production.

Yes, Peabody previously saw the market dynamic, and continues to make steps. Among Peabody’s already existing export infrastructure, Peabody started the permitting process for an export facility at the Gateway Pacific Terminal at Cherry Point, Washington, just outside of Bellingham. This start originated in February. Peabody proposed shipments of 24M tons per year, with a capacity of 48M tons.

It appears at this point that the Gateway Terminal is bogged in opposition and bureaucratic tape. The builder of the terminal, SSA Marine, has obtained a second 90 day extension on filing the permit application. An applicant has 90 days to file its application following the applicant’s preliminary notice of application. SSA Marine is on their 2^nd 90 day extension. The issue now is the environmental impacts of the project. Consultants are being gathered.